Coffee Market Report February 14 2019

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 3.36% over the week of trade leading up to Tuesday 15th. January; to register a new net short sold position of 62,107 Lots.  Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 4.15%, to register a net long position of 39,656 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 8.64%; 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 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 New York market meanwhile, remains under pressure from the bearish sentiment that comes with the perception of significant short-term global coffee supply surplus, as a result of the bumper 2018 Brazil coffee crop.   This being accompanied by another large new Vietnam coffee crop and good crops coming to the fore from Central America and Colombia, which shall potentially soon be followed by another good crop of fine washed arabica coffees from Peru. 

The Ethiopian Commodity Exchange ECX have reported that the exchange has traded approximately 490 million U.S. dollars over the first six months of their July 2018 to June 2019 financial year, of which they appropriate 87% to the trade of coffees.   Thus, indicating that approximately 426.3 million U.S. dollars was related to coffee and with most of the balance, being related to the trade of Sesame. 

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 32.72 usc/Lb., while this equates to 31.98% 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 6,858 bags yesterday; to register these stocks at 2,478,855 bags.  There was meanwhile a smaller in number 5,130 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 40,914 bags. 

The commodity markets were mixed in trade yesterday and encountered some degree of buoyancy for the U.S. dollar, but with many markets showing some degree of buoyancy, to see the overall macro commodity index taking a steady track for the day.   The Oil, Cocoa, Cotton, Copper, Orange Juice, Wheat and Corn markets ended the day on a positive note and the London robusta Coffee market ended the day on a near to steady note, while the Natural Gas, Sugar, New York arabica Coffee, Soybean, Gold and Silver markets ended the day on a negative note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.01% higher; to see this index registered at 398.58.   The day starts with the U.S. Dollar steady and trading at 1.286 to Sterling, at 1.128 to the Euro and with the US Dollar buying 3.754 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, to see the markets maintaining this stance into the early afternoon trade.   As the afternoon progressed the London market started to add some value, but with the New York market falling back into negative territory and soon followed by the London market slipping back to trade around par.   The New York market and with a weakening Brazil Real threatening increased price fixation selling from Brazil, continued to lose some more weight and to move further south, with the London market moving back into modest negative territory. 

The London market ended the day on a near to steady note and having recovered 87.5% of the earlier modest losses of the day, while the New York market ended the day on a negative note and with 86.2% of the earlier losses of the day intact.   This close paints a rather negative picture for the charts of the New York market and shall not assist to inspire confidence, but with the speculative and fund sectors of the markets already significantly net short sold into the market and many producers showing price resistance towards the markets, many might show caution in terms of following the market further south.  Making one think that there shall be another hesitant near to steady start due for the markets for early trade today, against the prices set yesterday, as follows: 

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

MAR   1511 unch                                          MAR     98.90 – 1.55

MAY   1534 – 1                                              MAY   102.30 – 1.25

JUL    1549 – 2                                               JUL   104.95 – 1.30

SEP    1567 – 2                                              SEP   107.65 – 1.30

NOV   1586 – 2                                               DEC   111.45 – 1.35

JAN    1604 – 2                                              MAR   115.25 – 1.35

MAR   1624 – 2                                              MAY   117.70 – 1.40

MAY   1644 – 2                                               JUL    120.00 – 1.45

JUL    1660 – 2                                               SEP    122.30 – 1.45

SEP    1677 – 2                                               DEC   125.55 – 1.50