Coffee Market Report October 29 2018

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 short sold position within the market by 23.68% over the week of trade leading up to Tuesday 23rd. October; to register a new net short sold position of 51,983 Lots.   This net short-sold position which is the equivalent of 14,736,950 bags has most likely been little changed to perhaps marginally increased, following the period of mixed but overall slightly softer trade, that has since followed. 

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative Managed Money sector of this market decrease their net short sold position within this market by 36.04% during the week of trade leading up to Tuesday 23rd. October; to register a net short sold position of 7,811 Lots on the day.  This net short sold position which is the equivalent of 1,301,833 bags has most likely been reduced further, following the period of mixed but overall more positive trade, which has since followed. 

With the speculative sectors of the coffee markets having more than halved their net short sold positions within the coffee markets and with the fundamental of an over 5% surplus global coffee supply for the coming months, it is difficult to imagine that the funds shall continue to short cover their positions within the coffee markets.  Particularly so with the pending surge in new crop coffee supply that is due from Mexico, Central America, Colombia and Vietnam, which with consumer industries well covered at the recent lows of the coffee markets, that these new crop coffees are likely to bring with them the negative impact of price fixation hedge selling pressure.

 The General Statistics Office in Vietnam have with the month of October ending, have estimated that the countries coffee exports for the first ten months of this year, shall be approximately 21.5% higher than the same period last year, at a total of approximately 26.28 million bags.    These exports which they indicate brought in 2.98 billion U.S. Dollars, having contributed towards 6.72% of the countries impressive 200.3 billion U.S. Dollars of exports over this ten-month period, with an estimated trade surplus for the period of approximately 6.4 billion U.S. dollars. 

The January 2019 to December 2018 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 41.18 usc/Lb., while this equates to 34.42% 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 2,586 bags on Friday; to register these stocks at 2,440,664 bags.  There were meanwhile a larger in number 6,211 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 45,397 bags. 

The commodity markets encountered a softening U.S. Dollar on Friday and to seem many markets having a day of buoyancy, to see the overall macro commodity index taking an upside track for the day.   The Oil, Cocoa, London robusta Coffee, Cotton, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Natural Gas, Sugar, New York arabica Coffee, Copper and Orange Juice markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.58% higher; to see this index registered at 417.09.  The day starts with the U.S. Dollar showing a degree of buoyancy and trading at 1.283 to Sterling, at 1.139 to the Euro and with the dollar buying 3.643 Brazilian Real, while North Sea Oil is steady and is selling at US$ 77.80 per barrel. 

The London and New York markets started the day on a modestly positive note on Friday and with both markets taking a positive track, into the early afternoon trade.   As the afternoon progressed though, the New York market started to come under pressure and slipped back into negative territory, while the London market held on to its gains and set the markets for a mixed close for the day.  

The London market ended the day on a positive note and with 92% of the earlier gains of the day intact, while the New York market ended the day on a negative note and 78.9% of the earlier losses of the day intact.   This close and with the evidence of the sharply lower net short sold positions within the coffee markets is not likely to inspire confidence, but some might see the firmer post-election Brazil Real to be a factor that shall dampen Brazil price fixation selling pressure.  However, this latter factor might also bring to the fore some incentive for selling into what is still in terms of the recent market values, a relatively firm New York market.   Thus with mixed signals coming to the coffee markets, one might expect a degree of hesitancy due for early trade today against the prices set yesterday, as follows: 

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

NOV   1711 + 37                                             DEC    119.65 – 1.50

JAN    1730 + 23                                             MAR   123.40 – 1.65

MAR   1743 + 18                                             MAY   125.95 – 1.65

MAY   1757 + 17                                              JUL    128.35 – 1.65

JUL    1771 + 16                                              SEP    130.65 – 1.65

SEP    1785 + 16                                              DEC   133.95 – 1.65

NOV   1799 + 15                                              MAR   137.15 – 1.65

JAN    1813 + 14                                              MAY   139.05 – 1.70

MAR   1827 + 14                                              JUL    140.70 – 1.75

MAY   1839 + 14                                              SEP    142.25 – 1.80