Coffee Market Report February 12 2018

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non-Commercial Speculative sector of this market increase their net short sold position within the market by 4.88% during the week of trade leading up to Tuesday 6th. February; to register a net short sold position of 56,600 Lots on the day. This net short-sold position which is the equivalent of 16,045,849 bags has most likely been once again increased, following the period of mixed but mostly more negative trade, which has since followed. 

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative Non-Commercial sector of this market decrease their net short sold position within this market by 26,37% during the week of trade leading up to Tuesday 6th. February; to register a net short sold position of 13,016 Lots on the day.  This net short sold position which is the equivalent of 2,169,333 bags has most likely been little changed, following a period of mixed but overall sideways trade, which has since followed. 

The Brazilian Coffee Exporters Council Cecafé have reported that the countries green coffee exports of mostly arabica coffees for the month of January were 5.1% lower, at a total of 2,327 million bags.   This relatively slow pace of exports they foresee, shall continue through to the impact of the larger new crop for the second half of this year.  

The Agricultural Ministry in Costa Rica who have so far resisted requests to allow for the farming of robusta coffees within the lower altitude districts of the country and with the support of the Coffee Institute of Costa Rica, have passed a resolution to allow robusta coffee farming.  While the decision is still to be signed off by the countries President that would restrict the growing of robusta coffees to areas not suitable for arabica coffee farming, would now seem to be on the cards for the future. 

This decision follows similar decisions previously taken within Mexico, Guatemala and Nicaragua, where there is rising interest in robusta coffee farming within the lower altitude and higher humidity areas of these countries, to broaden the coffee industries of these traditional fine washed arabica coffee producing countries.  While with soluble coffee industries already active within the region, there is already a good potential local demand for these robusta coffees to fuel both domestic consumption demand and export demand, for these soluble coffees.    A factor that is likely to underpin the potential successful future, for the regional robusta coffee farmers. 

Meanwhile and having encountered some spells of cold and wet weather leading into and during the prevailing new crop harvest, there have been many reports from Costa Rica and Nicaragua that anticipate that their new crops might not be as high as had initially been forecast.   These are however and alike the similar reports and evidence of more modest monthly production figures from Colombia to the south, these reports and forecasts have not been able to counter the negative impact of the forecasts for a significantly larger new crop from Brazil this year, in terms of the prevailing negative speculative sentiment within the related New York market. 

The May 2018 to May 2018 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 43.56 usc/Lb., while this equates to 35.19% 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 1,174 bags on Friday; to register these stocks at 1,917,962 bags.  There was meanwhile a larger in number 7,695 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 14,650 bags.  

The commodity markets encountered some renewed muscle for the U.S. dollar on Friday and with many markets tending softer, to see the overall macro commodity index on a softer track for the day.  The Sugar, Cocoa, London robusta Coffee and Orange Juice markets nevertheless had a day of buoyancy, while the Oil, Natural Gas, New York arabica Coffee, Cotton, Copper, 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 1.12% lower; to register this index at 416.13.   The day starts with the U.S. Dollar tending softer and trading at 1.386 to Sterling, at 1.229 to the Euro and the dollar is buying 3.295 Brazilian Real, while North Sea Oil is showing some degree of corrective buoyancy and is selling at US$ 63.15 per barrel. 

The London market started the day on Friday with modest buoyancy, while the New York market started the day within modest negative territory and with the markets maintaining this mixed stance, into the early afternoon trade.  As the afternoon progressed the London market started to add value and added to its modest gains, with the New York market bouncing back and moving into positive territory.   The recovery for the New York market was however short lived and the market started back on downside track towards the close, while the London market likewise started to falter and to move back towards par for the close. 

The London market ended the day on a steady note and with 10% of the earlier gains of the day intact, while the New York market ended the day on a negative note and with 95.7% of the earlier losses of the day intact.  This mixed close and with the London market having faltered during late trade does not inspire confidence, but perhaps with the softening of the U.S. dollar and the evidence of the increase in the speculative net short position in New York there might be some degree of caution, to see the markets set for a steady start for early trade today against the prices set on Friday, as follows: 

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

MAR   1793 unch                                          MAR   121.85 – 1.00

MAY   1769 + 1                                              MAY   123.80 – 1.10

JUL    1792 + 1                                               JUL    125.95 – 1.20 

SEP    1791 + 1                                              SEP    128.25 – 1.20

NOV   1796 + 6                                              DEC    131.70 – 1.25

JAN    1800 + 7                                              MAR   135.00 – 1.25

MAR   1811 + 7                                              MAY   137.00 – 1.25

MAY   1825 + 7                                                JUL   138.75 – 1.25

JUL    1854 + 7                                                SEP   140.25 – 1.40

SEP    1857 + 7                                               DEC   142.70 – 1.55