Coffee Market Report December 17 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 13.51% over the week of trade leading up to Tuesday 11th. December; to register a new net short sold position of 55,103 Lots.   This net short-sold position which is the equivalent of 15,621,456 bags has most likely been little changed to perhaps marginally increased further, following the mixed but overall sideways trade which has since followed. 

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 the market by 282.1% during the week of trade leading up to Tuesday 11th. December; to register a short-sold position of 10,248 Lots on the day.  This net short position which is the equivalent of 1,708,000 bags has most likely been further extended, following the softer track that the market took for the second half of last week. 

The respected U.S. Department of Agriculture USDA Foreign Agricultural Service have increased their forecast for global coffee supply for the present October 2018 to September 2019 coffee year by 1.93% to now forecast global coffee supply at 174.5 million bags.  While they have forecast that global coffee demand for the same period shall be 163.6 million bags. 

This latest forecast would indicate the potential for global surplus coffee supply of 10.9 million bags, which comes in over and above what is seen to be still reasonable consumer market stock levels, which is a very bearish report for coffee market sentiment.   While with so far for the spring and summer rain season in Brazil the rains having been near perfect and indicating the prospects for a good follow on 2019 Brazil coffee crop, it is further adding to bearish coffee market sentiment. 

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 35.57 usc/Lb., while this equates to 34.79% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 2,409 bags on Friday; to register these stocks at 2,451,071 bags.  There was meanwhile a larger in number 6,509 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 56,091 bags. 

The commodity markets and with some renewed muscle for the U.S. dollar were mostly on the back foot on Friday, to see the overall macro commodity index taking a softer track for the day.  The Cotton, Orange Juice and Corn markets ended the day on a positive note, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Copper, Wheat, Soybean, 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 1% lower; to see this index registered at 403.87.   The day starts with the U.S. Dollar steady and trading at 1.258 to Sterling, at 1.131 to the Euro and with the dollar buying 3.917 Brazilian Real. 

The London and New York markets started the day on Friday on a marginally softer note and with the markets maintaining this track, into the early afternoon progressed.   As the afternoon progressed and with some influence from the negative nature of the overall macro commodity index, both markets attracted speculative fund selling pressure, to extend the losses.   To see London market hitting contract lows for the second delivery month and to set the New York market, for less dramatic losses for the day. 

The London market ended the day on a very negative note and with 94.4% of the earlier losses of the day intact, while the New York market ended the day on a negative note and with 92.5% of the earlier losses of the day intact.   This close does not paint a pretty picture for the charts and despite the evidence of the extended short sold status of the New York market, one might expect to see little better than a near to steady start for the markets for early trade today.   Against the soft prices set on Friday, as follows: 

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

                                                                        DEC      96.95 – 1.85

JAN    1443 – 34                                             MAR   102.25 – 1.85

MAR   1470 – 34                                             MAY   105.40 – 1.80

MAY   1484 – 35                                              JUL    108.10 – 1.80

JUL    1501 – 35                                              SEP    110.85 – 1.75

SEP    1519 – 36                                              DEC   114.60 – 1.75

NOV   1537 – 36                                              MAR   118.20 – 1.75

JAN    1555 – 36                                              MAY   120.65 – 1.75

MAR   1569 – 36                                              JUL    123.05 – 1.70

MAY   1590 – 36                                              SEP    125.35 – 1.65

JUL    1602 – 36                                              DEC    128.35 – 1.55