Coffee Market Report August 13 2018

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non-Commercial Speculative sector of this market increase their net short sold position within the market by 9.56% over the week of trade leading up to Tuesday 7th. August; to register a new net short sold position of 97,098 Lots.   This net short-sold position which is the equivalent of 27,526,853 bags has most likely been little changed to perhaps marginally increased again, following the period of mixed but overall softer 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 decrease their net short sold position within this market by 0.78% during the week of trade leading up to Tuesday 7th. August; to register a net short sold position of 33,705 Lots on the day.  This net short sold position which is the equivalent of 5,617,500 bags has most likely been little changed to perhaps marginally increased, following the period of mixed but overall softer trade, which has since followed. 

The significant net short sold position of the speculative and fund sectors of the New York market could be seen to indicate that this market is somewhat oversold and might be seen to be a factor that could encourage some profit taking short covering, but with the negative impact of the large new Brazil crop and the forthcoming large new Vietnam crop on the horizon, it is difficult to foresee any swift correction to the market.  Especially so as with the weakening value of the Brazil Real, it is encouraging for steady selling and the related price fixation terminal market hedge selling activity, within the internal market in Brazil. 

There is furthermore the evidence of the rising certified stock levels of the New York market that has to have some degree of negative impact upon speculative sentiment, as it is by nature of this alternative market attracting new stocks, an indication of a surplus supply arabica coffee market.   But of course, a market with many of the industry buyers still very much on holiday and perhaps over the next couple of weeks, there might be some increase in physical coffee market demand coming upon the field of play.  

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 35.75 usc/Lb., while this equates to 32.49% 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 5,100 bags on Friday; to register these stocks at 2,079,541 bags.  There were meanwhile a larger in number 47,635 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 187,537 bags. 

The commodity markets encountered further muscle for the U.S. dollar and were mostly on the downside on Friday, to see the overall macro commodity index taking a softer track for the day.   The Oil markets nevertheless ended the day on a positive note, while the Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a negative note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.11% lower; to see this index registered at 404.35.  The day starts with the U.S. Dollar steady and trading at 1.276 to Sterling, at 1.140 to the Euro and with the dollar buying 3.858 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 70.95 per barrel. 

The London and New York markets started the day on Friday on a softer note, to see the markets taking a softer track into the early afternoon trade.   As the afternoon progressed and very much in line with the softer nature of the overall macro commodity index, both markets remained within negative territory, but tending to bounce back from the nearby lows and seemingly indicating that the markets are close to the bottom of the prevailing trading range. 

The London market ended the day on a negative note but having recovered 75% of the earlier losses of the day by the close, while the New York market likewise ended the day on a negative note and with 56% of the earlier losses of the day intact.    This close does little to inspire confidence, but perhaps with the evidence of the significant speculative short sold status of the markets and the ability for the markets to end the day relatively close to par on Friday, there might be a degree of hesitant caution.   Thus, we would expect to see a near to steady start due for early trade today against the prices set on Friday, as follows: 

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

SEP    1674 + 3                                               SEP    107.00 – 0.65

NOV   1638 – 3                                               DEC    110.05 – 0.70

JAN    1630 – 3                                               MAR   113.30 – 0.65

MAR   1638 – 3                                               MAY   115.65 – 0.55

MAY   1650 – 4                                                JUL    118.05 – 0.55

JUL    1663 – 4                                                SEP    120.45 – 0.50

SEP    1676 – 4                                                DEC   123.85 – 0.50

NOV   1689 – 3                                                MAR   127.15 – 0.50

JAN    1701 – 3                                                MAY   129.20 – 0.40

MAR   1712 – 3                                                JUL    131.25 – 0.45