Coffee Market Report March 19 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 3.25% during the week of trade leading up to Tuesday 13th. March; to register a net short sold position of 52,375 Lots on the day. This net short-sold position which is the equivalent of 14,848,080 bags has most likely been once again increased, following the period of mixed but overall 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 5.84% during the week of trade leading up to Tuesday 13th. March; to register a net short sold position of 11,827 Lots on the day.  This net short sold position which is the equivalent of 1,971,167 bags is most likely little changed, following the period of mixed but overall sideways trade, which has since followed. 

The National Coffee Association in the U.S.A. have reported that in their recent survey that the number of Americans drinking a daily cup of coffee is at its highest since 2012, with 64% of Americans over the age of 18 reported to have had a cup of coffee the previous day.   This being 2% better than the results in the survey conducted the previous year and with the survey reporting that coffee is recovering consumer support, at the expense of the cola beverages.  

The survey did also note that the resurgence in support for coffee was being boosted by younger consumers and with 48% of these millennials not only reporting that they had a cup of coffee the previous day, but that it was what they considered to be gourmet coffee.   The coffees that are loosely considered to be gourmet coffee in the American market include the espresso-based beverages and the capsule coffees, which are parsimonious in terms of their relatively low grammage servings, when compared to the more traditional filter and plunger forms of brewing coffee. 

One might comment that this factor is common to all the developed consumer markets and while there is indeed a growing popularity in coffee and coffee-based beverages within the higher income markets, that it is very much lead by the examples of the coffee shop culture and the mostly modest portion-controlled espresso beverages.   Thus, while bringing with it fashionable vibrancy for the coffee market and many new consumers, one might speculate that the reality is only very modest growth in overall coffee consumption volumes within these developed markets. 

The traditional developed coffee markets aside though, there is no doubt that there is steady and good volume growth in coffee consumption within most of the Asian markets, which brings with it steadily increasing demand and contributes to much of the approximate 2.5 million bags of increase in global green coffee demand each year.   A consumption growth factor that must contribute towards a market recovery on the medium to longer term, albeit that with the speculative and fund sectors of the market in the driving seat, it is unlikely to have any short-term influence. 

The May 2018 to May 2018 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 38.90 usc/Lb., while this equates to 32.95% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to remain unchanged on Friday; to register these stocks at 1,927,447 bags.  There were meanwhile 960 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 26,027 bags. 

The commodity markets were mostly on the back foot on Friday, with only the energy markets bucking the trend and showing some buoyancy for the day.   The Oil, Natural Gas, London robusta Coffee and Soybean markets had a day of buoyancy, while the Sugar, Cocoa, New York arabica Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, 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 0.34% lower; to see this index registered at 426.68.  The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.392 to Sterling, at 1.226 to the Euro and with the dollar buying 3.278 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 64.60 per barrel. 

The London market started the day on Friday on a positive note, while the New York market started the day marginally north of par, but with both markets coming under pressure and slipping south of par in early afternoon trade.   As the afternoon progressed the New York market started to attract increased speculative and fund selling pressure and with sell stops being triggered to accentuate the losses, with the London market following suit in a more sedate manner.   The markets did however bounce off the lows in later trade and with the London market taking on a very positive stance, while the New York market made a partial but nevertheless reasonable recovery for the day.   

The London market ended the day on a very positive note and with 80.9% of the earlier gains of the day intact, while the New York market ended the day on a negative note but having recovered 62.2% of the earlier losses of the day by the close.   This mixed close does not assist to provide direction, but one might think that with the New York market looking somewhat oversold at present, that it shall assist towards 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   1785 + 9                                                MAR   116.95 – 0.70

MAY   1745 + 17                                              MAY    118.05 – 0.70

JUL    1774 + 16                                               JUL    120.20 – 0.75 

SEP    1776 + 16                                              SEP    122.40 – 0.80

NOV   1780 + 16                                              DEC    125.80 – 0.80

JAN    1785 + 17                                              MAR   129.30 – 0.85

MAR   1797 + 18                                               MAY   131.65 – 0.85

MAY   1810 + 18                                               JUL    133.80 – 0.80

JUL    1823 + 18                                               SEP    135.70 – 0.85

SEP    1834 + 13                                               DEC   138.35 – 0.95