Coffee Market Report December 18 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 23.94% over the week of trade leading up to Tuesday 11th. December; to register a new net short sold position of 45,606 Lots.  Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 2.92%, to register a net long position of 41,007 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 13.51%; 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 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 Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 94,824 bags or 1.54% during the month of November, to register these stocks at 6,082,043 bags at the end of the month.   The overall Green Coffee stocks reported, do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 570,000 bags per week, would conservatively have been at least 1.1 million bags. 

Suggesting that if one is to consider the additional unreported stocks the end month stocks, this would equate to more than twelve weeks of roasting activity, which most would consider to be a very safe reserve.    Especially so ahead of the pending deliveries from large new Mexican and Central American crop, a new Colombian main crop, a large new Vietnam crop and the ongoing potential surge of new crop deliveries from Brazil. 

There is though the factor of the prevailing soft nature of the reference prices of the coffee terminal markets, which might cause some degree of internal market price resistance within some producer countries.  This and along with the delays in the Mexican and Central American new crop harvest, might delay any growth in the U.S.A and North America coffee stocks in general, for a couple of months still.   

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 33.06 usc/Lb., while this equates to 33.03% 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 3,270 bags yesterday; to register these stocks at 2,454,341 bags.  There was meanwhile a larger in number 6,699 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 49,392 bags. 

The commodity markets started the week on a softer note yesterday, to see the overall macro commodity index taking a softer track for the day.  The London robusta Coffee and Gold markets ended the day on a positive note, while the Oil, Sugar, Cocoa, New York arabica Coffee, Cotton and Copper markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.36% lower; to see this index registered at 402.4.   The day starts with the U.S. Dollar steady and trading at 1.263 to Sterling, at 1.134 to the Euro and with the dollar buying 3.899 Brazilian Real. 

The London and New York markets started the day yesterday with the London market making a relatively strong positive correction to the sharply lower prices of Friday and the New York market taking a more modest positive stance and with the markets maintaining this stance, into the early afternoon trade.   As the afternoon progressed and with the Americas entering the field of play, the New York market came under pressure and dipped back into negative territory, while the London market likewise came under pressure and shed much of its $ 31.00 per Mt. gains of the day.  The New York market soon started to trigger sell stops and to move deeper into negative territory, while the London market moved back to single digit gains for the day and to set the markets for a mixed close for the day. 

The London market ended the day on a very positive note and with 25.8% of the earlier gains of the day intact, while the New York market ended the day on a very negative note and with 86% of the earlier losses of the day intact.   This close does not paint a pretty picture for the charts and despite the thoughts that the New York market might be now somewhat oversold, the bearish fundamentals of the market might assist to little better than a near to steady start for the markets for early trade today.   Against the prices set yesterday, as follows: 

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

                                                                        DEC      94.70 – 2.25

JAN    1450 + 7                                               MAR   100.10 – 2.15

MAR   1478 + 8                                               MAY   103.35 – 2.05

MAY   1493 + 9                                                JUL    106.10 – 2.00

JUL    1510 + 9                                                SEP    108.85 – 2.00

SEP    1528 + 9                                                DEC   112.60 – 2.00

NOV   1547 + 10                                              MAR   116.30 – 1.90

JAN    1566 + 11                                              MAY   118.75 – 1.90

MAR   1584 + 15                                              JUL    121.15 – 1.90

MAY   1607 + 17                                              SEP    123.45 – 1.90

JUL    1619 + 17                                              DEC    126.45 – 1.90