Coffee Market Report November 29 2016

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non-Commercial Speculative sector of this market decrease their net long position within the market by 4.8% during the week of trade leading up to Tuesday 22nd. November; to register a net long position of 49,076 Lots on the day.  This net long position which is the equivalent of 13,912,829 bags has most likely been further decreased, following the period of mixed but overall more negative 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 long position within this market by 6.59% during the week of trade leading up to Tuesday 22nd. November; to register a long position of 31,818 Lots.  This net long position which is the equivalent of 5,303,000 bags has most likely been marginally decreased, following the period of mixed but overall softer trade that has since followed. 

The Port workers in the leading commodity export port of Santos in Brazil are reported to be planning a 24-hour strike for tomorrow, which by nature of the short one day off from work is not really threatening to short term coffee supply.   But there would be concerns that this might be the start of further and more long term strikes and one would think that there shall be some degree of market focus on the developments of the port workers demands, in case there might be more disruptive delays in Brazil shipments to come. 

The New York market and with the perspective of surplus arabica coffee supply for the present October 2016 to September 2017 coffee year being largely accepted by the international coffee trade and industry, remains vulnerable to some further negative pressure.   However, with the perspective that there is most definitely going to be tighter medium term robusta coffee supply and with some industries and including the domestic roasting industry in Brazil due to supplement robusta coffee with lower grade arabica coffees, there would still be some signs of underlying support for sentiment within the New York market.   Albeit that sentiment has become somewhat bearish, over the past couple of weeks and is threatening to narrow the price gap between the New York arabica coffee and the London robusta coffee markets.  

The Vietnam Coffee and Cocoa Association and with state support have voiced their intent to inspire a long-term program to value add the countries coffee crop, with a view to encourage domestic industries to become more active in processing coffees and to increase the volumes of soluble and roast and ground coffee exports.  In this respect to target a 30% of coffee exports in the form of processed coffees to develop, over the next fourteen years.   It is perhaps an ambitious plan as the traditional main stream consumer markets are well developed and with consumer demand for the sophisticated coffee blend products it makes it difficult for somewhat one dimensional origin products to compete, but there is no doubt that price competitive origin processed coffee products do have a potential within the developing new markets in Eastern Europe and Asia and with trade agreements in place for the latter Asian markets, some potential for Vietnam to increase the counties exports of processed coffee products.  

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 63.44 usc/Lb., while this equates to a 40.5% 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 1,532 bags yesterday; to register these stocks at 1,256,154 bags.  There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 21,110 bags. 

The commodity markets had a mixed but overall more positive day yesterday, with the overall macro commodity index showing a degree of buoyancy through the day.   The Oil, Natural Gas, Sugar, Coffee, Cotton, Corn, Soybean, Gold and Silver markets had a day of buoyancy, while the Cocoa, Copper, Orange Juice and Wheat markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.57% higher; to see this Index registered at 421.14.   The day starts with the U.S. dollar near to steady and trading at 1.240 to Sterling and 1.060 to the Euro, while North Sea Oil is steady and is selling at 46.25 per barrel. 

The London and New York markets started the day yesterday on a hesitantly buoyant note and with both markets taking a positive track into early afternoon trade, but with the New York market faltering and dipping back into negative territory, while the London market maintained its positive stance.    The New York market did however recover as the afternoon progressed and both markets continued to end the day with buoyancy, through to the close.  The London market ended the day on a very positive note and with 97.9% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 71.4% of the earlier gains of the day intact.    This close is somewhat supportive but one might think that many might still in terms of the fundamentals of medium term arabica coffee view the New York market to be still overbought and one might think to see little better than a near to steady start for early trade today against the prices set yesterday, as follows: 

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

NOV     2100 + 42                                               DEC   153.00 + 0.70

JAN      2078 + 46                                              MAR   156.65 + 1.25

MAR     2055 + 40                                              MAY   158.90 + 1.20

MAY     2062 + 40                                                JUL   160.95 + 1.10

JUL      2068 + 39                                                SEP   162.80 + 1.10

SEP      2072 + 36                                               DEC   165.55 + 1.10

NOV     2077 + 36                                               MAR   168.00 + 1.10

JAN      2083 + 36                                               MAY   169.40 + 1.25

MAR     2092 + 32                                                JUL   170.55 + 1.30

MAY     2108 + 32                                                SEP   171.60 + 1.35