Coffee Market Report October 16 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 decrease their net short sold position within the market by 16.48% over the week of trade leading up to Tuesday 9th. October; to register a new net short sold position of 77,800 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 3.4%, to register a net long position of 45,949 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market decreased their net short sold position within this market by 11.23%, to register a net short sold position of 86,266 Lots.  This net short sold position which is the equivalent of 24,456,029 bags has most likely been further reduced, following the period of overall positive trade that has since followed and likewise, that of the managed money fund sector of the market. 

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 224,641 bags or 3.37% during the month of September, to register these stocks at 6,438,220 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. 

Suggesting that if one is to consider the additional unreported stocks the end month stocks, this would equate to more than thirteen weeks of roasting activity, which most would consider to be a very safe reserve.    Especially so ahead of the pending deliveries from large new Mexican and Central American crop, a new Colombian main crop, a large new Vietnam crop and the ongoing surge of new crop deliveries from Brazil. 

Thus, it is somewhat surprising with no one arguing the fact that there shall be global coffee surplus supply for the coming year, that the market correction has been sustained for some days.  But it is related to speculative short covering and one might think that with the equity markets losing their lustre in the recent days, that it is more a matter of moving money and reducing what was a historic over sold position within the New York market.   Making one think that the markets with pending increased volumes of producer price fixation selling on the horizon, that the markets might already be looking towards a nearby ceiling. 

The January 2019 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 39.88 usc/Lb., while this equates to 33.41% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 525 bags yesterday; to register these stocks at 2,423,724 bags.  There were meanwhile a larger in number 5,435 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 60,185 bags. 

The commodity markets experienced a slightly softer U.S. dollar and had an overall positive day yesterday, to see the overall macro commodity index on an upside track for the day.  The Oil, Natural Gas, Sugar, Coffee, Cotton, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Cocoa and Copper markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.9% higher; to see this index registered at 421.28.   The day starts with the U.S. Dollar steady and trading at 1.315 to Sterling, at 1.158 to the Euro and with the dollar buying 3.735 Brazilian Real, while North Sea Oil is steady and is selling at US$ 81.15 per barrel. 

The London and New York markets started the day yesterday on a positive note and with both markets maintaining a positive track, into the early afternoon trade.  As the afternoon progressed the New York market and with some support coming from the positive nature of the overall macro commodity index, started to attract higher volumes of short covering buying, with buy stops being triggered, to accentuate the gains.  This was followed by increased support and added value for the London market, to see both markets moving on towards a relatively strong end to the day. 

The London market ended the day on a positive note and with 87% of the earlier gains of the day intact, while the New York market started the day on a likewise positive note and with 88.9% of the earlier gains of the day intact.   This close further assists to paint a positive picture for the charts, but is not accompanied by any supportive fundamental news.  Thus, aside from a firmer Brazil Real that is anyhow now countered by higher terminal market prices to provide emotive support, it is difficult to have too much confidence in a steady upside track, which might start to bring to the fore some degree of caution and perhaps only a steady start due for early trade today, against the prices set yesterday, as follows: 

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

NOV   1738 + 25                                             DEC    119.35 + 2.80

JAN    1752 + 27                                             MAR   122.95 + 2.85

MAR   1767 + 26                                             MAY   125.35 + 2.85

MAY   1780 + 26                                              JUL    127.70 + 2.85

JUL    1791 + 25                                              SEP    130.00 + 2.80

SEP    1803 + 24                                              DEC   133.25 + 2.75

NOV   1815 + 23                                              MAR   136.45 + 2.70

JAN    1827 + 21                                              MAY   138.50 + 2.70

MAR   1841 + 19                                              JUL    140.25 + 2.65

MAY   1853 + 19                                              SEP    141.90 + 2.55