Coffee Market Report July 31 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 decrease their net short sold position within the market by 0.45% over the week of trade leading up to Tuesday 24th. July; to register a new net short sold position of 89,603 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 0.31%, to register a net long position of 47,815 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 3.01%, to register a net short sold position of 89,014 Lots.  This net short sold position which is the equivalent of 25,235,075 bags has most likely been little reduced, following the period of mixed but overall modestly more positive trade that has since followed and likewise, that of the managed money fund sector of the market. 

There has been no striking news coming to the fore in terms of the coffee markets, but one might presume that with the evidence of the significant net short sold status of the New York market, that there might be some additional short covering activity coming forth to support the market.   However, with significant volumes of new crop price fixation selling hanging over the market from Brazil, it is difficult to foresee much in the way of short term upside for the market. 

However, until there is clarity as to the quality of the new spring and summer rain season for the main coffee districts in Brazil, there might well be some precautionary holding back of new crop coffee stocks within Brazil and not too much short term selling aggression within the internal market in Brazil.   As many farmers might take the view that if there might be problems with the next rain season and problems that might be damaging to the potential for the next 2019 crop, that it would bring with it added value for the reference prices of the coffee terminal markets and confirm that there is more time in hand to sell off the present crop coffee stocks.  Albeit that presently, there is not indication of any threat for anything other than a normal 2018/2019 rain season for Brazil. 

The September 2018 to September 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 36.1 usc/Lb., while this equates to 32.4% 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 4,604 bags yesterday; to register these stocks at 2,055,836 bags.  There were meanwhile a larger in number 8,214 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 37,687 bags. 

The commodity markets encountered a softer U.S. dollar yesterday and with many markets reacting with a degree of buoyancy, to see the overall macro commodity index taking a softer track for the day.  The Oil, Natural Gas, Cocoa, Coffee, Cotton, Orange Juice, Wheat, Corn, Soybean and Silver markets ended the day on a positive note, while the Sugar, Copper and Gold markets ended the day on a softer note.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.8% higher; to see this index registered at 412.18.  The day starts with the U.S. Dollar steady and trading at 1.313 to Sterling, at 1.171 to the Euro and with the dollar buying 3.729 Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 74.65 per barrel. 

The London and New York markets started the day trading marginally south of par, but soon attracting support and taking a positive stance into the early afternoon trade.   As the afternoon progressed the New York market and with a softer dollar and firmer Brazil real in play, attracted short covering and stop loss buying support and posted gains that peaked at 2.95 usc/Lb. for the day, as had the London market added value.   This was however short lived and the markets came under some pressure to limit the gains, towards a nevertheless positive close for the day. 

The London market ended the day on a positive note, but with only 30.4% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 32.2% of the earlier gains of the day intact.   This close is somewhat constructive for market sentiment as is the talk of a cold front coming into the Brazil coffee districts this week, but most foresee the frost season to be close to over and one might think that the markets might be due little better than another hesitant steady start for early trade today against the prices set yesterday, as follows: 

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

SEP    1660 + 7                                               SEP    111.40 + 0.95

NOV   1652 + 7                                               DEC    114.60 + 1.00

JAN    1653 + 5                                               MAR   118.05 + 0.90

MAR   1665 + 5                                               MAY   120.45 + 0.90

MAY   1678 + 5                                                JUL    122.80 + 0.85

JUL    1690 + 5                                                SEP    125.15 + 0.85

SEP    1702 + 5                                                DEC   128.40 + 0.80

NOV   1715 + 5                                                MAR   131.55 + 0.70

JAN    1726 + 5                                                MAY   133.55 + 0.70

MAR   1737 + 5                                                JUL    135.50 + 0.70