Coffee Market Report November 17 2016
The coffee markets were devoid of striking news yesterday and with the further bouts of rain showers due to interrupt new crop harvesting in Vietnam already visible in the resilience of the London market, as this market bucked the negative trend set within the New York market. This latter market that is supported by the still substantial speculative and fund net long positions, tending to be somewhat threatened by the pending increase in new crop price fixation selling that is due with the new and potentially larger Colombian and Central American fine washed arabica coffee crops.
The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 67.15 usc/Lb., while this equates to a 40.85% 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 1,752 bags yesterday; to register these stocks at 1,274,194 bags. There was meanwhile a smaller in volume 506 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 17,930 bags.
The commodity markets continued to encounter a relatively strong U.S. dollar yesterday and to see the markets mixed in trade, with the overall macro commodity index remaining relatively steady for the day. The Natural Gas, Cocoa, London robusta Coffee, Cotton, Orange Juice, Wheat, Corn and Soybean markets had a day of buoyancy, while the Oil, Sugar, New York arabica Coffee, Copper, Gold and Silver markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.03% higher; to see this Index registered at 413.21. The day starts with the U.S. dollar steady and trading at 1.242 to Sterling and 1.069 to the Euro, while North Sea Oil is steady and is selling at 44.70 per barrel.
The London market started the day yesterday coming under pressure and trading south of par, while the New York market showed some early buoyancy. Trade was however very erratic for the New York market and with relatively sharp swings dipping below and above par into the afternoon trade but with the overall momentum taking this market on an erratic downside track for the rest of the day, while the London market finally took a late in the day upside recovery track and moved back into positive territory. The London market ended the day on a positive note and with 96.4% of the gains of the day intact, while the New York market ended the day on a softer note and with 45% of the earlier losses of the day intact. This mixed close tends to highlight that uncertainty within the somewhat overbought New York market, but with some focus upon the medium-term tighter supply for robusta coffee supply related to the London market. Thus, one might think that with the weaker Brazil Real now trading at 3.45 to the dollar, that there might only be a near to steady start for the New York market and perhaps a steadier start due for the London market for early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
NOV 2215 + 22 DEC 161.25 – 0.55
JAN 2163 + 27 MAR 164.40 – 0.90
MAR 2144 + 17 MAY 166.75 – 0.95
MAY 2149 + 19 JUL 168.85 – 0.95
JUL 2153 + 20 SEP 170.65 – 1.00
SEP 2158 + 23 DEC 173.05 – 0.95
NOV 2163 + 23 MAR 175.10 – 0.90
JAN 2171 + 23 MAY 176.15 – 0.85
MAR 2185 + 23 JUL 176.95 – 0.90
MAY 2201 + 23 SEP 177.65 – 0.95