Coffee Market Report November 27 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 8.03% over the week of trade leading up to Tuesday 20th. November; to register a new net short sold position of 38,825 Lots.   This net short-sold position which is the equivalent of 11,006,715 bags has most likely been marginally increased again, following the period of mixed but overall more negative trade, that has since followed. 

Tropical Storm Usagi has passed over southern Vietnam and headed into Cambodia yesterday, bringing with it torrential rains and has interrupted the new crop harvest, with the London market reacting to the potential delays of new crop coffees with a positive stance for the days trade.   But one would speculate that there are already sufficient coffee stocks from the new crop in hand to satisfy short term export commitments, with the potential for the new crop harvest to continue in only a few days’ time. 

At a presentation on the forthcoming Vietnam Coffee Day 2018 that shall take place over the 11th. and 12th. December in Gia Nghia town in Dak Nong province, the Chairman of the Vietnam Coffee and Cocoa Association VICOFA has forecast that the country shall export approximately 28.33 million bags of coffee during 2018.   The forecast in line with earlier statements, by officials in the country. 

While with an already a relatively large value adding coffee processing industry in play within the country, the Ministry of Agriculture and Rural Development and with many new processing plants coming into production, has forecast that the possibility for Vietnam to be processing as much as 25% of the country’s coffee crop into soluble and roast coffees for export, by 2020. 

This forecast might in terms of available international mostly no name brands markets for origin processed coffees be a bit ambitious, but there is no doubt that Vietnam is bringing to the fore aggressive price competition for the traditional soluble coffee producer exporters, such as Brazil, India, Colombia and Ecuador.    

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 36.41 usc/Lb., while this equates to 32.86% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen decrease by 845 bags yesterday; to register these stocks at 2,454,598 bags.  There was meanwhile a larger in number 34,570 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 60,931 bags. 

The commodity markets encountered dollar buoyancy yesterday, to see a number of markets under pressure and to influence a marginally softer track for the overall macro commodity index for the day.   The Oil, Sugar, London robusta Coffee, Cotton, and Wheat markets ended the day on a positive note and the Gold and Silver markets on a near to steady note, while the Natural Gas, Cocoa, New York arabica Coffee, Copper, Orange Juice, Corn and Soybean markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.07% lower; to see this index registered at 404.42.   The day starts with the U.S. Dollar steady and trading at 1.281 to Sterling, at 1.134 to the Euro and with the dollar buying 3.839 Brazilian Real. 

The London and New York markets started the day yesterday trading around par, with both markets picking up support and moving into positive territory for the early afternoon trade.  As the afternoon progressed and with some speculation over rain delays for the new Vietnam harvest and for export shipments out of Ho Chi Minh City, the London market attracted additional support and value.  However, with the Brazil Real losing value and providing the perception for increased selling out of Brazil, the New York market came under pressure and moved back into modest negative territory and to see the markets heading towards a mixed close for the day. 

The London market ended the day on a very positive note and with 95.8% of the earlier gains of the day intact, while the New York market ended the day on a modestly negative note, but having recovered 88% of the earlier modest losses of the day by the close.  The day is starting with an even softer Brazil Real which is unlikely to inspire confidence for the markets and with the effects of the tropical storm in Vietnam abating, it is probably going to influence a modestly softer start for early trade today.   Against the prices set yesterday, as follows: 

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

NOV   1574 unch                                            DEC   107.00 – 0.15

JAN    1637 + 26                                             MAR   110.80 – 0.15

MAR   1640 + 23                                             MAY   113.65 – 0.15

MAY   1652 + 23                                              JUL    116.30 – 0.20

JUL    1664 + 23                                              SEP    118.95 – 0.15

SEP    1677 + 23                                              DEC   122.60 – 0.10

NOV   1689 + 23                                              MAR   126.20 – 0.10

JAN    1702 + 23                                              MAY   128.60 – 0.10

MAR   1716 + 23                                              JUL    130.95 – 0.10

MAY   1736 + 23                                              SEP    133.10 unch