Coffee Market Report December 24 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 10.52% over the week of trade leading up to Tuesday 18th. December; to register a new net short sold position of 60,900 Lots.   This net short-sold position which is the equivalent of 17,264,880 bags has most likely been little changed, 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 105.45% during the week of trade leading up to Tuesday 18th. December; to register a short-sold position of 21,055 Lots on the day.  This net short position which is the equivalent of 3,509,167 bags has most likely been little changed, following the period of mixed but overall sideways trade that has since followed. 

On Friday the respected international brokers Marex Spectrum increased their assessment of the global coffee supply surplus for this new October 2018 to September 2019 coffee year by 34.4%, to now foresee a surplus coffee supply of 8.2 million bags.   This report following many others and including the USDA report, that have recently increased their perception of a larger than earlier expected surplus coffee supply and adds to the prevailing bearish sentiment within the coffee markets. 

With coffee farmers within Colombia struggling with the low and often loss-making farm gate prices for the coffees that are being dictated by the soft reference prices of the New York market, the Colombian Ministry of Agriculture and Rural Development have reconfirmed on Friday their intent to provide funding for the Price Stabilisation Fund for coffee farmers. 

This shall presumably assist Colombia’s farmers to finance inputs and to maintain yields during the coming year, but most of their neighbours in Central America do not receive such support and one might speculate that the low prices shall by the next 2019/2020 harvest have some negative impact upon yields and finally come to fore, to buoy sentiment and prices within the New York market, for the second half of the coming year.   

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 32.07 usc/Lb., while this equates to 32.17% 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 2,699 bags on Friday; to register these stocks at 2,460,079 bags.  There was meanwhile a larger in number 5,130 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 22,042 bags. 

The commodity markets encountered some renewed muscle for the U.S. dollar and were mostly on a softer track on Friday, to see to overall macro commodity index taking a softer track for the day.  The Natural Gas and Corn markets nevertheless ended the day on a positive note and the Cocoa market was steady for the day, while the Oil, Sugar, Coffee, Cotton, Copper, Orange Juice, 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 0.51% lower; to see this index registered at 394.47.   The day starts with the U.S. Dollar tending a little softer and trading at 1.267 to Sterling, at 1.139 to the Euro and with the dollar buying 3.904 Brazilian Real. 

The London market started the day on Friday on a positive note and with the New York market trading around par, to see the markets taking this mixed stance into the early afternoon trade.  As the afternoon progressed and with the negative influences of the softening overall macro commodity index and a softer Brazil Real in play, the New York market started to come under pressure and to move into negative territory and with the London market soon losing its way, to join the New York market in negative territory.   Both markets started to trigger Sell Stops to accentuate the losses, but while the London market bounced back partially from the lows, the New York market remained soft for late trade. 

The London market ended the day on a negative note and with 71.7% of the earlier losses of the day intact, while the New York market ended the day on a very negative note and with 9.3% of the earlier losses of the day intact.   This close does little to inspire confidence, but with many players already on holiday and the dollar a little softer, one might think that the markets are due for a cautious and hesitant steady start for early trade today.   Against the prices set on Friday, as follows: 

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

JAN    1461 – 33                                             MAR     99.70 – 2.80

MAR   1491 – 33                                             MAY   102.90 – 2.75

MAY   1510 – 31                                              JUL    105.70 – 2.70

JUL    1527 – 30                                              SEP    108.50 – 2.70

SEP    1546 – 29                                              DEC   112.35 – 2.70

NOV   1566 – 27                                              MAR   116.10 – 2.70

JAN    1584 – 28                                              MAY   118.60 – 2.70

MAR   1606 – 27                                              JUL    121.00 – 2.70

MAY   1629 – 26                                              SEP    123.25 – 2.70

JUL    1646 – 21                                              DEC    126.30 – 2.70