Coffee Market Report December 12 2018

The latest Commitment of Traders report from the New York arabica coffee market has seen the shorter term in nature Managed Money fund sector of this market increase their net short sold position within the market by 31.42% over the week of trade leading up to Tuesday 4th. December; to register a new net short sold position of 36,798 Lots.  Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 2.63%, to register a net long position of 42,240 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market increased their net short sold position within this market by 24.57%; 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 further increased, following the period of mixed but overall softer trade that has since followed and likewise, that of the Managed Money Fund sector of the market. 

The Brazil Coffee Exporters Association Cecafé have reported that the countries green coffee exports for the month of November were 25.9% higher than the same month last year, at a total of 3.42 million bags.  While noting that the approximately 500% increase in conilon robusta coffee exports for the month at 233,951 had contributed to this increase.   The report also notes that the association expects the prevailing high volumes of exports and following the bumper 2018 new coffee crop, shall continue into the coming months. 

This forecast for high volumes of coffee exports from Brazil and the related perception for high volumes of exporter hedge selling into the coffee terminal markets, contributes to bearish sentiment for the markets.   Particularly so for the New York arabica coffee market, which can foresee rising volumes of exporter hedge selling due from the new Mexican and Central American coffee crops, which are presently being harvested. 

While with the Christmas and New Year holiday season now on a close horizon and with most industry buyers already well covered with forward contracts for the short term and looking rather to year end statistics, the short-term physical demand and buying support for the market is thin for the present.   Adding to a lack of industry support, under the markets that presently suffer from the combination of speculative and producer selling pressure. 

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 33.09 usc/Lb., while this equates to 32.33% 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 8,749 bags yesterday; to register these stocks at 2,446,331 bags.  There was meanwhile a smaller in number 2,475 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 75,196 bags. 

The commodity markets had a mixed day yesterday, to see the overall macro commodity index on something of a sideways track for the day.  The Oil, Sugar, Cotton and Copper markets ended the day on a positive note, while the Cocoa, Coffee and Gold markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.28% lower; to see this index registered at 405.66.   The day starts with the U.S. Dollar steady and trading at 1.251 to Sterling, at 1.133 to the Euro and with the dollar buying 3.904 Brazilian Real. 

The London market started the day yesterday on a softer note, while the New York market started the day trading close to par, but to soon soften and to join the London market in modest negative territory into the early afternoon trade.   As the afternoon progressed both markets came under pressure and extended their losses and with the New York market triggering sell stops, to accentuate the decline.

 The London market ended the day on a very negative note and with 95.5% of the earlier losses of the day intact, while the New York market ended the day on a likewise very negative note and with 90.3% of the earlier losses of the day intact.   This close paints a rather negative picture for the charts and does not inspire confidence but some might see that with the evidence of the increased short sold status of the New York market that has most certainly been increased further, that this market might be somewhat oversold.  Which is a factor that might cause a degree of hesitancy and caution for early trade today and a steady start, against the prices set yesterday, as follows: 

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

                                                                        DEC      97.65 – 2.80

JAN    1502 – 22                                             MAR   102.35 – 2.80

MAR   1527 – 21                                             MAY   105.60 – 2.70

MAY   1540 – 19                                              JUL    108.35 – 2.65

JUL    1555 – 20                                              SEP    111.05 – 2.60

SEP    1572 – 19                                              DEC   114.75 – 2.60

NOV   1589 – 19                                              MAR   118.40 – 2.60

JAN    1606 – 18                                              MAY   120.85 – 2.60

MAR   1619 – 17                                              JUL    123.25 – 2.60

MAY   1640 – 17                                              SEP    125.55 – 2.60

JUL    1652 – 17                                              DEC    128.55 – 2.65