Coffee Market Report September 18 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 0.52% over the week of trade leading up to Tuesday 11th. September; to register a new net short sold position of 102,688 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 4.6%, to register a net long position of 45,660 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 0.51%, to register a net short sold position of 105,874 Lots.  This net short sold position which is the equivalent of 30,014,810 bags has most likely been further increased, following the period of mixed but overall negative trade that has since followed and likewise, that of the managed money fund sector of the market. 

Meanwhile the new crop cherries in Mexico and Central America are steadily ripening, as is the case for many Colombian farmers, ahead of the new crop for these fine washed arabica coffee producers.   But with the soft nature of the speculatively short sold reference prices within the New York market, these producers are presently looking at something of a coffee crisis and with the potential lack of profitability due to make the full quality of harvest costs difficult to finance.   Even for those countries who have managed to gains some relief, from the softening of their local currency against the U.S. dollar. 

One might not though suggest that the inability to finance usual frequency of ripe cherry picks through the harvest season shall have any impact on the prospects for a follow through good crop from the Mexico, the Central Americans and Colombia, but rather higher than normal percentages of under and over ripe cherries being stripped from the trees.   This to have some negative impact upon the overall quality of the new crop, coming from these fine washed arabica coffee producers. 

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 172,768 bags or 2.53% during the month of August, to register these stocks at 6,662,861 bags at the end of the month.   The overall Green Coffee stocks reported, do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 570,000 bags per week, would conservatively have been at least 1.1 million bags.   If one is to consider the additional unreported stocks the end month stocks, this would equate to more than thirteen and half weeks of roasting activity, which most would consider to be a very safe reserve. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 30.21 usc/Lb., while this equates to 31.05% 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 11,971 bags yesterday; to register these stocks at 2,319,821 bags.  There were meanwhile a larger in number 15,253 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 118,988 bags. 

The commodity markets encountered a softening of the dollar yesterday, but with most markets nevertheless on the back foot, to see the overall macro commodity index taking a softer track for the day.  The Natural Gas, cocoa, Copper, Gold and Silver markets ended the day on a positive note, while the Oil, Sugar, Coffee, Cotton, Orange Juice, Wheat, Corn and Soybean markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.54% lower; to see this index registered at 398.41.  The day starts with the U.S. Dollar steady and trading at 1.315 to Sterling, at 1.169 to the Euro and with the dollar buying 4.134 Brazilian Real, while North Sea Oil is steady and is selling at US$ 77.60 per barrel. 

The London and New York markets started the day yesterday trading on a softer note and with both markets taking a softer track, into the early afternoon trade.  The London market continued through the afternoon trading mostly south of par, while the New York market with a weak Brazil Real, rain reports out of Brazil came under further pressure and triggered sell stops to extend the gains and set new twelve-year lows. 

The London market ended the day on a negative note and with 71.4% of the earlier losses of the day intact, while the New York market ended the day on a very negative note and with 94.1% of the earlier losses of the day intact.   This close does little to inspire confidence, but one might think that there might be some degree of speculative exhaustion within the New York market, to set the New York market for a modest corrective positive start and the London market for a steady start, for early trade today.  Against the prices set yesterday, as follows: 

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

SEP    1521 – 16                                             SEP      93.45 – 2.00

NOV   1479 – 10                                             DEC      97.30 – 2.40

JAN    1486 – 11                                             MAR   100.75 – 2.40

MAR   1506 – 10                                             MAY   103.20 – 2.35

MAY   1525 – 10                                              JUL    105.60 – 2.35

JUL    1543 – 10                                              SEP    107.95 – 2.40

SEP    1559 – 10                                              DEC   111.40 – 2.35

NOV   1573 – 8                                                MAR   114.75 – 2.35

JAN    1587 – 7                                                MAY   116.80 – 2.35

MAR   1605 – 7                                                JUL    118.60 – 2.30