Coffee Market Report May 22 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 increase their net short sold position within the market by 22.93% over the week of trade leading up to Tuesday 15th. May; to register a new net short sold position of 50,063 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 3.33%, to register a net long position of 34,695 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market increased their net short sold position within this market by 19.03%, to register a net short sold position of 49,735 Lots.  This net short sold position which is the equivalent of 14,099,652 bags has most likely been decreased again, following the period of mixed by overall more positive trade that has since followed and likewise, that of the managed money fund sector of the market. 

The respected U.S. Department of Agriculture Global Agricultural Network USDA have reported that they had reduced their earlier coffee production forecast for Brazil for the present October 2017 to September 2018 coffee year by 0.59%, to now assess the crop for the present coffee year at 50.9 million bags.  They do however and with the new crop harvest already started, forecast this crop to be 9.3 million bags or 18.27% larger at a total of 60.2 million bags.   

The forecast by the USDA is in line with and to the conservative side of many other significantly larger new crop forecasts by respected members of the domestic and international coffee trade and industry players, which would see this report being taken as a further confirmation of rising coffee supply for the second half of the year.   While in terms of this new crop, the USDA have forecast that it shall be made up by 44.5 million bags of arabica coffee and 15.7 million bags of conilon robusta coffee, with the report forecasting exports for the coming coffee year in terms of the combination of green coffees and value added processed coffees, to be over 4.9 million bags or 16.13% higher than the present coffee year, at a total of 35.33 million bags. 

The USDA have reported that they forecast a 1.74% increase in Venezuelan coffee production for the forthcoming October 2018 to September 2019 coffee year, to see the crop total 585,000 bags.  However, with a domestic coffee consumption of an estimated 1,172,000 bags, they foresee that the cash strapped country shall need to finance the importation of approximately 603,000 bags of coffee. 

Reports of light frosts in some of the southern corn growing areas of Brazil and even within some low-lying areas further to the north, had brought the subject of frost to the fore yesterday.  This highlight of the frost season threat was accompanied by the positive nature of the overall macro commodity index, which assisted to buoy spirits within the coffee markets for the day. 

There are meanwhile protests by transporters in the leading Brazil port of Santos over the price of diesel, which has been disrupting incoming deliveries for export and likewise, deliveries into the internal market of imports.   It is not clear as of yet how long these protests might continue and how much this might impact on short term coffee export volumes, but it is a factor that shall be closely watched. 

The July 2018 to July 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 38.78 usc/Lb., while this equates to 32.26% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were unchanged yesterday; to register these stocks at 2,015,278 bags.  There was meanwhile also no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 41,552 bags. 

The commodity markets were mixed in trade yesterday, but with many markets having a good start to the week and assisting to buoy many markets and to see the overall macro commodity index taking a modestly positive track for the day.  The Oil, Sugar, Coffee, Cotton, Copper, Orange Juice, Corn, Soybean and Silver markets ended the day on a positive note, while the Natural Gas, Cocoa, Wheat and Gold markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.72% higher; to see this index registered at 437.30.  The day starts with the U.S. Dollar steady and trading at 1.342 to Sterling, at 1.178 to the Euro and with the dollar buying 3.677 Brazilian Real, while North Sea Oil is steady and is selling at US$ 78.85 per barrel. 

The London and New York markets started the day yesterday trading mostly to the positive side of par, but with the London market soon slipping modestly south of par and to see the markets taking this mixed stance, into the early afternoon trade.  As the afternoon progressed the New York market started to add some value and to attract buy stops to accentuate the gains, while the London market moved back up into more modest positive territory.  The London market did however catch up in late trade and to join the New York market for a relatively strong close for the day. 

The London market ended the day on a positive note and with 89.2% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 84.6% of the earlier modest gains of the day intact.   This positive close might assist to inspire a degree of confidence and with many leading consumer trade and industry players in Europe returning from the Pentecost long weekend holiday, it could assist the markets to have a steady start for early trade today, against the prices set yesterday, as follows: 

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

MAY   1783 + 33

JUL    1795 + 33                                              JUL    120.20 + 2.20 

SEP    1777 + 29                                             SEP    122.45 + 2.20

NOV   1781 + 29                                             DEC    125.95 + 2.20

JAN    1784 + 29                                             MAR   129.35 + 2.15

MAR   1792 + 28                                             MAY   131.60 + 2.05

MAY   1795 + 21                                              JUL    133.65 + 1.90

JUL    1783 + 3                                                SEP    135.50 + 1.80

SEP    1787 – 4                                                DEC   138.15 + 1.80

NOV   1798 – 4                                                MAR   140.80 + 1.75