Coffee Market Report June 25 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 25.72% during the week of trade leading up to Tuesday 19th. June; to register a net short sold position of 60,409 Lots on the day. This net short-sold position which is the equivalent of 17,125,684 bags has most likely been little changed, following the period of mixed but overall somewhat sideways 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 27.93% during the week of trade leading up to Tuesday 19th. June; to register a net short sold position of 29,378 Lots on the day.  This net short sold position which is the equivalent of 4,896,333 bags has most likely been since reduced, following the period of mixed but overall more positive trade, which has since followed. 

The Uganda Coffee Development Authority have reported that the countries coffee exports for the month of May were 89,419 bags or 21.89% lower than the same month last year, at a total of 319,035 bags.  This lower export performance follows lower performances so far this year, but also good coffee export performances during October and November last year and therefor results in the cumulative coffee exports for the first seven months of the present October 2017 to September 2018 coffee year to still be only 138,108 bags or 4.62% lower than the same period in the previous coffee year, at a total of 2,849,102 bags. 

The relatively modest dip in terms of Ugandan coffee exports is however meaningless in terms of rising global coffee supply for the short the medium term, which comes with the significantly larger Vietnam new crop and soon to be followed by the significantly larger new Brazil crop.    With the latter Brazil crop continuing to influence speculative negative sentiment and assisted to a degree, by the softer nature of the Brazil Real that indicates that despite the soft reference price of the dollar-based coffee terminal markets, that Brazilian farmers shall still be willing sellers of new crop coffees. 

Albeit that until the end of the year and the evidence of the quality of the new summer October to March summer rainfall season that shall dictate the potential of the next 2019 Brazil coffee crop becomes clearer, it is likely that many farmers might not be aggressive sellers of their new coffee crop stocks.   With the potential for some degree of precautionary price resistance and rebuilding of stocks to possibly slow the anticipated high volumes of price fixation selling coming to the fore from Brazil over the New York market, during the second half of this year.   A factor that shall perhaps assist to bring back some degree of buoyancy and speculative short covering activity, during the second half of this year. 

The September 2018 to September 2018 contracts arbitrage between the London and New York markets broadened on Friday, to register this at 39.61 usc/Lb., while this equates to 33.87% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to remain unchanged on Friday; to register these stocks at 2,054,432 bags.  There were meanwhile 3,320 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 24,698 bags. 

The commodity markets were mixed but with most markets tending to show some degree of buoyancy on Friday, to see the overall macro commodity index on an upside track for the day.  The Il, Sugar, Coffee, Cotton, Copper, Orange Juice, Corn, Soybean and Silver markets ended the day on a positive note and the Gold market ended the day on a steady note, while the Natural Gas, Cocoa and Wheat markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.95% higher; to see this index registered at 424.23.  The day starts with the U.S. Dollar steady and trading at 1.324 to Sterling, at 1.163 to the Euro and with the dollar buying 3.785 Brazilian Real, while North Sea Oil is near to steady in early trade and is selling at US$ 74.40 per barrel. 

The London and New York markets started the day on Friday trading close to par and with the London market attracting support and adding value and to see both markets showing modest buoyancy, into the early afternoon trade.   As the afternoon progressed the London market came under pressure and briefly dipped back into modest negative territory, but with the New York market maintaining its positive nature and with the London market soon bouncing back and joining the New York market on the positive side of par and with both markets heading towards a positive close for the day.  

The London market ended the day on a positive note and with 44.4% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 56% of the earlier gains of the day intact.   This close while not really contributing much to change the picture of the charts is however accompanied by the evidence of the extensive short sold and perhaps even oversold speculative position within the New York market, which might assist towards a steady to perhaps modestly buoyant start for early trade today against the prices set on Friday, as follows: 

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

JUL    1724 + 7                                                JUL    113.85 + 1.25 

SEP    1705 + 4                                               SEP    116.95 + 0.70

NOV   1702 + 4                                               DEC    120.35 + 0.65

JAN    1707 + 4                                               MAR   123.90 + 0.65

MAR   1716 + 2                                               MAY   126.30 + 0.70

MAY   1728 + 1                                               JUL    128.60 + 0.70

JUL    1740 + 1                                               SEP    130.60 + 0.70

SEP    1753 + 1                                               DEC   133.55 + 0.70

NOV   1767 + 1                                               MAR   136.45 + 0.70

JAN    1772 + 1                                               MAY   138.20 + 0.70