Coffee Market Report December 11 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 24.57% over the week of trade leading up to Tuesday 4th. December; to register a new net short sold position of 48,545 Lots.   This net short-sold position which is the equivalent of 13,762,292 bags has most likely been increased further, following the mixed but overall negative trade which has since followed. 

Correction: The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative Managed Money sector of this market move back into a net short sold position within the market during the week of trade leading up to Tuesday 4th. December; to register a short-sold position of 2,682 Lots on the day.  This net short position which is the equivalent of 447,000 bags has most likely been further extended, following the softer track that the market took for the second half of last week. 

The markets remain devoid of any supportive news and with bearish fundamentals for surplus global coffee supply for the coming year often repeated, the coffee terminal markets remain soft and with the general perspective that this shall remain the case for the first quarter of the coming year.   As it can only be some damaging weather-related news for one or the other of the main coffee producer blocs, that could come to the fore to change the nature of the markets. 

Global consumption growth that many foresee to be well in excess of 3 million bags per annum is of course a longer-term supportive factor, but with still reasonable consumer market stocks in hand and the probability that global coffee supply for the coming year shall significantly exceed the global consumption growth, this has to be seen to be only a longer-term market support factor. 

The big question is now what shall be the prospects for the next 2019 Brazil crop as if it does not exceed 55 million bags due to biennial bearing factors, the global consumption growth factor might have to some positive impact for the market for the second half of next year.   Along with the probability that due to unprofitable sales during the first half of the coming year and the resulting lower inputs on the part of many farmers in Central America and some other producers, forecasts coming to the fore for lower new crop volumes for the follow-on October 2019 to September 2020 coffee year. 

The March 2019 to March 2019 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 34.93 usc/Lb., while this equates to 33.22% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen increase by 1,140 bags yesterday; to register these stocks at 2,455,080 bags.  There was meanwhile a larger in number 9,120 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 77,671 bags. 

The commodity markets encountered renewed muscle for the U.S. dollar and had an overall negative day yesterday, to see the overall macro commodity index on a negative track for the day.   The Natural Gas and New York arabica Coffee markets ended the day on a positive note, while the Oil, Sugar, Cocoa, London robusta Coffee, Cotton, Copper, Orange Juice, Wheat, 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 0.86% lower; to see this index registered at 406.81.   The day starts with the U.S. Dollar near steady and trading at 1.258 to Sterling, at 1.137 to the Euro and with the dollar buying 3.918 Brazilian Real. 

The London market started the day yesterday on a softer note, while the New York market started the day trading in modest positive territory and with the markets maintaining this mixed stance, into the early afternoon trade.  As the afternoon progressed the London market remained under pressure and extended its losses, while the New York market maintained its buoyancy.   The London market did though manage to bounce back partially from its lows and the New York market to extend its gains, for later in the day trade. 

The London market ended the day on a negative note and with 37.5% of the earlier relatively modest losses of the day intact, while the New York market ended the day on a positive note and with 87.5% of the earlier gains of the day intact.   This close despite some corrective buoyancy for the New York market does little to inspire confidence, but perhaps the news of the increased short sold nature of the New York market might assist to ease the prospects for further speculative selling pressure, to set the markets for a steady start for early trade today.  Against the prices set yesterday, as follows: 

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

                                                                        DEC    100.45 + 1.65

JAN    1524 – 9                                               MAR   105.15 + 1.05

MAR   1548 – 6                                               MAY   108.30 + 1.10

MAY   1559 – 8                                                JUL    111.00 + 1.10

JUL    1575 – 8                                                SEP    113.65 + 1.10

SEP    1591 – 8                                                DEC   117.35 + 1.15

NOV   1608 – 8                                                MAR   121.00 + 1.15

JAN    1624 – 6                                                MAY   123.45 + 1.15

MAR   1636 – 6                                                JUL    125.85 + 1.15

MAY   1657 – 6                                                SEP    128.15 + 1.10

JUL    1669 – 6                                                DEC    131.20 + 1.10