Coffee Market Report October 30 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 36.13% over the week of trade leading up to Tuesday 23rd. October; to register a new net short sold position of 34,730 Lots.  Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 1.45%, to register a net long position of 48,096 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 23.68%; 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 once again increased, following the mixed but overall softer trade that has since followed and likewise, that of the managed money fund sector of the market. 

The Certified Arabica coffee stocks being held against the New York exchange remain dominated by the Mexican and Central American coffees and lead by high volumes of Honduras coffees, with this producer bloc accounting for 77.9% of the stocks.  Followed by Peru, who account for 12.4% of the stocks and with the balance made up from minimal quantities of Brazil, Burundi, Colombia, India, Papua New Guinea, Rwanda and Uganda coffees. 

While in terms of storage of these certified arabica coffee stocks, the European warehouses of the exchange in Antwerp, Barcelona, Bremen and Hamburg and dominated by the high volume being held in Antwerp, are holding close to 84% of the stocks.   With these European based warehouses likewise, accounting for over 99% of the coffees pending grading for the exchange. 

These Certified coffee stocks which increased by 58.48% during 2017, have increased by a further 23.89% during the first ten months of this year.   While with another follow on good new coffee crop due for the Mexican and Central American producer bloc, one might anticipate that these stocks shall further increase by the end of the year and through the coming year.   A factor that shall most likely, further contribute towards short to medium term bearish sentiment for the New York market. 

The January 2019 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 37.73 usc/Lb., while this equates to 33.02% 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 4,469 bags yesterday; to register these stocks at 2,445,133 bags.  There were meanwhile a larger in number 7,830 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 37,567 bags. 

The commodity markets encountered some renewed muscle for the Dollar yesterday, to see most markets turning south later in the day and to see the overall macro commodity index taking a softer track for the day.   The Orange Juice and Wheat markets nevertheless ended the day on positive note, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, 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 0.84% lower; to see this index registered at 413.58.  The day starts with the U.S. Dollar near to steady and trading at 1.280 to Sterling, at 1.138 to the Euro and with the dollar buying 3.717 Brazilian Real, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 77.70 per barrel. 

The London market started the day yesterday taking a softer stance, while the New York market and with a firm Brazil real in play, started the day on a positive note and with the London market soon recovering, to see both markets taking a positive track into the early afternoon trade.   As the afternoon progressed the markets added value and triggering buy stops, to accentuate the gains in New York.  This was however short lived and in line with the negative nature of the overall macro commodity index, the firming of the dollar to the real and producer price fixation sell stops in play, both markets slipped back into positive territory and with some speculative short selling adding to the pressure, both markets proceed to take a steady track south for the rest of the day’s trade. 

The London market ended the day on a negative note and with 78.2% of the earlier losses of the day intact, while the New York market ended the day on a very negative note and 94.7% of the earlier losses of the day intact.   This close does not assist to paint a very good picture for the charts, but one might think that following the sharp reversal in the fortunes for the markets yesterday, that there might be a degree of caution and a hesitantly steady start due for the markets for early trade today.   Against the prices set yesterday, as follows: 

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

NOV   1668 – 43                                             DEC    114.25 – 5.40

JAN    1687 – 43                                             MAR   118.05 – 5.35

MAR   1704 – 39                                             MAY   120.60 – 5.35

MAY   1718 – 39                                              JUL    123.00 – 5.35

JUL    1733 – 38                                              SEP    125.30 – 5.35

SEP    1748 – 37                                              DEC   128.65 – 5.30

NOV   1762 – 37                                              MAR   131.90 – 5.25

JAN    1775 – 38                                              MAY   133.90 – 5.15

MAR   1787 – 40                                              JUL    135.65 – 5.05

MAY   1799 – 40                                              SEP    137.20 – 5.05