Coffee Market Report November 30 2016

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 decrease their net long position within the market by 4.07% over the week of trade leading up to Tuesday 22nd. November; to register a net long position of 50,722 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 0.92%, to register a net long position of 41,145 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market decreased their long position within the market by 4.8%, to register net long position of 49,076 Lots.   This net long position which is the equivalent of 13,912,829 bags is most likely to have since been further decreased, following the period of mixed but overall softer trade that has since followed and likewise, that of the Managed Money fund sector of the market. 

The Vietnam new crop coffee harvest is now in full flow and with some districts estimated to have already completed in excess of 50% of their harvest, but there remain many questions as to what shall ultimately be the size of this harvest.   The traditionally conservative and perhaps to some degree market manipulative in nature Vietnam Coffee and Cocoa Association have been talking of a new crop that might be as much as 20% lower than the last crop, while there are many others talking of around a 10% dip and some also talking of a minimal 5% dip in the size of the new crop. 

But there is no doubt that following a year of significant increases in coffee exports that there has been liquidation of some of the record carryover stocks into the previous crop, which shall with the continued consumer market demand for good volumes of Vietnam coffees allow for farmers post their initial cash raising sales, to show some degree of medium term price resistance.  Particularly so, as they shall not encounter much in the way of competition from other producers until around June next year.   

The traditionally conservative Brazil Coffee Research Foundation Procafe have forecast that due to biennial bearing factors and parsimonious application of fertilisers over the past year that following this year’s 49.6 million bag crop in Brazil, that they foresee the next 2017 crop shall be sharply lower and quote and expectation of only 39 million bags.   These numbers are however so far out of cinque with the host of reliable trade and industry new crop reports as to the size of the recently completed present crop and likewise, for the few 2017 forecasts that have already been voiced, that the bullish nature of this report has not really had any impact upon market sentiment. 

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 60.74 usc/Lb., while this equates to a 39.69% 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 be unchanged 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 Certified Robusta coffee stocks held against the London exchange were seen to have increased by 48,500 bags or 2.11% over the week of trade leading up to Monday 28th. November, to see these stocks registered at 2,351,33 bags, on the day.    

The commodity markets had a mostly down day yesterday and with the oil markets taking the lead on this downside track, to see the overall macro commodity index sliding backwards for the day.   The Natural Gas, Cocoa, Orange Juice and Silver markets nevertheless had a day of buoyancy, while the Oil, Sugar, Coffee, Cotton, Copper, Wheat, Corn, Soybean and Gold markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.25% lower; to see this Index registered at 415.89.   The day starts with the U.S. dollar steady and trading at 1.248 to Sterling and 1.063 to the Euro, while North Sea Oil is steady and is selling at 44.75 per barrel. 

The London market started the day yesterday with modest buoyancy, while the New York market following a brief pip to the upside almost immediately dipped back into modest negative territory.    The markets maintained this mixed stance into early afternoon trade and with the exception of a short-lived recovery in New York into the mid-afternoon trade, when both markets came under pressure and with the London market trading close to par, while the New York market and with the negative influences of the softening overall macro commodity index in play, slid deeper into negative territory.   The London market followed suit to a degree but not nearly as violently and took an erratic negative track for the rest of the day, while the New York market continued on its steady downside track.   The London market ended the day on a soft note and with 88.9% of the earlier losses of the day intact, while the New York market having hit seven week lows, ended the day on a very soft note and with 86.7% of the earlier losses of the day intact.  This soft close and with the charts painting something of a negative picture does little to inspire and one might expect to see a softening start for early trade today against the prices set yesterday, as follows:   

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

NOV     2050 – 50                                               DEC   149.90 – 3.10

JAN      2046 – 32                                              MAR   153.05 – 3.60

MAR     2035 – 20                                              MAY   155.35 – 3.55

MAY     2042 – 20                                                JUL   157.40 – 3.55

JUL      2047 – 21                                                SEP   159.30 – 3.50

SEP      2051 – 21                                               DEC   162.10 – 3.45

NOV     2056 – 21                                               MAR   164.55 – 3.45

JAN      2062 – 21                                               MAY   165.90 – 3.50

MAR     2071 – 21                                                JUL   167.00 – 3.55

MAY     2087 – 21                                                SEP   167.90 – 3.70