Coffee Market Report December 12 2016

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non-Commercial Speculative sector of this market decrease their net long position within the market by 41.47% during the week of trade leading up to Tuesday 6th. December; to register a net long position of 23,857 Lots on the day.  This net long position which is the equivalent of 6,763,354 bags has most likely been further decreased, following the period of negative trade, which has since followed. 

It has been reported in the press in Brazil that the countries Agricultural Ministry plans to meet with coffee farmer representatives and with representatives of the the countries domestic coffee industry, to re-address the request from the latter to allow for the importation of robusta coffees.  This request related to the partial failure of this year drought affected conilon robusta coffee crop, which has proved to be insufficient to fuel the approximately 13 million bags of domestic roaster demand for the combination of domestic consumption and soluble export demand for these coffees.  

One might think though that with the internal market tightness in supply of conilon robusta coffees that has enabled the conilon farmers to supplement lower volumes with significant added value for their new crop stocks, while the arabica coffee farmers have likewise been able to add value to their lower grades from the new crops that are in demand to supplement the shortage of robusta coffees, that there might not be much support from the farmers for this request.   In this respect, it might take some time for such discussions to get close to an agreement and especially so with the interruptions of the pending holiday season and one would think that it is unlikely that Brazil shall soon become an importer of robusta coffees. 

The Ivory Coast have announced a 11.94% increase in the official minimum farm gate price for ungraded robusta coffees for their new December 2016 to November 2017 coffee year, in a bid to inspire coffee farmers to target increased production.   This move and with a new minimum price of $ 1.23 per Kg. at farm gate, is designed to inspire farmers to plant more coffee and to double the nations robusta coffee production over the next five years, to approximately 3.3 million bags per annum.     

The March to March contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 49.13 usc/Lb., while this equates to a 35.26% price discount for the London robusta coffee market.  This narrowing arbitrage is now becoming less of an attractive factor for the roasters who have considered robusta coffees to be an opportunist discount component, within their mostly arabica coffee blends. 

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 2,410 bags on Friday; to register these stocks at 1,261,639 bags.  There was meanwhile a smaller in number 1,853 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 18,356 bags. 

The commodity markets were mixed in trade on Friday and with the firmer nature of the U.S. dollar that is reacting to good economic data and the speculation of a Federal Reserve Bank interest rate hike this week, dampening spirits within a number of markets, to see the overall macro commodity index taking a marginally softer track for the day.   The Oil, Cotton, Copper, Wheat and Soybean markets had a day of buoyancy, while the Natural Gas, Sugar, Cocoa, Coffee, Orange Juice, Corn, Gold and Silver markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.24% lower; to see this Index registered at 423.24.   The day starts with the U.S. dollar near to steady and trading at 1.258 to Sterling and 1.056 to the Euro, while North Sea Oil is showing buoyancy and is selling at 54.90 per barrel. 

The London market and New York markets started the day on Friday and tending to take paint something of a steady picture, following the previous days of hesitantly softer trade that had been encountered.  However, as the day progressed and with the strong dollar in play and the technical picture looking negative, both markets faltered and with sell stops being triggered, both markets took a soft track through to the close.    The London market ended the day on a soft note and with 73.3% of the earlier losses of the day intact, while the New York market ended the day on a likewise soft note and with 83.7% of the earlier losses of the day intact.   This close and with the dollar still showing its muscle while the charts for the markets are painting a negative picture does little to inspire and one might expect to see little better than a steady start for early trade today against the prices set on Friday, as follows: 

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

JAN      1989 – 26                                               DEC    135.55 – 2.05

MAR     1989 – 22                                               MAR   139.35 – 2.05

MAY     1997 – 22                                               MAY   141.65 – 2.10

JUL      2003 – 22                                               JUL     143.90 – 2.05

SEP      2007 – 22                                              SEP     145.90 – 2.10

NOV     2012 – 22                                               DEC    148.80 – 2.10

JAN      2016 – 22                                               MAR   151.50 – 2.10

MAR     2026 – 22                                               MAY   153.15 – 2.00

MAY     2042 – 22                                               JUL    154.80 – 1.80

JUL      2060 – 22                                               SEP    156.45 – 1.30