Coffee Market Report November 16 2016

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 long position within the market by 4,65% over the week of trade leading up to Tuesday 8th. November; to register a net long position of 59,252 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 1.54%, to register a net long position of 41,516 Lots on the day. 

Over the same week the Non-Commercial Speculative sector of this market increased their long position within the market by 5.44%, to register net long position of 58,960 Lots.   This net long position which is the equivalent of 16,714,899 bags is most likely to have since been decreased, following the period of mixed but overall softer trade that has since followed and likewise, that of the Managed Money fund sector of the market. 

The remarkable size of the net longs within the New York market and with somewhat questionable fundamentals to support such a strong bullish stance towards this market have however taken their toll over the past week and thus one would think, there shall be a keen interest in the numbers that shall be reported at the end of the week and early next week.   As even with the past week’s correction, the New York market still looks to be somewhat overbought. 

Conversely and with the news of some further rain delays for the progress of the new Vietnam robusta coffee crop and with the short to medium term tightness in robusta coffee supply from Brazil and Indonesia, the London market would look to justify some degree of speculative and industry support.  

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 7,982 bags or 0.13% during the month of October, to register these stocks at 6,207,005 bags at the end of the month.   These stocks do not of course include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of 560,000 bags per week, would conservatively have been at least 1.1 million bags. 

Therefore, if one is to consider the additional unreported stocks and look to end September stocks in North America of approximately 7.3 million bags, it would have equated to something in the order of 13 weeks of roasting activity.  This number remains a safe reserve, in terms of the steady flow of new crop arabica coffees from Brazil and Colombia that are already coming to the market and soon to be followed, by the new crop arabica coffees from Central America, along with the new crop robusta coffees from Vietnam.  

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 70.29 usc/Lb., while this equates to a 42.48% price discount for the London robusta coffee market.  This arbitrage remains an attractive factor for the roasters who have considered robusta coffees to be an opportunist discount component, within their mostly arabica coffee blends. 

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 184 bags yesterday; to register these stocks at 1,272,442 bags.  There was meanwhile a larger in volume 2,671 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 17,424 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 7,167 bags or 0.31% over the week of trade leading up to Monday 14th. November, to register these stocks at 2,286,667 bags, on the day. 

The commodity markets despite the continued strength of the U.S. dollar, had something of a day of recovery yesterday and with the Oil markets taking the lead, the overall macro commodity index took a positive track for the day.  The Oil, London robusta Coffee, Cotton, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets had a day of buoyancy the New York arabica Coffee market ended the day on a steady note, while the Natural Gas, Sugar, Cocoa and Copper markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.62% higher; to see this Index registered at 413.07.   The day starts with the U.S. dollar near to steady and trading at 1.247 to Sterling and 1.074 to the Euro, while North Sea Oil is showing early buoyancy and is selling at 45.10 per barrel. 

The London and New York markets started the day on a positive note and maintained this track into the early afternoon trade.   However, as the afternoon progressed the markets started to falter and dipped back towards par, but with a bounce back that was continued in an erratic manner by the London market that took an overall positive track for the day, while the New York market staggered on an erratic and uncertain track for the rest of the day.   The London market ended the day on a positive note and with 84.1% of the earlier gains of the day intact, while the New York market ended the day on a hesitant steady note.    This close and with the technical picture of the New York market tending negative and the London market tending to look positive provides for mixed signals and one might expect to see a mixed start for early trade today, with possible follow through buoyancy for the London market and a near to steady start for the New York market, against the prices set yesterday, as follows: 

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

NOV     2193 + 55                                               DEC   161.80 unch

JAN      2136 + 37                                              MAR   165.30 – 0.15

MAR     2127 + 29                                              MAY   167.70 – 0.15

MAY     2130 + 26                                                JUL   169.80 – 0.05

JUL      2133 + 22                                                SEP   171.65 unch

SEP      2135 + 17                                               DEC   174.00 + 0.05

NOV     2140 + 13                                               MAR   176.00 + 0.05

JAN      2148 + 13                                               MAY   177.00 + 0.05

MAR     2162 + 13                                                JUL   177.85 + 0.05

MAY     2178 + 13                                                SEP   178.60 + 0.05