Coffee Market Report November 22 2016

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 long position within the market by 10.77% over the week of trade leading up to Tuesday 15th. November; to register a net long position of 52,872 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 0.03%, to register a net long position of 41,529 Lots on the day. 

Over the same week the Non-Commercial Speculative sector of this market decreased their long position within the market by 12.56%, to register net long position of 51,553 Lots.   This net long position which is the equivalent of 14,615,047 bags is most likely to have since been decreased, following the period of mixed but overall softer trade that has since followed and likewise, that of the Managed Money fund sector of the market. 

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 long position within this market by 9.34% during the week of trade leading up to Tuesday 15th. November; to register a long position of 29,850 Lots.  This net long position which is the equivalent of 4,975,000 bags has most likely been further reduced, following the period of mixed but overall softer trade that has since followed. 

The well-respected USDA Foreign Agricultural Service have forecasted that Indian coffee production for this new October 2016 to September 2017 shall be 630,000 bags or 10.86% lower than the previous coffee year, at a total of 5,170,000 bags.   This new crop they forecast shall be made up by a 17.68% lower arabica coffee crop of 1,420,00 bags and a 7.98% lower robusta coffee crop of 3,750,000 bags, while they estimate that Indian domestic coffee consumption has somewhat stalled and shall be 1.1 million bags for this new coffee year. 

The well-respected USDA Foreign Agricultural Service have forecasted that Colombian coffee production shall remain unchanged for this new October 2016 to September 2017 coffee year, at a total of 14 million bags.   Against this they forecast that green coffee exports for the present coffee year shall be approximately 11,900,000 bags, while they foresee value added soluble coffee exports in terms of their green bean equivalent to be 825,000 bags and roast and ground coffee exports to be the equivalent of 90,000 bags of green coffee.

 

The well-respected USDA Foreign Agricultural Service have estimated the Brazil coffee crop for the countries July 2016 to June 2017 marketing year to be 6,700,00 bags or 13,56% higher than the previous marketing year’s crop, at a total of 56.1 million bags.   This figure they relate to a 26.32% increase in arabica coffee production to total 45,600,000 bags, as against a 21.05% decline in the conilon robusta coffee crop this year, which they have estimated at 10,500,000 bags. 

One might comment that these reports from the USDA in terms of their Indian and Brazilian numbers are fairly close to most of the trade and industry assessments so far, but that they would appear to be a bit conservative in terms of their forecast for little change to the Colombian production for this new coffee year.   As there are many trade and industry players who refer to the maturing new coffee trees that have been planted in recent years and the improved weather conditions over most of the coffee districts in Colombia, to believe in a new crop that shall exceed 14.5 million bags. 

Meanwhile there have been reports of continued good rains due for the Brazil coffee districts, while there is new speculation that the new Vietnam robusta crop might not quite that much lower than the previous coffee crop, as many had previously forecasted.   This latter Vietnam new crop factor tending to dampen speculative spirits within the London market, albeit that even if the new Vietnam robusta crop is only marginally lower, one has to keep in mind the dip in both the Brazil and Indonesia robusta coffee production this year and the prospects for a dip in the forthcoming new Indian robusta coffee crop.    

The March to March contracts arbitrage between the London and New York markets broadened yesterday, to register this at 69.13 usc/Lb., while this equates to a 42.33% 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 decrease by 15,379 bags yesterday; to register these stocks at 1,256,846 bags.  There was meanwhile a smaller in volume 3,063 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 15,343 bags. 

The commodity markets tended to take a positive track yesterday, with the Oil markets supported by renewed speculation for OPEC production cuts taking the lead in terms of gains for the day, to see the overall macro commodity index taking a positive track for the day.   The Oil, Natural Gas, Sugar, New York arabica Coffee, Copper, Wheat, Corn, Soybean and Gold markets had a day of buoyancy and the Cocoa, Cotton and Orange Juice markets were steady for the day, while the London robusta Coffee and Silver markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.55% higher; to see this Index registered at 420.49.   The day starts with the U.S. dollar tending softer and trading at 1.249 to Sterling and 1.063 to the Euro, while North Sea Oil is steady and is selling at 46.90 per barrel.

 The London market started the day yesterday on a softer note and particularly so for the prompt months, while the New York market started the day with early buoyancy and seemingly taking some heart from the slightly firmer nature of the Brazil Real to the dollar rate.   This remained the track for both markets into the afternoon trade, but as the afternoon progressed and with the London market retaining its softer stance, to finally be joined by a softer New York market that slipped south of par and into modest negative territory.    The loss of confidence within the New York market started to trigger stop loss selling to accentuate the losses, with the London market coming under similar pressure and extending its earlier losses of the day.   However, the New York market soon hit a support level and with renewed buoyancy a resurgence of confidence to see the market bounce back into positive territory and with roaster buying under the market, a partial recovery for the London market.   The London market ended the day on a soft note and with 68.3% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 60% of the earlier gains of the day intact.   This mixed close provides for mixed signals and an uncertain technical picture but one might expect that the recovery for the New York market might assist to buoy confidence and set the markets for a degree of buoyancy for the London market and a steady start for the New York market for early trade today, against the prices set yesterday, as follows: 

LONDON ROBUSTA US$/MT                           NEW YORK ARABICA USc/Lb. 

NOV     2112 – 89                                               DEC   158.65 + 0.80

JAN      2083 – 69                                              MAR   163.30 + 1.20

MAR     2076 – 40                                              MAY   165.60 + 1.25

MAY     2083 – 34                                                JUL   167.65 + 1.25

JUL      2089 – 25                                                SEP   169.60 + 1.40

SEP      2094 – 19                                               DEC   172.15 + 1.55

NOV     2100 – 16                                               MAR   174.45 + 1.80

JAN      2108 – 16                                               MAY   175.65 + 1.90

MAR     2122 – 16                                                JUL   176.50 + 1.95

MAY     2138 – 16                                                SEP   177.35 + 2.10