Coffee Market Report January 30 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 11.33% over the week of trade leading up to Tuesday 23rd. January; to register a new net short sold position of 54,198 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 2.5%, to register a net long position of 42,866 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 7.12%, to register a net short sold position of 58,970 Lots.  This net short sold position which is the equivalent of 16,717,734 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. 

The certified washed arabica coffee stocks continued to decline yesterday, but one would suggest that this is no reflection upon the availability of new crop washed arabica coffee supply, but is perhaps more an interest in these relatively inexpensive coffees on the part of industries, as a reaction to the price resistance that is inflating export differentials from both many washed arabica coffee producers and for the new crop Brazil natural arabica coffees.   Thus, and with no doubt that there are significant volumes of new crop Mexican and Central American washed arabica coffees still to come to the market, one would think that these few days of declining certified stocks cannot really to be seen to be a positive fundamental for the New York market.  

There are effectively now only a dozen trading days to the fore before the advent of the eve of the week-long Tet New Year holiday in Vietnam and with farmers looking to raise cash to celebrate the bringing in of the new Year of the Dog, one might see this to be a factor that shall put some pressure upon the fortunes of the London robusta coffee market for the short term.   While in terms of the New York market and with the speculative and fund sectors of the market already heavily sold short and many producers maintaining some degree of price resistance towards the relatively soft prices that this market dictates, there might not be as much short-term pressure coming to the New York market.   If this proves to be the case and it is not a certainty but more a possibility, it would be likely to be a factor that would contribute to a broadening of the arbitrage between the two markets in the coming days. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 45.25 usc/Lb., while this equates to 36.21% 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 12,201 bags yesterday; to register these stocks at 1,967,165 bags.  There was meanwhile a smaller in number 6,140 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 36,848 bags.  

The commodity markets encountered some modest renewed muscle for the U.S. dollar yesterday, which had some impact within some of the markets, to contribute towards the overall macro commodity index tending softer for the day.   The Natural Gas, Sugar, Orange Juice, Wheat, Corn and Soybean markets nevertheless had a day of buoyancy, while the Oil, Cocoa, Coffee, Cotton, Copper, 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 0.153% lower; to register this index at 433.01.   The day starts with the U.S. Dollar showing some degree of early buoyancy and trading at 1.404 to Sterling, at 1.236 to the Euro and the dollar is buying 3.155 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 67.95 per barrel. 

The London and New York markets started the day yesterday with some modest buoyancy and with both markets holding steady and remaining north of par, into the early afternoon trade.   As the afternoon progressed the markets started to come under pressure and to slip south of par and while it was only a relatively modest decline for the London market, the New York market took a brief sharp slide deeper into negative territory.   The New York market did however soon attract support and to head back to par, while the London market continued to suffer from modest losses and towards a softer close and with the New York market once again slipping back into modest negative territory during late trade. 

The London market ended the day on a soft note and with 71.4% of the earlier losses of the day intact, while the New York market ended the day on a modestly negative note and having recovered 86.7% of the earlier losses of the day by the close.   This close and with the New York market having managed to bounce back from the earlier lows might inspire some degree of hesitancy and contribute towards a degree of caution and a steady start for early trade today against the prices set yesterday, as follows: 

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

JAN    1751 – 21     

MAR   1757 – 10                                            MAR   124.95 – 0.20

MAY   1740 – 6                                              MAY   127.20 – 0.30

JUL    1775 – 3                                               JUL   129.55 – 0.30 

SEP    1778 – 3                                              SEP    131.90 – 0.35

NOV   1783 – 4                                              DEC    135.30 – 0.40

JAN    1789 – 5                                              MAR   138.60 – 0.40

MAR   1802 – 5                                              MAY   140.55 – 0.45

MAY   1816 – 5                                               JUL   142.30 – 0.40

JUL    1846 – 5                                               SEP   143.95 – 0.40