Coffee Market Report July 03 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 3.1% over the week of trade leading up to Tuesday 26th. June; to register a new net short sold position of 68,210 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 2.39%, to register a net long position of 38,557 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 0.54%, to register a net short sold position of 60,736 Lots.  This net short sold position which is the equivalent of 17,218,387 bags has most likely been further increased, following the period of mixed but overall sharply negative trade that has since followed and likewise, that of the managed money fund sector of the market. 

It was a particularly negatively violent day for the New York market yesterday, with the industry buyers mostly standing aside from the market, while speculative and producer sell stops were being triggered, to take the market down to four and half year lows.   The prospects of the larger new Brazil crop now starting to come to the market and with the weakening Brazil real coming to the fore and potentially assisting to encourage new crop sales, having a negative influence upon speculative sentiment for the present.   But when one looks at the significant net short sold status of the New York market, one might guess that this market is by now, very much over sold. 

The National Coffee Institute in Costa Rica have reported that the countries coffee exports for the month of June were 35% higher than the same month last year, at a total of 166,495 bags.   This they report has contributed to the countries cumulative coffee exports for the first nine months of the present October 2017 to September 2018 coffee year are approximately 10% higher than the same period in the previous coffee year, at a total of 981,978 bags. 

The National Coffee Institute in Honduras have reported that the countries coffee exports for the month of June were 43,722 bags or 4.75% lower than the same month last year, at a total of 875,930 bags.  This they report has contributed to the countries cumulative coffee exports for the first nine months of the present October 2017 to September 2018 coffee year to be 79,258 bags or 1.35% lower than the same period in the previous coffee year, at a total of 5,775,906 bags.   While the Institute are now forecasting coffee exports of between 7.28 million and 7.36 million bags, for the present coffee year. 

The International Coffee Organisation have reported that the global coffee exports for the month of May were 12.4% lower than the same month last year, at a total of 9.27 million bags. This they say has contributed to the cumulative global coffee exports for the first eight months of the present October 2017 to September 2018 coffee year to be 0.5% lower than the same period in the previous coffee year, at a total of 79.95 million bags. 

The reported dip in cumulative export volumes and completely related to a 2.4% dip in arabica coffee exports as opposed to a 2.8% rise in robusta coffee exports is however ahead of the larger new Brazil arabica coffee crop, which completely negates any support for market sentiment that might have come with this latest ICO report.   The ratio of coffee exports over these past eight months of the present coffee year, being related to a 62.74 to 37.26 ratio of arabica to robusta coffees. 

The September 2018 to September 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 35.58 usc/Lb., while this equates to 31.87% 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 4,100 bags yesterday; to register these stocks at 2,061,136 bags.  There were meanwhile a smaller in number 3,999 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 15,168 bags. 

The commodity markets encountered increased muscle for the U.S. dollar yesterday and with most markets on the backfoot for the day, to see the overall macro commodity index taking a softer track for the day.  The Orange Juice market nevertheless ended the day on a positive note, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.49% lower; to see this index registered at 416.42.  The day starts with the U.S. Dollar marginally softer and trading at 1.315 to Sterling, at 1.165 to the Euro and with the dollar buying 3.914 Brazilian Real, while North Sea Oil is steady and is selling at US$ 77.05 per barrel. 

The London market started the day yesterday on a steady note, but with the New York market starting the day on a softer note and to see the London market slipping back into modest negative territory for early afternoon trade.   As the afternoon progressed the New York market and with the negative nature of the overall macro commodity index having some influence started to lose some more weight, to trigger sell stops and to accentuate the losses.   While the London market lost some more weight, but in a much less aggressive manner.  

The London market ended the day on a negative note and with 92.9% of the earlier losses of the day intact, while the New York market ended the day on a very negative note and with 97.2% of the earlier sharp losses of the day intact.   This close does not inspire any confidence, but with the evidence of an extensive net short sold position within the New York market and most producers off the field of play, 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 corrective steady start for early trade today against the prices set yesterday, as follows: 

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

JUL    1738 + 15                                             JUL    107.80 – 3.70 

SEP    1677 – 13                                             SEP    111.65 – 3.45

NOV   1671 – 12                                             DEC    115.10 – 3.45

JAN    1676 – 11                                             MAR   118.70 – 3.40

MAR   1688 – 10                                             MAY   121.10 – 3.40

MAY   1702 – 8                                                JUL    123.50 – 3.35

JUL    1714 – 8                                                SEP    125.80 – 3.20

SEP    1726 – 8                                                DEC   129.00 – 3.05

NOV   1738 – 8                                                MAR   132.25 – 2.80

JAN    1749 – 8                                                MAY   134.15 – 2.65