Coffee Market Report July 23 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 16.07% over the week of trade leading up to Tuesday 17th. July; to register a new record net short sold position of 86,413 Lots.   This net short-sold position which is the equivalent of 24,497,703 bags has most likely been marginally reduced, following the period of mixed but overall more positive 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 5.66% during the week of trade leading up to Tuesday 17th. July; to register a net short sold position of 38,813 Lots on the day.  This net short sold position which is the equivalent of 6,468,833 bags has most likely been marginally decreased, following the period of mixed but overall more positive trade, which has since followed. 

The significant net short sold status of the New York market in particular, would make one suspect that the market is somewhat oversold and that the downside potential for the market is somewhat limited, with the possibility for some further short covering support due for this week.    The weaker nature of the U.S. dollar could also be seen to be supportive for the coffee markets, as it is likely to diminish producer price fixation selling volumes for early this week.  

The September 2018 to September 2018 contracts arbitrage between the London and New York markets broadened on Friday, to register this at 34.31 usc/Lb., while this equates to 31.01% 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 1,835 bags on Friday; to register these stocks at 2,058,044 bags.  There were meanwhile a larger in number 12,393 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 44,450 bags. 

The commodity markets and with a softer U.S. dollar in play to provide support, were mostly buoyant for the day on Friday, to see the overall macro commodity index on an upside track for the day.  The Oil, Sugar, Cocoa, Coffee, Copper, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Natural Gas and Cotton markets ended the day on a softer note.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.81% higher; to see this index registered at 408.08.  The day starts with the U.S. Dollar steady and trading at 1.314 to Sterling, at 1.172 to the Euro and with the dollar buying 3.768 Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 72.00 per barrel. 

The London and New York markets started the day on Friday trading mostly marginally south of par and with the markets maintaining this stance, into the early afternoon trade.  As the afternoon progressed and with the positive influences of a softening U.S. dollar and the positive nature of the overall commodity index coming into play, the New York market recovered and triggering price fixation and short covering buy stops to move back up into positive territory.   This new-found muscle for the New York market had its influence within the London market which moved up into modest positive territory, while the New York market maintained a mostly sideways positive stance and with the London market adding more value in late trade.   

The London market ended the day on a very positive note and with 100% of the early gains of the day intact, while the New York market ended the day on a positive note and with 83.7% of the earlier gains of the day intact.   This close and on top of the news of the increased short sold status for both markets and accompanied by a softer U.S. dollar, is likely to inspire some degree of confidence.  Thus, one might guess that the markets are due for a follow through steady to buoyant start for early trade today, against the prices set on Friday, as follows: 

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

JUL    1782 + 19 

SEP    1683 + 11                                             SEP    110.65 + 1.85

NOV   1673 + 10                                             DEC    114.05 + 1.80

JAN    1675 + 10                                             MAR   117.70 + 1.80

MAR   1684 + 9                                               MAY   120.15 + 1.80

MAY   1696 + 9                                                JUL    122.55 + 1.75

JUL    1708 + 9                                                SEP    124.85 + 1.70

SEP    1719 + 9                                                DEC   128.20 + 1.65

NOV   1731 + 9                                                MAR   131.45 + 1.65

JAN    1743 + 8                                                MAY   133.50 + 1.65