Coffee Market Report August 27 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 5.54% over the week of trade leading up to Tuesday 21st. August; to register a new net short sold position of 106,105 Lots.   This net short-sold position which is the equivalent of 30,080,297 bags has most likely been decreased, 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 1.88% during the week of trade leading up to Tuesday 21st. August; to register a net short sold position of 32,229 Lots on the day.  This net short sold position which is the equivalent of 5,371,500 bags has most likely been increased again, following the period of mixed but overall softer trade, which has since followed. 

The record net short sold status of the New York market as at Tuesday last week, which sees the speculative sector of the market having sold forward the equivalent of approximately 23% of global exportable production had to crack, with the New York market having attracted some speculative short covering and industry support on Friday.  But the rally was in terms of the relatively soft nature of this market somewhat limited and in reality, does little to alleviate the pain that is being felt by the majority of arabica coffee farmers, globally. 

While with significant volumes of new crop Brazil, Central American and Colombian coffees due to come to the fore above the market over the next five months, the sentiment within the New York market remains bearish.   This market one would speculate, shall require some form of dramatic climatic issues to come to the fore, it there really is to be a change in sentiment and a significant short covering recovery in value.  

The Minister of Agriculture and Rural Development in Colombia and in company of the executive of the Colombian National Federation of Coffee Growers reiterated on Friday the support of the countries government for the approximately 540,000 families who are related to coffee farming, in that the government is going to look for ways to provide support for the industry.   Noting that this investigation into means to provide support shall start tomorrow and with the establishment of the National Committee of Coffee Growers, to see how the government can step in to counter the financial difficulties that coffee farmers are presently facing.  

The November 2018 to December 2018 contracts arbitrage between the London and New York markets broadened on Friday, to register this at 34.80 usc/Lb., while this equates to 33.24% 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 4,960 bags on Friday; to register these stocks at 2,167,785 bags.  There were meanwhile a larger in number 6,895 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 184,190 bags. 

The commodity markets encountered a softening of the U.S. dollar on Friday which was supportive for many markets, to see the overall macro commodity index taking a more positive track for the day.  The Oil, Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Natural Gas and Wheat markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.71% higher; to see this index registered at 401.07.  The day starts with the U.S. Dollar steady and trading at 1.284 to Sterling, at 1.161 to the Euro and with the dollar buying 4.105 Brazilian Real, while North Sea Oil is tending a little softer and is selling at US$ 74.10 per barrel. 

The London market started the day on Friday on a steady note and trading either side of par, while the New York market started the day with modest buoyancy and with the London market soon moving up to join the New York market in positive territory, into the early afternoon trade.    As the afternoon progressed and with the Brazil Real firming marginally and assisting along with the support from the more positive overall macro commodity index to buoy sentiment, the New York market attracted support and to trigger short covering and industry buy stops, while the London market maintained its more subdued positive stance.   The New York market did however soon hit a ceiling and to settle into a positive sideways track, while the London market bounced back from a short mini rally, to end the day with only modest gains. 

The London market ended the day on a positive note and with 41.7% of the earlier gains of the day intact, while the New York market ended the day on a very positive note and with 82.1% of the earlier gains of the day intact.  This close does though look more corrective than positive for the markets and one would not think that it will do much to inspire short term confidence, to perhaps see the New York market trading solo today, while the UK takes a long weekend, due for little better than a cautious and hesitant steady start for early trade today.   Against the prices set on Friday, as follows: 

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

SEP    1620 + 6                                               SEP    100.55 + 3.35

NOV   1541 + 10                                             DEC    104.70 + 3.20

JAN    1532 + 10                                             MAR   108.00 + 3.20

MAR   1540 + 8                                               MAY   110.35 + 3.20

MAY   1554 + 7                                                JUL    112.70 + 3.15

JUL    1570 + 7                                                SEP    115.00 + 3.10

SEP    1587 + 7                                                DEC   118.45 + 3.10

NOV   1601 + 7                                                MAR   121.80 + 3.10

JAN    1613 + 9                                                MAY   123.90 + 3.10

MAR   1627 + 11                                              JUL    125.75 + 3.15