Coffee Market Report August 21 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 3.39% over the week of trade leading up to Tuesday 14th. August; to register a new net short sold position of 97,727 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 0.08%, to register a net long position of 47,969 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 3.54%, to register a net short sold position of 100,533 Lots.  This net short sold position which is the equivalent of 28,500,660 bags has most likely been further increased, following the period of softer trade that has since followed and likewise, that of the managed money fund sector of the market. 

The New York market and despite the extensive and new record net short sold position that is held by speculative and fund sectors of the market, took another tumble in late trade yesterday and to see the second delivery month of the market hitting and over twelve year low.  This situation is becoming a disaster for the global arabica coffee producers, as even though some have the advantage of some degree of assistance from weakening currencies relative to the U.S. dollar, the decline in the dollar reference prices of the New York market is far more severe than the assistance that comes with weakening exchange rates. 

Meanwhile one would think that most industry buyers would already be holding some forward cover, from scale down buying over the past few weeks of declining value within the New York market.   A factor that would limit the potential from much in the way of short term support from the industries, for the soft arabica coffee market.   Albeit that the unsustainable for the producers lows in the New York market and along with many industry buyers now returning from their summer holidays, might still attract some increased volumes of industry buying support. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 29.92 usc/Lb., while this equates to 29.64% 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 9,645 bags yesterday; to register these stocks at 2,137,795 bags.  There were meanwhile a larger in number 12,690 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 225,935 bags. 

The commodity markets encountered a softening U.S. Dollar and had a mixed day yesterday, to see the overall macro commodity index relatively steady for day.  The Oil, Natural Gas, Cocoa, London robusta Coffee, Cotton, Copper, Soybean, Golda and Silver markets ended the day on a positive note, while the Sugar, New York arabica Coffee, Orange Juice, Wheat and Corn markets ended the day on a softer note.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.09% lower; to see this index registered at 399.91.  The day starts with the U.S. Dollar tending softer and trading at 1.284 to Sterling, at 1.153 to the Euro and with the dollar buying 3.968 Brazilian Real, while North Sea Oil is steady and is selling at US$ 71.40 per barrel. 

The London a New York markets started the day yesterday on a corrective positive note and with the markets taking a positive stance, into the early afternoon trade.   As the afternoon progressed the New York market started to attract selling pressure and moved south into negative territory, with the London following suit and moving back into modest negative territory.  The New York market carried on to trigger sell stops and to accentuate the losses, while the London market managed to bounce back from the lows and move back up into modest positive territory. 

The London market ended the day on a positive note and 28.6% of the earlier gains of the day intact, while the New York market ended the day on a very negative note and with 91.5% of the earlier losses of the day intact.   This close does not inspire any confidence but one would think that the New York market has to be oversold and there would be some degree of speculative exhaustion and with the weaker dollar in play, that it might inspire some industry buying activity.   To assist towards a steady start for the London market and perhaps some buoyancy for the New York market for early trade today, against the prices set yesterday, as follows: 

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

SEP    1653 + 10                                             SEP      97.25 – 3.95

NOV   1566 + 6                                               DEC    100.95 – 3.75

JAN    1557 + 6                                               MAR   104.35 – 3.60

MAR   1565 + 7                                               MAY   106.75 – 3.55

MAY   1581 + 10                                              JUL    109.20 – 3.50

JUL    1596 + 10                                              SEP    111.60 – 3.50

SEP    1613 + 10                                              DEC   115.05 – 3.35

NOV   1630 + 13                                              MAR   118.35 – 3.30

JAN    1642 + 13                                              MAY   120.35 – 3.40

MAR   1653 + 13                                              JUL    122.20 – 3.50