Coffee Market Report November 06 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 25.5% over the week of trade leading up to Tuesday 30th. October; to register a new net short sold position of 25,874 Lots.  Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 3.05%, to register a net long position of 46,626 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 14.62%; 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 mixed but overall more positive trade, that has since followed and likewise, that of the Managed Money Fund sector of the market. 

The coffee markets encountered the news of the further reduction in the speculative fund short positions within the terminal markets, along a weakening of the Brazil Real.   This accompanied by the return from their long weekend holiday of the Brazilians, which brought with it increased price fixation hedge selling for the New York market and possibly also with a larger new conilon robusta coffee crop and export activity for these coffees, some similar selling for the London market. 

There are also many who forecast that the new Vietnam crop shall be close to the bumper crop levels of the last crop, which is coming to the fore fuel bearish sentiment.    While with the new Mexican and Central American harvest starting and due to bring good volumes of new crop coffees to the market for the first quarter of next year, there really is nothing much to assist to buoy market sentiment at present.  The markets and following this year’s bumper Brazil crop, presently looking at an approximate 5% surplus global coffee supply for the October 2018 to September 2019 coffee year. 

The coffee markets would really need something dramatic in the way of damaging weather to change the prevailing negative sentiment within the market but so far aside from some chance for an El Niño phenomenon to start within the Pacific Ocean, there is no indication that weather shall have any short-term influence upon sentiment.  While even if the El Niño does become reality, it would need to be severe one and bringing with it damaging weather conditions for the Pacific Rim coffee producing countries.  

The January 2019 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 40.53 usc/Lb., while this equates to 34.61% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to remain unchanged yesterday; to register these stocks at 2,447,302 bags.  There were meanwhile 4,801 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 29,616 bags. 

The commodity markets had another mixed day yesterday, to see the overall macro commodity index taking something of a sideways track for the day.   The Natural Gas, Cocoa, Cotton, Orange Juice and Corn markets ended the day on a positive note and Brent Oil ended the day on a steady note, while the U.S. Oil, Sugar, Coffee, Copper, Wheat, 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 0.09% lower; to see this index registered at 416.89.   The day starts with the U.S. Dollar steady and trading at 1.301 to Sterling, at 1.140 to the Euro and with the dollar buying 3.726 Brazilian Real, while North Sea Oil is steady and selling at US$ 72.25 per barrel. 

The London and New York markets started the day yesterday on a very soft note, while the New York market started the day on soft note and with the markets maintaining this stance, into the early afternoon trade.  As the afternoon progressed the London market remained under pressure and with significant losses for the day, which was followed by increased selling pressure coming to the fore for the New York market.   This setting the markets for a soft day’s trade and losing not only the gains of Friday, but also some of the gains that were made during the strong rally in prices, on Thursday last week. 

The London market ended the day on a very negative note and with 89.1% of the earlier losses of the day intact, while the New York market ended the day on a negative note and with 77.6% of the earlier losses of the day intact.   This close is unlikely to inspire confidence and the failure of the markets to hold on to the somewhat unexpected gains of the previous week, might well inspire additional producer and speculative selling and one would think that the markets are due little better than a near to steady start for early trade today, against the prices set yesterday, as follows: 

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

NOV   1670 – 41                                             DEC    117.10 – 2.95

JAN    1688 – 41                                             MAR   121.05 – 2.80

MAR   1703 – 39                                             MAY   123.65 – 2.80

MAY   1718 – 40                                              JUL    126.15 – 2.75

JUL    1732 – 40                                              SEP    128.50 – 2.75

SEP    1747 – 39                                              DEC   131.85 – 2.75

NOV   1761 – 40                                              MAR   135.20 – 2.75

JAN    1776 – 40                                              MAY   137.30 – 2.65

MAR   1788 – 40                                              JUL    139.20 – 2.55

MAY   1808 – 32                                              SEP    140.90 – 2.55