Coffee Market Report August 29 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 6.76% over the week of trade leading up to Tuesday 21st. August; to register a new net short sold position of 104,336 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 11.49%, to register a net long position of 42,456 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 5.54%, to register a 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 marginally decreased, following the period of mixed but overall more positive trade that has since followed and likewise, that of the managed money fund sector of the market. 

With the August export registrations in hand and the month close to the end, the General Statistical Office in Vietnam have estimated that the countries coffee exports for the month shall be approximately 2.25 million bags.   This they say, shall contribute to the countries cumulative exports for the first eight months of the year to be 14.8% higher than the same period last year, at a total of 21.78 million bags. 

The Colombian National Committee of Coffee Growers that included members of the coffee farming community and the government have concluded their meetings, within which they have addressed the fact that for coffee farmers to enjoy a reasonable profitable business that farm gate prices should be approximately 67% higher than the present price levels.  The conclusion is that the Colombian government shall create a fund of the equivalent of 34 million U.S. dollars, that shall be utilised to assist their struggling coffee farmers.   

One might however comment, that this is in terms of the dismal farm gate prices that are dictated by the soft nature of the reference prices of the New York market and in terms of the countries annual crop of around 14.5 million bags, a very modest amount of money that the Colombian government has put on the table.   Making one speculate that the result shall be that many of the farmers shall not be able to afford their full levels of farm inputs and the labour costs to do multiple ripe cherry picks on their farms, which shall impact upon both the overall quality of the new main crop and the longer-term farm yields. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 33.38 usc/Lb., while this equates to 32.39% 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 2,350 bags yesterday; to register these stocks at 2,197,799 bags.  There were meanwhile a larger in number 70,691 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 212,556 bags. 

The commodity markets came under some pressure yesterday and with many markets dipping in value, to see the overall macro commodity index taking a softer track for the day.   The Cotton, Copper and Wheat markets nevertheless ended the day on a softer note, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Orange Juice, Corn, 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 0.95% lower; to see this index registered at 399.74.  The day starts with the U.S. Dollar steady and trading at 1.285 to Sterling, at 1.168 to the Euro and with the dollar buying 4.135 Brazilian Real, while North Sea Oil is steady and is selling at US$ 75.25 per barrel. 

The London market post the long weekend holiday opened the day yesterday on a catch-up positive note, while the New York market started the day on a steady note, but to soon attract support and to join the London market in positive territory.   Both markets remained in positive territory into the early afternoon trade, but with the New York market showing less muscle and once the Brazil Real started to slip in value and to indicate the potential for increased selling out of Brazil, the New York market attracted increased selling pressure with sell stops in play to accentuate the losses.   The London market finally followed the New York market into negative territory but to soon bounce off the lows, while the New York market maintained its soft stance through to the close. 

The London market ended the day on a negative note and with 35.7% of the earlier losses of the day intact, while the New York market ended the day on a very negative note and with 88.5% of the earlier losses of the day intact.   This close and with a soft Brazil Real in play does little to inspire confidence and paints a rather negative picture for the charts, which is likely to see the markets due for only a hesitant 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    1618 – 2                                               SEP      99.25 – 2.60

NOV   1536 – 5                                               DEC    103.05 – 2.70

JAN    1528 – 4                                               MAR   106.40 – 2.65

MAR   1537 – 3                                               MAY   108.75 – 2.60

MAY   1551 – 3                                                JUL    111.15 – 2.60

JUL    1566 – 4                                                SEP    113.55 – 2.55

SEP    1582 – 5                                                DEC   117.00 – 2.50

NOV   1597 – 4                                                MAR   120.35 – 2.50

JAN    1609 – 4                                                MAY   122.45 – 2.50

MAR   1623 – 4                                                JUL    126.05 – 2.50