Coffee Market Report July 02 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 0.54% during the week of trade leading up to Tuesday 26th. June; to register a net short sold position of 60,736 Lots on the day. This net short-sold position which is the equivalent of 17,218,387 bags has most likely been little changed to possibly marginally increased, following the period of mixed but overall somewhat softer 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 17.47% during the week of trade leading up to Tuesday 26th. June; to register a net short sold position of 34,511 Lots on the day.  This net short sold position which is the equivalent of 5,751,833 bags has most likely been little changed to perhaps marginally reduced, following the period of mixed but overall sideways trade, which has since followed. 

The Indonesian government trade data from Sumatra which is the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month of June were 237,665 bags or 80.21% lower than the same month last year, at a total of 58,622 bags.   This number and following a similarly modest export performance for the previous months has contributed to the cumulative coffee exports for the first nine months of the present October 2017 to September 2018 coffee year to be 2,178,651 bags or 69.8% lower than the same period in the previous coffee year, at a total of 942,718 bags. 

There is however a new and potentially larger Sumatra robusta coffee crop harvest that has started to be harvested and due to pick up in volume, over the coming weeks.   However, with strong domestic market demand to take in the early crop coffees and to inflate prices, one might not expect to experience any increase in export volumes until late August and thereon, for the rest of the year. 

The Vietnam General Statistics office has come to the fore on Friday with the countries cumulative trade figures for the first six months of the year, with exports reported to have been close to 114 Billion U.S. Dollars and a trade surplus for these six months of close to 3.5 Billion U.S. Dollars.   But what is quite interesting and despite Vietnams relatively high profile in terms of global agricultural supply, is that the world’s second largest coffee producer only accounted for 1.74% of the value of total exports for these six months.   Albeit that in terms of employment and especially for the rural areas of the country, the relatively labour-intensive coffee farms provide for an important contribution to overall national employment. 

The September 2018 to September 2018 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 38.44 usc/Lb., while this equates to 33.4% 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 2,746 bags on Friday; to register these stocks at 2,057,036 bags.  There were meanwhile a larger in number 3,017 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 19,167 bags. 

The commodity markets had another mixed day on Friday but with the U.S. dollar coming of the boil a little through the day and to assist for buoyancy for many markets, to see the overall macro commodity index taking a modestly upside track for the day.  The Oil, Cocoa, Cotton, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note and the Sugar market was near to steady, while the Natural Gas, Coffee, Copper and Orange Juice markets ended the day on a softer note.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.94% higher; to see this index registered at 422.71.  The day starts with the U.S. Dollar steady and trading at 1.317 to Sterling, at 1.165 to the Euro and with the dollar buying 3.877 Brazilian Real, while North Sea Oil is tending quite a bit softer in early trade and is selling at US$ 75.10 per barrel. 

The London market started the day on Friday on a modestly softer note, while the New York market started the day with modest buoyancy but with the New York market soon starting to falter, to join the London market in modest negative territory for early afternoon trade.   As the afternoon progressed both markets continued to bounce back from their nearby lows within an environment of slow and lacklustre trade, but with an inability to move back into positive territory.  

The London market ended the day on a negative note and with 63.6% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 52% of the earlier losses of the day intact.   This close does not inspire much confidence, but with the evidence of a still extensive net short sold position within the New York market and a not insignificant net short sold position within the London market, it might assist to bring to the fore some industry price fixation support and even some speculative short covering activity.   Thus, the possibility 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. 

JUL    1723 – 7                                                JUL    111.50 – 0.65 

SEP    1690 – 7                                               SEP    115.10 – 0.65

NOV   1683 – 9                                               DEC    118.55 – 0.65

JAN    1687 – 10                                             MAR   122.10 – 0.60

MAR   1698 – 10                                             MAY   124.50 – 0.60

MAY   1710 – 10                                              JUL    126.85 – 0.55

JUL    1722 – 10                                              SEP    129.00 – 0.50

SEP    1734 – 11                                              DEC   132.05 – 0.50

NOV   1746 – 13                                              MAR   135.05 – 0.50

JAN    1757 – 13                                              MAY   136.80 – 0.50