Coffee Market Report April 09 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 10.2% during the week of trade leading up to Tuesday 3rd. April; to register a net short sold position of 61,685 Lots on the day. This net short-sold position which is the equivalent of 17,487,424 bags has most likely been reduced a little, following the period of overall more positive 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 3.19% during the week of trade leading up to Tuesday 3rd. April; to register a net short sold position of 20,912 Lots on the day.  This net short sold position which is the equivalent of 3,485,333 bags is probably little changed, following the period of mixed but overall sideways trade through the rest of last week. 

The evidence of the significantly short sold status of the coffee terminal markets at present that reflects the prevailing bearish sentiment of the speculative and fund sectors of the coffee markets, provides for a rather depressing backdrop for the 121st. Session of the Council of the International Coffee Organisation is due to start today.   But there really is nothing very much that the producer members of the ICO can do about the problem of low coffee prices as history has proven that with so many producers in play, that the retention of coffee stocks programs are unaffordable for most producers and finally such schemes fail.  

One might however speculate that with global coffee consumption steadily increasing and with the soft coffee prices more than likely due to have some impact upon medium to longer term yields for many producers and particularly the relatively high cost Mexicans and Central Americans, that this shall bring to the fore forecasts for smaller new crops.   While with the major negative factor being the pending bumper new Brazil coffee crop that post the harvest that many shall start to forecast a biennial bearing small Brazil crop for 2019 and that such forecasts might well start to impact upon longer term market sentiment, by as early as the end of the third quarter of this year. 

A change in sentiment that would potentially bring with it speculative and fund short covering activity, which could assist towards some degree of market buoyancy and a modest recovery for the second half of the year.   While in terms of global weather it is erratic and unstable and while the coffee industry has come through a couple of years of generally stable weather, that the probability is that there shall be some weather issues due for one or the other of the main producer blocs by the end of the year, which might be further supportive for coffee market sentiment and prices.  But it is meanwhile a rather depressing time for the coffee producers. 

The July 2018 to July 2018 contracts arbitrage between the London and New York markets broadened on Friday, to register this at 40.20 usc/Lb., while this equates to 33.67% price discount for the London Robusta coffee market.  

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 875 bags on Friday; to register these stocks at 1,949,641 bags.  There were meanwhile a larger in number 2,218 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 25,279 bags. 

The commodity markets had a mixed day on Friday but with the influential Oil markets on the back food for the day, the overall macro commodity index took a softer track for the day.   The Natural Gas, Cotton, Wheat, Corn, Soybean, Gold and Silver markets had a day of buoyancy and the New York arabica Coffee market was near to steady for the day, while the Oil, Sugar, Cocoa, London robusta Coffee, Copper and Orange Juice markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.35% lower; to see this index registered at 420.24.  The day starts with the U.S. Dollar near to steady and trading at 1.409 to Sterling, at 1.228 to the Euro and with the dollar buying 3.368 Brazilian Real, while North Sea Oil is steady and is selling at US$ 66.50 per barrel. 

The London and New York markets started the day on Friday on a steady note, but with the London market soon coming under pressure and dipping south into negative territory, while the New York market settled back to only marginally south of par and with the markets maintaining this stance into the early afternoon trade.  As the afternoon progressed the London market remained under pressure and south of par, while the New York market experienced some support and a move back into positive territory but this was short lived and the New York market once again dipped back south of par, to see the markets due for a soft close for the week. 

The London market ended the day on a very negative note and with 88% of the earlier losses of the day intact, while the New York market ended the day on a modestly negative note and having recovered 80% of the earlier losses of the day, by the close.   This close does little to inspire but perhaps with the evidence of the extensive net short sold status of the markets there might be some degree of caution, to 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. 

MAY   1730 – 29                                             MAY   117.45 – 0.10

JUL    1746 – 22                                              JUL    119.40 – 0.15 

SEP    1742 – 18                                             SEP    121.40 – 0.25

NOV   1747 – 16                                             DEC    124.80 – 0.30

JAN    1750 – 16                                             MAR   128.35 – 0.25

MAR   1759 – 14                                             MAY   130.75 – 0.25

MAY   1771 – 14                                              JUL    133.00 – 0.30

JUL    1784 – 13                                              SEP    134.95 – 0.35

SEP    1797 – 12                                              DEC   137.80 – 0.50

NOV   1802 – 12                                              MAR   140.60 – 0.60