Coffee Market Report February 06 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 decrease their net short sold position within the market by 7.32% over the week of trade leading up to Tuesday 30th. January; to register a new net short sold position of 50,231 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 3.7%, to register a net long position of 44,451 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market decreased their net short sold position within this market by 8.49%, to register a net short sold position of 53,965 Lots.  This net short sold position which is the equivalent of 15,298,838 bags has most likely been once again increased, following a period overall more negative trade that has since followed and likewise, that of the managed money fund sector of the market. 

The National Coffee Growers Federation in Colombia have reported that the country’s coffee production for the month of January was 144,000 bags or 11.29% lower than the same month last year, at a total of 1,131,000 bags.   This has contributed to the countries cumulative production for the first four months of the present October 2017 to September 2018 coffee year to be 584,000 bags or 10.35% lower than the same period in the previous coffee year, at a total of 5.058,000 bags. 

The National Coffee Growers Federation in Colombia have also reported that the country’s coffee exports for the month of January were 3,000 bags or 0.27% higher than the same month last year, at a total of 1,131,000 bags.   This has contributed to the countries cumulative coffee exports for the first four months of the present October 2017 to September 2018 coffee year to be 271,000 bags or 5.32% lower than the same period in the previous coffee year, at a total of 4,825,000 bags. 

This dip in both production and exports over the past four months in Colombia and as the third largest coffee producer would most usually have had a been supportive for sentiment within the New York arabica coffee market, but with many foreseeing the prospects for rising Central American and Brazil arabica coffee supply for the year, this has not been the case so far. 

A Reuters report has come to the fore with the news that the Brazil trade house Comexim have forecast the new 2018 Brazil crop to be on track for 60.7 million bags, of which 45.15 million bags would be arabica coffees and 15.55 million bags.    This forecast for what Comexim see to be a 17% increase in arabica coffee production for this year and a 43.3% increase in conilon robusta coffee production and an overall 22.9% increase in coffee production for this year, is likely to be disputed by many within both the Brazil and International coffee market but it does underpin the general perception for a larger new Brazil crop due for this year and will contribute to the prevailing bearish market sentiment.  

While with a Reuters Poll of fourteen leading coffee trade houses and coffee analysts having come to the fore yesterday with a new Brazil crop of 60 million bags and very much in line with the Comexim report above, it further fuels bearish sentiment.    This bearish in nature Poll having assessed that with this larger new crop from Brazil in hand, that global coffee supply for the forthcoming October 2018 to September 2019 shall be 4 million bags of surplus coffee supply. 

Albeit that South East Brazil still must be in receipt of good regular rains over the next ten to twelve weeks, if the more ambitious new Brazil coffee crop forecasts are to be close to reality.  But there are so far, no weather forecasts that indicate any threat for poor rains for the coffee regions in Brazil and it is presently difficult to see any short-term chance for speculative and fund sectors of the coffee markets to change their prevailing bearish sentiment towards the coffee markets. 

The May 2018 to May 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 42.60 usc/Lb., while this equates to 34.89% 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 9,811 bags yesterday; to register these stocks at 1,943,409 bags.  There was meanwhile a larger in number 11,860 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 27,896 bags.  

The commodity markets and with the U.S. dollar showing some follow through muscle yesterday were mostly on the back foot for the day, to see the over macro commodity index taking a softer track for the day.   The Sugar, London robusta Coffee and Copper markets nevertheless had a day of buoyancy, while the Oil, Natural Gas, Cocoa, New York arabica Coffee, Cotton, Orange Juice, Wheat, Corn, Soybean, 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 0.83% lower; to register this index at 424.87.   The day starts with the U.S. Dollar showing follow through buoyancy and trading at 1.396 to Sterling, at 1.237 to the Euro and the dollar is buying 3.262 Brazilian Real, while North Sea Oil is tending softer and selling at US$ 66.25 per barrel. 

The London and New York markets started the day yesterday trading around par, while the New York market suffered from some early negative pressure but to claw its way back and to join the London market trading around par into the early afternoon trade.  As the afternoon progressed the markets took separate tracks and with the London market retaining its buoyancy and taking a modest positive track for the day, while the New York market which had encountered a brief rally back to par, was overshadowed by bearish news and moved back into negative territory towards the close.   

The London market ended the day on a positive note and with 87.5% of the earlier modest gains of the day intact, while the New York market ended the day on a negative note and with 68.4% of the earlier losses of the day intact.   This close and with the more robust U.S. dollar still in play and with the added weakness of the Brazil Real that tends to indicate increased price fixation selling volumes due to come to the New York market, is unlikely to inspire confidence and one might expect to see only a near to steady start due for the markets for early trade today, against the prices set yesterday, as follows: 

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

MAR   1780 + 16                                            MAR   119.80 – 0.60

MAY   1752 + 7                                              MAY   122.10 – 0.65

JUL    1783 + 4                                               JUL    124.45 – 0.65 

SEP    1786 + 5                                              SEP    126.80 – 0.70

NOV   1789 + 5                                              DEC    130.25 – 0.65

JAN    1795 + 6                                              MAR   133.55 – 0.60

MAR   1806 + 3                                              MAY   135.55 – 0.65

MAY   1817 – 2                                               JUL   137.30 – 0.70

JUL    1847 – 2                                               SEP   138.95 – 0.75

SEP    1850 – 2                                              DEC   141.70 – 0.80