Coffee Market Report November 05 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 14.62% over the week of trade leading up to Tuesday 30th. October; to register a new net short sold position of 44,381 Lots.   This net short-sold position which is the equivalent of 12,581,817 bags has most likely been further decreased, following the period of more positive 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 78.73% during the week of trade leading up to Tuesday 30th. October; to register a net short sold position of 4,786 Lots on the day.  This net short sold position which is the equivalent of 797,667 bags has most likely been reduced further, following the period of mixed but overall more positive trade, which has since followed. 

Vietnam’s General Statistics Office has reported that the countries coffee exports for the just completed October 2017 to September 2018 coffee year, totalled approximately 29.1 million bags.  This volume underpins the view that Vietnam did indeed, experience a bumper harvest over October 2017 to January 2018, which exceeded 30 million bags.   While with the new crop in Vietnam started and due to be peaking by early December, many forecast a follow through good crop being due.  

The good Vietnam crop of mostly robusta coffees, to be joined in terms of consumer market robusta coffee supply for this new October 2018 to September 2019 coffee year, but the addition of approximately 4 million to 5 million bags of Brazil conilon robusta coffees.  Following the much improved new conilon robusta coffee crop this year, which well exceeded the approximate 11 million to 12 million bags of domestic market demand. 

Brazil celebrated their Dia de Finados (All Souls’ Day) public holiday on Friday and with new crop sellers out of the market, which along with the sentiment that came with a firmer Real, assisted for the New York market to lead the way with follow through speculative short covering buying.   The London market following the positive trend, towards a strong close for the markets for the week. 

The January 2019 to December 2018 contracts arbitrage between the London and New York markets broadened on Friday, to register this at 41.62 usc/Lb., while this equates to 34.67% 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 3,085 bags on Friday; to register these stocks at 2,447,302 bags.  There were meanwhile a larger in number 6,734 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 24,815 bags. 

The commodity markets had a mixed day on Friday, but with the overall macro commodity index nevertheless having a day of buoyancy.   The Sugar, Cocoa, Coffee and Copper markets ended the day on a positive note, while the Oil, Cotton and Gold markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.48% higher; to see this index registered at 417.27.   The day starts with the U.S. Dollar steady and trading at 1.299 to Sterling, at 1.139 to the Euro and with the dollar buying 3.696 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 70.75 per barrel. 

The London and New York markets started the day on Friday on a positive note and with both markets taking a positive track, into the early afternoon trade.   As the afternoon progressed and with the North Americans entering the field of play, the New York market started to attract short covering buying activity and this triggering buy stops, to accentuate the gains.   Followed by a more modest increase in value for the London market, but with the New York market hitting something of a ceiling and with presumably some producer price fixation selling in play, to bounce back from the highs.  But nevertheless, heading towards firm close for the day. 

The London market ended the day on a very positive note and holding on to its gains for the day, while the New York market ended the day on a positive note and with 64.3% of the earlier gains of the day intact.   This close assists to paint a good picture for the charts, but one might expect with still negative fundamentals for the short to medium term coffee market in play, to see some degree of caution post the evidence of the much-reduced speculative net short status of the markets.   Likewise, with the post long weekend return to the market of Brazil, some concern that there might be higher volumes of price fixation hedge selling due to chase the higher values of the terminal market, which might inspire only a hesitant steady start for the markets for early trade today.   Against the prices set on Friday, as follows: 

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

NOV   1711 + 17                                             DEC    120.05 + 2.25

JAN    1729 + 17                                             MAR   123.85 + 2.35

MAR   1742 + 18                                             MAY   126.45 + 2.40

MAY   1758 + 20                                              JUL    128.90 + 2.40

JUL    1772 + 20                                              SEP    131.25 + 2.40

SEP    1786 + 20                                              DEC   134.60 + 2.40

NOV   1801 + 20                                              MAR   137.95 + 2.40

JAN    1816 + 20                                              MAY   139.95 + 2.35

MAR   1828 + 20                                              JUL    141.75 + 2.30

MAY   1840 + 20                                              SEP    143.45 + 2.25