Coffee Market Report June 03 2019

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non-Commercial Speculative sector of this market decrease their net short sold position within this market by 11.36%; over the week of trade leading up to Tuesday 28th. May; to register a new net short sold position of 62,441 Lots.  This net short-sold position which is the equivalent of 17,701,747 bags has most likely been further decreased, following the period of mixed but overall more positive trade that 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 decrease their net short sold position within the market by 3.5% over the week of trade leading up to Tuesday 28th. May; to register a short-sold position of 34,893 Lots.  This net short sold position which is the equivalent of 5,815,500 bags has most likely been further decreased, following the period of mixed but overall more positive trade that has since followed. 

The United States Department of Agriculture’s Foreign Agricultural Service USDA have forecast that the forthcoming October 2019 to September 2020 coffee crop from Nicaragua shall be 371,000 bags or 15.54% lower than the last crop, at a total of 2,016,000 bags.   This crop to be related to 1,976,000 bags of fine washed arabica coffee and to 40,000 bags of robusta coffees. 

The USDA have appropriated this relatively dismal forecast for the next Nicaraguan coffee crop to the negative effects of the prevailing low prices at which the last crop has had to be marketed, along with limited access to finance for the inputs towards the development of the next crop. 

Factors one might speculate, shall be mirrored for many farmers within Nicaragua’s neighbouring fine washed arabica coffee producers in Central America, which is likely to see the regions production to fuel the next October 2019 to September 2020 coffee year decline by perhaps in excess of one million bags and possibly, by as much as an overall two million bags.  

The Ivory Coast as West Africa’s largest robusta coffee producer have reported that the countries coffee exports for the first four months of this year were 48.4% higher than the same period last year, at a total of 391,750 bags.   

The September to September contracts arbitrage between the London and New York markets broadened on Friday, to register this at 39.15 usc/Lb., while this equates to 36.55% 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 6,514 bags on Friday; to register these stocks at 2,393,145 bags.  There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 1,593 bags. 

The commodity markets were mixed in trade on Friday but with many markets coming under pressure, to see the overall macro commodity index taking a softer track for the day.   The Sugar, Coffee, Orange Juice, Gold and Silver markets ended the day on a softer note, while the Oil, Natural Gas, Cocoa, Cotton, Copper, Wheat, Corn and Soybean markets ended the day on a softer note.   The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets, is 0.93% lower, to see this index registered at 392.24.   The day starts with the U.S. Dollar steady and trading at 1.263 to Sterling, at 1.117 to the Euro and with the US Dollar buying 3.922 Brazilian Real. 

The London and New York markets started the day on Friday on a softer note and with both markets coming under pressure, to extend the losses and to take a very soft track into the early afternoon trade.   As the afternoon progressed and with the Brazil Real firming against the dollar, the markets bounced off the lows and with buy stops being triggered, to rally back into positive territory.  Setting both markets for strong close for the day and the week. 

The London market ended the day on a positive note and with 88.9% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 78.7% of the earlier gains of the day intact.  This ability of the markets to bounce back from the negative start on Friday was though, not related to any supportive fundamental news and with the evidence of the reduced net short speculative positions within both markets and the likelihood that they have been since further reduced, might bring to the fore a degree of caution.   To make one speculate that the market might be due for some degree of opportunist producer price fixation activity and a softer start for early trade today, against the prices set on Friday, as follows:

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

JUL    1478 + 22                                            JUL     104.60 + 2.25

SEP    1498 + 24                                            SEP    107.10 + 2.40

NOV   1520 + 24                                            DEC    110.65 + 2.50

JAN    1541 + 24                                            MAR   114.10 + 2.60

MAR   1461 + 24                                            MAY   116.05 + 2.60

MAY   1581 + 23                                            JUL    117.70 + 2.55

JUL    1601 + 23                                            SEP    119.25 + 2.45

SEP    1621 + 22                                            DEC   121.65 + 2.45

NOV   1637 + 19                                            MAR   124.10 + 2.55

JAN    1653 + 16                                            MAY   125.60 + 2.50