Coffee Market Report April 23 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 22.86% during the week of trade leading up to Tuesday 17th. April; to register a net short sold position of 70,577 Lots on the day. This net short-sold position which is the equivalent of 20,008,267 bags has most likely been since reduced, following the period of mixed but 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 increase their net short sold position within this market by 6.75% during the week of trade leading up to Tuesday 17th. April; to register a net short sold position of 18,323 Lots on the day.  This net short sold position which is the equivalent of 3,053,833 bags is probably little changed, following the period of mixed but overall sideways trade, which has since followed. 

The speculative net short sold position within the New York washed arabica coffee market as at Tuesday last week is the equivalent of approximately 30% of the global washed arabica production and in terms of arabica coffee in general, the equivalent of approximately 20% of this years forecasted arabica production.   These are fascinating percentages of speculative selling of coffees that do not exist and would make one question where the point of exhaustion is, on the part of this sector of the New York market. 

Likewise, to make one speculate how violent might be the corrective reaction, should any unforeseen weather-related incident occur to turn this market bullish rather than the prevailing bearish sentiment that prevails.   The latter is unlikely but there is the Brazil frost season to the fore, which with the uncertainty of global weather patterns, has still to be watched.  

Following the string of forecasts from respected coffee trade houses and commodity brokerage houses that have pegged the forthcoming new Brazil coffee crop that range between 58 million and as much as 65 million bags, Sucden Financial have increased their earlier forecast for a new Brazil crop of 58 million bags, to between 60 million and 62 million bags.  Further fuelling the bearish sentiment within the coffee markets, which lack any form of supportive fundamental news for the present. 

The July 2018 to July 2018 contracts arbitrage between the London and New York markets broadened on Friday, to register this at 37.91 usc/Lb., while this equates to 32.21% 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 7,280 bags on Friday; to register these stocks at 1,979,472 bags.  There were meanwhile a larger in number 10.970 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 61,089 bags. 

The commodity markets were mixed in trade on Friday but with many markets experiencing a softer day’s trade, to see the overall macro commodity index taking a softer track for the day.  The Brent Oil, Natural Gas, New York arabica Coffee, Cotton and Orange Juice markets had a day of buoyancy and the U.S. Oil markets was near to steady for the day, while the Sugar, Cocoa, London robusta Coffee, Copper, Wheat, Corn, Soybean, 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 0.14% lower; to see this index registered at 430.82.  The day starts with the U.S. Dollar steady and trading at 1.403 to Sterling, at 1.227 to the Euro and with the dollar buying 3.413 Brazilian Real, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 75.15 per barrel. 

The London market started the day on Friday trading marginally south of par, while the New York market started the day with some modest buoyancy and with the markets holding this mixed stance trading close to but either side of par, into the early afternoon trade.   As the afternoon progressed the London market remained in modest negative territory, while the New York market started to attract more support and to add value and while the New York market started on a steady upside track for the rest of the day’s trade, the London market came under pressure to slip further into negative territory. 

The London market ended the day on a negative note and with 80% of the earlier losses of the day intact, while the New York market ended the day on a very positive note and with 85.3% of the earlier gains of the day intact.  This mixed close provides little in the way of guidance but with the buoyancy seen within the New York market the evidence of the extensive short sold positions within this market, it may assist towards some  degree of hesitant support and to set both markets for 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   1722 – 8                                                MAY   115.75 + 1.50

JUL    1759 – 8                                                JUL    117.70 + 1.45 

SEP    1739 – 7                                               SEP    119.80 + 1.40

NOV   1739 – 5                                               DEC    123.30 + 1.40

JAN    1742 – 4                                               MAR   126.80 + 1.35

MAR   1753 – 4                                               MAY   129.15 + 1.35

MAY   1765 – 3                                                JUL    131.35 + 1.30

JUL    1778 – 3                                                SEP    133.30 + 1.30

SEP    1790 – 2                                                DEC   136.15 + 1.30

NOV   1807 – 2                                                MAR   138.95 + 1.30