Coffee Market Report April 17 2018

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 decrease their net short sold position within the market by 8.23% over the week of trade leading up to Tuesday 10th. April; to register a new net short sold position of 59,835 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 1.89%, to register a net long position of 39,446 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market decreased their net short sold position within this market by 6.88%, to register a net short sold position of 57,444 Lots.  This net short sold position which is the equivalent of 16,285,119 bags and following yesterday’s relatively sharp and high-volume selloff, has most likely been once again increased and likewise, that of the managed money fund sector of the market. 

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 42,449 bags or 0.65% during the month of March, to register these stocks at 6,567,316 bags at the end of the month.   It must be noted that despite some small month by month declines in these port warehouse stocks over the previous seven months, that these stocks remain relatively substantial. 

These stocks do not 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 approximately 570,000 bags per week, would conservatively have been at least 1.1 million bags.  If one is to consider the additional unreported stocks the end month stocks, this would equate to more than 13 weeks of roasting activity, which most would consider to be more than a safe reserve. 

The evidence of the growth of the U.S.A. port warehouse stocks and despite relatively low volumes of coffee exports from Brazil over the past few months, further contributes to the prevailing bearish sentiment within the volatile New York market.    With the speculative sector of this market remaining focused on the possibility of surging new crop coffees coming to the fore from Brazil, albeit that many foresee that the Brazilians shall be more controlled and likely to rebuild their much-depleted coffee stocks, rather than aggressively sell the new crop coffees and depress the value of these coffees. 

The July 2018 to July 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 38.12 usc/Lb., while this equates to 32.71% 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 1,649 bags yesterday; to register these stocks at 1,954,482 bags.  There were meanwhile a larger in number 8,400 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 94,982 bags. 

The commodity markets were mixed in trade yesterday and with the weaker U.S. dollar not providing for an overall support factor, to see the overall macro commodity index only showing modest buoyancy for the day.  The Natural Gas, Cocoa, Cotton, Copper, Orange Juice, Gold and Silver markets had a day of buoyancy, while the Oil, Sugar, Coffee, Wheat, Corn and Soybean markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.17% higher; to see this index registered at 428.60.  The day starts with the U.S. Dollar tending softer and trading at 1.434 to Sterling, at 1.238 to the Euro and with the dollar buying 3.419 Brazilian Real, while North Sea Oil is posting some early buoyancy and is selling at US$ 72.85 per barrel. 

The London market started the day yesterday with modes buoyancy, while the New York market started the day on a modestly softer note and with the markets retaining this mixed stance, into the early afternoon trade.  As the afternoon progressed the London market started to add some more value and while the New York market remained within negative territory, but this mixed stance either side of par could not be sustained and the New York market started to come under further selling pressure.  The New York market encountered sell stops which accentuated the losses, while the London market lost its gains and slipped back into negative territory and set the markets for an overall softer close for the day’s trade.   

The London market ended the day on soft note and with 77.8% of the earlier losses of the day intact, while the New York market ended the day on a very soft note and with 96.7% of the earlier losses of the day intact.   This close contributes towards a negative picture for the charts and does not inspire confidence, but one might suspect that the combination of a softer U.S. dollar, speculative and fund exhaustion and opportunist industry price fixation might assist towards a modest corrective recovery for the New York market.   But with producer price fixation pressure hanging over the market, only a near to steady 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. 

MAY   1701 – 12                                             MAY   114.25 – 3.05

JUL    1729 – 7                                                JUL    116.55 – 2.95 

SEP    1718 – 8                                               SEP    118.65 – 2.90

NOV   1721 – 7                                               DEC    122.15 – 2.75

JAN    1723 – 7                                               MAR   125.65 – 2.75

MAR   1733 – 7                                               MAY   128.05 – 2.70

MAY   1745 – 7                                                JUL    130.35 – 2.55

JUL    1759 – 7                                                SEP    132.35 – 2.45

SEP    1772 – 7                                                DEC   135.35 – 2.25

NOV   1777 – 7                                                MAR   138.20 – 2.15