Coffee Market Report November 26 2018

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative Managed Money sector of this market increase their net short sold position within this market by 8.7% during the week of trade leading up to Tuesday 20th. November; to register a net short sold position of 300 Lots on the day.  This net short sold position which is the equivalent of 50,000 bags has most likely been little changed to perhaps marginally increased, following the period of mixed but overall marginally softer trade, which has since followed. 

The new crop coffee harvest in Vietnam that was last week seen to be over 40% complete is presently being interrupted within many districts, as Tropical Storm Usagi and bringing with it heavy rains, is skirting the south of the main central highlands coffee farming districts.   This is however not really seen to be too much of a problem, as there is already a good volume of new crop coffees that have been harvested and the perspective is that this storm shall soon pass and that by later in the week, the new crop harvest shall continue. 

With rising labour costs and low international coffee prices, many if not most Colombian coffee farmers are struggling to make any profit and most likely, there are many that are presently losing money with their new crop coffees.  This has inspired the move towards mechanisation but mostly in the form of vibrating coffee lances to knock ripe cherries off the trees, as the majority of steep hillside coffee farmers cannot make use of the self-drive or towed coffee harvesters that are common in Brazil. 

One might speculate that automated harvesting shall increase the percentages of underripe cherry that shall be harvested and therefore, increase the percentages of lower grades coming from the mechanised coffee farms.  This is for Brazil not so much of a problem, as the country unlike Colombia, has a significant domestic consumption of in excess of 21 million bags per annum, which is friendly to the use of lower priced secondary grade coffees.   But could if these coffee harvesting lances become popular in Colombia, become a problem for the mechanised Colombian coffee farms, to find a reasonable value market for their lower grade coffees. 

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 37.60 usc/Lb., while this equates to 33.89% price discount for the London Robusta coffee market.  

The Certified washed Arabica coffee stocks held against the New York exchange were seen to be unchanged on Friday; to register these stocks at 2,455,443 bags.  There were though 1,375 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 26,361 bags. 

Many of the U.S.A. based commodity markets had a thin day on Friday, with many players having taken the day off post Thursday’s Thanksgiving Day public holiday, to enjoy an extended long weekend.  The commodity markets meanwhile encountered some renewed muscle for the U.S. dollar and with the Oil markets further coming under pressure from negative fundamentals, to see most markets most markets taking a softer track for the day and the overall macro commodity index sharply lower for the day.  The Orange Juice and Wheat markets nevertheless ended the day on a positive note and the London robusta Coffee market near to steady for the day, while the Oil and markets were sharply lower and the Natural Gas, Sugar, Cocoa, New York arabica Coffee, Cotton, Copper, Corn, Soybean, Gold and Silver markets ended the day on a negative note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.38% lower; to see this index registered at 404.72.   The day starts with the U.S. Dollar near to steady and trading at 1.282 to Sterling, at 1.135 to the Euro and with the dollar buying 3.828 Brazilian Real. 

The London market started the day on Friday trading on a modestly positive note, while the New York market started the day on a softer note and with the markets taking this mixed track, into the early afternoon trade.  As the afternoon progressed the London market added some value and the New York market remained under pressure for a short while, before encountering the influences of a weaker Brazil Real and a softening overall macro commodity index.  This brought with it increasing selling pressure and with the New York market triggering sell stops to accentuate the losses, while the London market slipped back to trade within modest negative territory. 

The London market ended the day on a near to steady note and having recovered 71.4% of the earlier modest losses of the day, while the New York market ended the day on a very negative note and with 83.7% of the earlier losses of the day intact.   This close does not inspire much confidence and one might expect to see only a hesitant and erratic near to steady start due for early trade today, against the prices set on Friday, as follows: 

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

NOV   1574 – 12                                             DEC    107.15 – 3.15

JAN    1611 + 1                                               MAR   110.95 – 3.15

MAR   1617 – 2                                               MAY   113.80 – 3.15

MAY   1629 – 1                                                JUL    116.50 – 3.05

JUL    1641 unch                                            SEP    119.10 – 3.05

SEP    1654 + 2                                                DEC   122.70 – 3.00

NOV   1666 + 2                                                MAR   126.30 – 2.95

JAN    1679 + 2                                                MAY   128.70 – 2.95

MAR   1693 + 2                                                JUL    131.05 – 2.90

MAY   1713 + 2                                                SEP    133.10 – 2.90