Coffee Market Report November 12 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 11.29% over the week of trade leading up to Tuesday 6th. November; to register a new net short sold position of 39,372 Lots.   This net short-sold position which is the equivalent of 11,161,788 bags has most likely been little changed, following the period of mixed but overall sideways 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 25.2% during the week of trade leading up to Tuesday 6th. November; to register a net short sold position of 3,580 Lots on the day.  This net short sold position which is the equivalent of 596,667 bags has most likely been little changed to perhaps marginally increased, following the period of mixed but overall more sideways trade, which has since followed. 

The International Coffee Organisation ICO have reduced their forecast for global coffee production for the just completed October 2017 to September 2018 coffee year, to 163.51 million bags, which they say fuelled a global surplus coffee supply of a more modest 1.59 million bags.   But this was ahead of the significantly larger new Brazil crop this year, which many foresee shall assist to fuel a global coffee supply surplus for the new October 2018 to September 2019 coffee year, which shall result in a global coffee supply surplus of in excess of 8 million bags.  A factor that presently supports the prevailing bearish sentiment within the coffee markets. 

The well-respected U.S. Department of Agriculture USDA have revised upwards by 5.32% their assessment of the new Brazil coffee crop this year, to now report this crop at 63.4 million bags.    This latest assessment they say has resulted in a new Brazil coffee crop this year, which is 12.5 million bags or 24.56% larger than the previous years coffee crop, with the new crop being related to 46.9 million bags of arabica coffees and 16.5 million bags of conilon robusta coffees.   Resulting in an 8.4 million bags increase in Brazil arabica coffee supply and a 4.1 million bags increase in conilon robusta coffee supply, for the present October 2018 to September 2019 coffee year. 

The Vietnam Customs Department have reported that the countries coffee export for the month of October were 2,301,850 bags, which they say has contributed to the country’s cumulative coffee exports for the first ten months of this year to be 22.2% higher than the same period in the previous year, at a total of in excess of 26.3 million bags.   But they do note that despite the sharp increase in volume of coffee exports that in line with the softer nature of the international coffee prices, that revenue from these exports was only 1.8% higher, at approximately 3 billion U.S. dollars.  

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 40.71 usc/Lb., while this equates to 34.65% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 4,617 bags; to register these stocks at 2,456,956 bags.  There were meanwhile 5,315 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 37,873 bags. 

The commodity markets encountered a firming U.S. dollar and softer day’s trade for most markets on Friday, to see the overall macro commodity index taking a softer track for the day.  The Natural Gas and Soybean markets nevertheless ended the day on a positive note and the London robusta coffee market ended the day on a steady note, while the Oil, Sugar, Cocoa, New York arabica coffee, Cotton, Copper, Orange Juice, Wheat, Corn, 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 0.74% lower; to see this index registered at 409.20.   The day starts with the U.S. Dollar showing some degree of buoyancy steady and trading at 1.289 to Sterling, at 1.131 to the Euro and with the US Dollar buying 3.733 Brazilian Real, while North Sea Oil is steady and selling at US$ 69.65 per barrel. 

The coffee markets started the day on Friday on a softer note and with both markets taking a softer track, into the early afternoon trade.   As the afternoon progressed the New York market and in line with the softer nature of the overall macro commodity index continued to lose value, but with the London market bouncing off the lows and taking on a positive stance and finally posting a full recovery for the day.   

The London market ended the day on a steady note, while the New York market ended the day on a very negative note and with 96.4% of the earlier losses of the day intact.   The close in New York does little to inspire confidence and likewise, the repetitive negative fundamental news that is coming to the coffee markets, which would make one think that the markets are due little more than a near to steady start for early trade today.    Against the prices set on Friday, as follows: 

London Robusta US$ / Mt.       New York Arabica Usc/Lb.                           

                                                                                               

NOV     1,661    +  1                  DEC     113.85  - 2.80

 JAN      1,685    +  1                  MAR     117.50  - 2.70

 MAR     1,693    unch               MAY     120.40  - 2.60

 MAY     1,704    - 4                   JULY    123.15  - 2.55

 JULY    1,712    -  7                  SEPT   125.70  - 2.50

 SEPT    1,720    -  10                 DEC     129.15  - 2.55

 NOV     1,728    -  12                 MAR     132.55  - 2.50

 JAN      1,738    -  14                 MAY     134.65  - 2.50

 MAR     1,749    -  15                 JULY    136.55  - 2.50

 MAY     1,766    -  15                 SEPT   138.30  - 2.50