Coffee Market Report December 03 2018

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non-Commercial Speculative sector of this market increase their net short sold position within the market by 0.37% over the week of trade leading up to Tuesday 27th. November; to register a new net short sold position of 38,971 Lots.   This net short-sold position which is the equivalent of 11,048,106 bags has most likely been increased, following the sharp selloff in the market to end last week. 

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative Managed Money sector of this market increase move into a net long position within the market during the week of trade leading up to Tuesday 27th. November; to register a net long position of 1,556 Lots on the day.  This net long position which is the equivalent of 259,333 bags has most likely been once again eroded and the market back into net short sold status, following the softer track that the market took for the second half of last week. 

The respected analysts Fitch Solutions were reported on Reuters on Friday to have forecast that due to the prospects for a biennially bearing lower new crop from Brazil next year that there shall be some degree of buoyancy due for the New York market in 2019, but with the prices for the New York market still only due to average around 120 usc/Lb.   This report one would suggest in terms of its forecast for what would be considered to be loss making price levels for many arabica coffee producers for the coming year, is a troubling one for the producer sector of the market. 

It is however not a shock for most within the industry, as with the prevailing near perfect weather conditions for the majority of coffee producers and including Brazil, the prospects are for another year of surplus coffee supply.   A factor that with the general assessment that there is already an approximate 8 million to 10 million bags surplus coffee supply for the present October 2018 to September 2019 coffee year and with the resulting increase in global coffee stocks, contributes to longer term bearish sentiment. 

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 35.02 usc/Lb., while this equates to 32.56% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen decrease by 1,319 bags on Friday; to register these stocks at 2,448,776 bags.  There was meanwhile a larger in number 8,845 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 37,062 bags. 

The commodity markets encountered dollar buoyancy and had a mixed day on Friday and with many markets on the back foot, to see the overall macro commodity index taking a marginally softer track for the day.  The Cocoa, Cotton, Wheat, Corn and Soybean markets ended the day on a positive note, while the Oil, Natural Gas, Sugar, Coffee, Copper, Orange Juice, 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 0.21% lower; to see this index registered at 404.88.   The day starts with the U.S. Dollar near to steady and trading at 1.278 to Sterling, at 1.137 to the Euro and with the dollar buying 3.866 Brazilian Real. 

The London and New York markets started the day on Friday, trading on a modestly negative note, but with the New York market soon moving back to par and to see the markets taking this stance into the early afternoon trade.   As the afternoon progressed and with the Brazil Real turning softer, the New York market moved back into negative territory and with the London market turning softer and with the New York market soon triggering sell stops, to significantly accentuate its losses.   This set both the markets, for a dismal end for the week.

The London market ended the day on a very negative note and with 92.9% of the earlier losses of the day intact, while the New York market ended the day on a likewise very negative note and with 94.1% of the earlier losses of the day intact.   This rather dramatic selloff of the markets and with the New York market in particular suffering from a technical readjustment against the bearish fundamentals that prevail, paints a negative picture for the charts and does little to inspire confidence.   But markets in general are reacting positively to the temporary trade deal between the U.S.A. and China over the weekend and one might think that there shall be some degree of hesitancy due for early trade today and the possibility of some stability and modest buoyancy for the markets, against the soft prices set on Friday, as follows. 

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

                                                                        DEC    103.25 – 5.25

JAN    1580 – 29                                             MAR   107.75 – 4.75

MAR   1599 – 26                                             MAY   110.45 – 4.70

MAY   1612 – 26                                              JUL    113.15 – 4.65

JUL    1625 – 25                                              SEP    115.75 – 4.60

SEP    1638 – 24                                              DEC   119.45 – 4.50

NOV   1651 – 24                                              MAR   123.00 – 4.50

JAN    1663 – 24                                              MAY   125.40 – 4.50

MAR   1676 – 24                                              JUL    127.75 – 4.50

MAY   1693 – 24                                              SEP    129.90 – 4.50

JUL    1705 – 24                                              DEC    132.85 – 4.50