Coffee Market Report March 19 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 4.14% over the week of trade leading up to Tuesday 12th. March; to register a new net short sold position of 78,184 Lots.  Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 4.68%, to register a net long position of 35,154 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 4.55%; to register a new net short sold position of 78,604 Lots. This net short-sold position which is the equivalent of 22,283,886 bags has most likely been little changed to perhaps marginally decreased, following the period of mixed but overall marginally more positive trade that has since followed and likewise, that of the Managed Money Fund sector of the market. 

The short selling activity on the part of the speculative fund sector of the New York market that sees the Non-Commercial sector of the market presently holding a net short sold position that is in excess of the entire Mexican and Central American producers’ annual crop, is proving to be devastating for the relatively high cost fine washed arabica coffee farmers in Mexico and Central America.   Many of whom are struggling to break even with their new crop coffee sales and can only live in hope that global coffee consumption steadily rising by approximately 3 million bags per annum and a smaller new Brazil arabica coffee crop forecast for this year, that it shall bring to the fore some later in the year speculative short covering and improved value for the New York market.  Thus, the potential for profitable sales for their next October 2019 to March 2020 crop. 

With their coffee farmers struggling to make profits from their new crop coffees, while selling against the soft reference prices of the New York market, the government in El Salvador have announced their intent to sign a finance agreement with the Central American Bank for Economic Integration CABEI.  This to raise 86 million U.S. dollars to finance coffee farmers for a renovation program, to replace aged trees with new higher yielding and disease resistant varieties.  The intention is that the fifteen-year loan shall have an initial three-year period of grace, prior to the start of repayments. 

The May to May contracts arbitrage between the London and New York markets narrowed yeterday, to register this at 29.49 usc/Lb., while this equates to 30.45% 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 679 bags yesterday; to register these stocks at 2,497,507 bags.  There was meanwhile, a larger in number 7,525 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 25,695 bags. 

The commodity markets were mixed in trade yesterday and with many markets gaining support from a softer dollar, to see the overall macro commodity index taking a relatively steady track for the day.  The Sugar market experienced a degree of buoyancy for the day and the London robusta Coffee market was steady for the day, while the Cocoa and New York arabica Coffee markets ended the day on a negative note.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.35% higher; to see this index registered at 408.70.   The day starts with the U.S. Dollar near to steady and trading at 1.326 to Sterling, at 1.134 to the Euro and with the US Dollar buying 3.791 Brazilian Real. 

The London market started the day yesterday trading marginally south of par and the New York market trading in negative territory and with the markets maintaining this stance, into the early afternoon trade.  As the afternoon progressed the London market took a sideways track and remaining near to par, while the New York market remained mostly within negative territory.  There was however a brief rally for both markets and to see the markets moving into modest positive territory, but with the London market moving back to trade around par the New York market back into negative territory. 

The London market ended the day on a steady note and ending the day on par, while the New York market ended the day on a negative note and with 63.3% of the earlier losses of the day intact.  This close does little to support confidence, but with the Brazil Real showing a little more muscle for the present, it might inspire some support for the already significantly short sold New York market, to set the markets for a steady start for early trade today, against the prices set yesterday, as follows: 

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

MAR   1471 + 2                                              MAR     93.65 – 0.95

MAY   1485 unch                                           MAY     96.85 – 0.95

JUL    1496 unch                                           JUL      99.55 – 0.90

SEP    1511 – 2                                              SEP    102.25 – 0.90

NOV   1529 – 1                                              DEC    106.05 – 0.90

JAN    1547 unch                                          MAR    109.85 – 0.85

MAR   1567 unch                                          MAY    112.30 – 0.80

MAY   1587 unch                                           JUL    114.55 – 0.75

JUL    1607 unch                                           SEP    116.70 – 0.70

SEP    1626 unch                                           DEC   119.85 – 0.65