Coffee Market Report January 23 2018

The latest Commitment of Traders report from the New York arabica coffee market has seen the shorter term in nature Managed Money fund sector of this market increase their net short sold position within the market by 16.43% over the week of trade leading up to Tuesday 16th. January; to register a new net short sold position of 48,684 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 10.77%, to register a net long position of 41,822 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market increased their net short sold position within this market by 28.54%, to register a net short sold position of 55,050 Lots.  This net short sold position which is the equivalent of 15,606,431 bags has most likely been once again decreased, following a period mixed but overall more positive trade that has since followed and likewise, that of the managed money fund sector of the market. 

Since the beginning of the year the Index Funds have increased their net long position within the New York market by 6,969 bags or 20%, which had been predicted.   However, with the managed money and speculative sectors of the market maintaining substantial net short positions within the market, there has been minimal support forthcoming from the Index Funds investing into this coffee market, as they have been doing within many other commodity markets for the start of the year. 

Meanwhile in terms of fundamentals for the coffee markets there has been little coming to the fore of late to provide support, with the prospects for a much larger new Brazil crop for later in the year weighing upon sentiment, along with the evidence of more than adequate short to medium term supply of both fine washed arabica coffee and robusta coffees. 

There are however some concerns being voiced that the new main Colombian crop has been somewhat wet weather affected and has not been quite up to expectations, but so far this has not become much of a factor for market sentiment, as it is countered by the prospects for a larger new overall Mexican and Central American crop.   While there have been some questions asked as to how much of the dip in apparent production is weather related and in this respect, how much has farmer price resistance and restraint in selling new crop coffees into the mills has contributed towards the more modest new main crop coffee supply.    

The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 42.40 usc/Lb., while this equates to 34.6% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 2,395 bags yesterday; to register these stocks at 2,014,911 bags.  There was meanwhile a larger in number 6,323 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 39,352 bags.  

The commodity markets had another mixed day yesterday and with the softening U.S. dollar assisting to buoy spirits within many markets, to see the overall macro commodity index showing a degree of buoyancy for the day.   The Natural Gas, Cocoa, Coffee, Copper, Orange Juice, Wheat and Soybean markets had a day of buoyancy and the Oil markets were steady for the day, while the Sugar, Cotton, Corn, Gold and Silver markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.15% higher; to register this index at 426.97.   The day starts with the U.S. Dollar marginally softer and trading at 1.398 to Sterling, at 1.226 to the Euro and 3.202 to the Brazilian Real, while North Sea Oil is steady and is selling at US$ 69.30 per barrel. 

The London and New York markets started the day yesterday with both markets showing early buoyancy, to see the markets maintain this stance into the early afternoon trade.   As the afternoon progressed the New York market attracted some increased support and to add more significant value, while the London market maintained its relatively more modest gains of the day.  The New York market did however seemingly hit a nearby ceiling and to come back from the highs, while the London market maintained a steady stance for the day. 

The London market ended the day on a positive note and with 84.6% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 61.9% of the earlier gains of the day intact.   This close and with a relatively soft U.S. dollar in play is likely to bring some degree of hesitant confidence to the fore and one would think is due to set the markets for a follow through steady start for early trade today, against the prices set yesterday, as follows: 

LONDON ROBUSTA US$/MT                       NEW YORK ARABICA USc/Lb. 

JAN    1783 + 7   

MAR   1767 + 11                                            MAR   122.55 + 1.30

MAY   1751 + 9                                              MAY   125.00 + 1.30

JUL    1779 + 9                                               JUL   127.35 + 1.25 

SEP    1783 + 8                                              SEP    129.70 + 1.30

NOV   1790 + 8                                              DEC    133.15 + 1.30

JAN    1797 + 7                                              MAR   136.45 + 1.35

MAR   1810 + 7                                              MAY   138.40 + 1.30

MAY   1824 + 4                                               JUL   140.15 + 1.30

JUL    1854 + 4                                               SEP   141.90 + 1.25