Coffee Market Report February 13 2019

The delayed 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 8.64% over the week of trade leading up to Tuesday 15th. January; to register a new net short sold position of 67,827 Lots.   This net short-sold position which is the equivalent of 19,228,654 bags has most likely been little changed to perhaps marginally increased, following the mixed but overall marginally softer trade which has since followed. 

A Reuters poll taken with nine leading trade and market analysts has concluded that the present October 2018 to September 2019 global coffee surplus shall be approximately 4.25 million bags, but that with the combination of a biennially bearing smaller 2019 Brazil crop and steadily rising global consumption, that there shall be a global coffee supply deficit of approximately 1 million bags for the next October 2019 to September 2020 coffee year. 

The poll also concluded that due to the change in supply and demand for the second half of the year, that the coffee markets shall firm later in the year and that it is likely that the New York market shall be trading at around 1.25 usc/Lb. and the London market at around US$ 1,775.00 per Mt., by the end of the year. 

One might comment that if these conclusions prove to be true and that there is indeed a chance for global coffee supply to move into deficit status by the end of the year, that the positive effects of speculative and fund short covering within the New York market and from the significant net short sold status at present, that there might be much more than an approximate 20 usc/Lb. recovery due for the market. 

While in terms of the global coffee supply factor and while the poll concluded that this years Brazil crop is likely to be around a respectable 55 million bags, there have to be questions as to the potential damaging effects that will come for the Central American producers, with having to sell their new crop against the prevailing soft New York prices.   Many have speculated already, that this situation and the resulting lower levels of often unaffordable farm inputs, might have a marked effect upon the potential for the next October 2019 to March 2020 harvest.   This if it proves to be the case and along with the rising global coffee consumption and the smaller Brazil crop, could result in a larger than 1 million bags global deficit coffee supply for the next coffee year.   

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 33.92 usc/Lb., while this equates to 32.76% 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 4,855 bags yesterday; to register these stocks at 2,485,713 bags.  There was meanwhile a similar in number 4,850 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 46,044 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 21,000 bags or 1.03% over the week of trade leading up to Monday 11th. February, to see these stocks registered at 2,026,333 bags, on the day. 

The commodity markets were mostly on a positive footing for trade yesterday, to see the overall macro commodity index taking a positive track for the day.  The Oil, Natural Gas, Sugar, Cocoa, Coffee, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Cotton and Copper markets ended the day on a negative note.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.52% higher; to see this index registered at 398.56.   The day starts with the U.S. Dollar steady and trading at 1.289 to Sterling, at 1.133 to the Euro and with the US Dollar buying 3.709 Brazilian Real. 

The London market started the day yesterday trading with some modest buoyancy, while the New York market started the day trading close to par and mostly to the positive side of par, to see the markets maintaining this stance into the early afternoon trade.   As the afternoon progressed the New York market moved up to join the London market in positive territory and with buy stops coming into play, to add some reasonable value, while the London market maintained a more sedate sideways track.   The New York market did however soon attract selling pressure and to slip back towards par for later in the day trade. 

The London market ended the day on a positive note and with 77.8% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note, but with only 23.8% of the earlier gains of the day intact.  This close and with the indication of an extensive net short sold status for the New York market, might assist towards some degree of caution and set the markets for another hesitant steady start for early trade today, against the prices set yesterday, as follows: 

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

MAR   1511 + 7                                              MAR   100.45 + 0.25

MAY   1535 + 7                                              MAY   103.55 + 0.25

JUL    1551 + 7                                               JUL   106.25 + 0.25

SEP    1569 + 7                                              SEP    108.95 + 0.20

NOV   1588 + 8                                               DEC   112.80 + 0.25

JAN    1606 + 8                                              MAR   116.60 + 0.30

MAR   1626 + 8                                              MAY   119.10 + 0.35

MAY   1646 + 8                                               JUL   121.45 + 0.45

JUL    1662 + 8                                               SEP   123.75 + 0.55

SEP    1679 + 8                                              DEC   127.05 + 0.65