Coffee Market Report August 07 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 0.71% over the week of trade leading up to Tuesday 24th. July; to register a new net short sold position of 90,239 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 1.2%, to register a net long position of 47,240 Lots on the day.

 Over the same week, the Non-Commercial Speculative sector of this market decreased their net short sold position within this market by 0.59%, to register a net short sold position of 88,485 Lots.  This net short sold position which is the equivalent of 25,085,105 bags has most likely been little changed, following the period of mixed but overall sideways trade that has since followed and likewise, that of the managed money fund sector of the market. 

The National Coffee Growers Federation in Colombia have reported that the country’s coffee production for the month of July was 322,000 bags or 23.45% lower than the same month last year, at a total of 1,051,000 bags.   This has contributed to the countries cumulative production for the first ten months of the present October 2017 to September 2018 coffee year to be 430,000 bags or 3.55% lower than the same period in the previous coffee year, at a total of 11,682,000 bags. 

The National Coffee Growers Federation in Colombia have also reported that the country’s coffee exports for the month of July were 55,000 bags or 5.46% higher than the same month last year, at a total of 1,062,000 bags.   This has contributed to the countries cumulative coffee exports for the first ten months of the present October 2017 to September 2018 coffee year to be 408,000 bags or 3.65% lower than the same period in the previous coffee year, at a total of 10,772,000 bags. 

This evidence of a relatively modest dip in Colombian coffee production over the past ten months and likewise that of the country’s coffee exports was however, very much anticipated.   In fact, it is a dip that is much less than many had forecasted at the end of last year, when weather issues were expected to have some negative impact upon production in the coming months and thus is a factor that really cannot be seen to be supportive for market sentiment. 

Especially so within the prevailing market, where the speculative and fund sectors of the market are completely focused upon the significantly larger new crop that is coming to the fore from Brazil and soon to be followed, by what is forecast to be another large new Vietnam crop. 

It has to be a concern though in terms of longer term global coffee supply, what might be the effects of the effects of the prevailing soft reference prices of the New York arabica coffee prices, which are forcing many arabica coffee farmers into selling at loss making prices.  There surely has to be some impact upon the affordability and levels of farm inputs within many arabica coffee producing countries, which has to in time, impact upon farm yields and overall arabica coffee supply.  Making one speculate and especially so with the New York market significantly short sold, that a short covering rally is due for the market in the coming year. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 37.07 usc/Lb., while this equates to 33.1% 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 1,825 bags yesterday; to register these stocks at 2,058,961 bags.  There were meanwhile a smaller in number 64 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 103,473 bags. 

The commodity markets were mixed in trade yesterday, to see the overall macro commodity index taking an upside track for the day.   The Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Wheat and Corn markets ended the day on a positive note, while the Copper, Orange Juice, 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 0.20% higher; to see this index registered at 410.23.  The day starts with the U.S. Dollar steady and trading at 1.294 to Sterling, at 1.155 to the Euro and with the dollar buying 3.736 Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 72.35 per barrel. 

The London and New York markets started the day yesterday trading close to par, but with the New York market soon moving up into modest positive territory, to see the markets taking a mixed stance into the early afternoon trade.   As the afternoon progressed the New York market started to add value and with the London market following and moving up into positive territory, but while the London market continued to take a steady upside track for the rest of the day, the New York market hit a ceiling and came under pressure to limit the gains for the day. 

The London market ended the day on a very positive note and with 100% of the earlier gains of the day intact, while the New York market ended the day on a positive note, but with only 40% of the earlier gains of the day intact.  This close while positive does follow something of a late in the day stumble for the volatile New York market and might bring with it a degree of caution, that might contribute towards only 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. 

SEP    1682 + 20                                             SEP    108.75 + 1.00

NOV   1652 + 10                                             DEC    112.00 + 0.90

JAN    1648 + 10                                             MAR   115.50 + 0.90

MAR   1656 + 10                                             MAY   117.90 + 0.90

MAY   1668 + 9                                                JUL    120.30 + 0.90

JUL    1681 + 8                                                SEP    122.65 + 0.90

SEP    1693 + 8                                                DEC   126.05 + 0.90

NOV   1706 + 7                                                MAR   129.30 + 0.85

JAN    1718 + 9                                                MAY   131.35 + 0.85

MAR   1729 + 9                                                JUL    133.35 + 0.80