Coffee Market Report January 10 2017

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 decrease their net long position within the market by 33.39% over the week of trade leading up to Tuesday 3rd. January; to register a net long position of 8,463 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 4.69%, to register a net long position of 33,429 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market decreased their long position within the market by 34.66%, to register net long position of 5,104 Lots.   This net long position which is the equivalent of 1,446,961 bags has most likely been increased again, following the period of mixed but overall more positive trade which has since followed and likewise, that of the Managed Money fund sector of the market. 

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative Non-Commercial sector of this market increase their net long position within this market by 7.55% during the week of trade leading up to Tuesday 3rd. January; to register a long position of 34,372 Lots.  This net long position which is the equivalent of 5,728,667 bags has most likely been little marginally increased again, following the period of mixed but overall marginally buoyant trade that has since followed. 

The Brazil Real is tending firmer and is trading at 3.19 to the U.S. dollar which with the still relatively soft nature of the reference prices of the New York market and with Brazil arabica coffee farmers already well sold for their new crop coffees, is retarding the negative pressure of price fixation selling pressure out of Brazil.  However, with the new Central American crop now flowing into the market in increasing volume and along with the new Colombian main crop coffees, there remains steady price fixation selling pressure above the New York market. 

Meanwhile with the forthcoming Tet New Year (Year of the Rooster) celebrations due to start in two and half weeks’ time in Vietnam and with these celebrations somewhat earlier than traditionally normal and thus closer to the end of what was a delayed new crop harvest, there is a shorter time period for farmers to cash in sufficient new crop coffees to finance the forthcoming celebrations.   Thus, for the short term there is some degree of price fixation selling pressure coming to London market, but one would think that with the Vietnam farmers well aware that there is medium term tighter robusta coffee supply on the horizon, that there shall be increasing internal market price resistance and less selling aggression due for February and thus, a somewhat supportive factor for the market in the coming month and thereon. 

The March to March contracts arbitrage between the London and New York markets broadened yesterday, to register this at 47.09 usc/Lb., while this equates to a 32.66% price discount for the London robusta coffee market.  This narrowing arbitrage is now becoming less of an attractive factor for the roasters who have considered robusta coffees to be an opportunist discount component, within their mostly arabica coffee blends. 

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 5,029 bags yesterday; to register these stocks at 1,262,840 bags.  There was meanwhile a smaller in number 6,645 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 56,190 bags. 

The commodity markets were mixed in trade yesterday but with the energy markets taking a negative stance, to see the overall macro commodity index taking a softer track for the day.   The Coffee, Wheat, Corn, Soybean, Gold and Silver markets had a day of buoyancy, while the Oil, Natural Gas, Sugar, Cocoa, Cotton, Copper and Orange Juice markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.68% lower; to see this Index registered at 424.49.   The day starts with the marginally softer U.S. dollar steady and trading at 1.215 to Sterling and 1.061 to the Euro, while North Sea Oil showing a degree of buoyancy and is selling at $ 53.90 per barrel. 

The London and New York markets started the day yesterday on a softer note, but with the London market soon recovering and to see the London market taking a steady track into the early afternoon trade, while the New York market remained south of par.    As the afternoon progressed both markets moved up into positive territory and with confidence building within the New York market that had anticipated Index Fund re-weighting selling that was not after all so aggressive, triggering short covering buying and buy stops being triggered, to accentuate the gains.   The New York market did however soon come off the boil and to settle back into more modest positive territory and followed by the London market, which attracted late in the day selling pressure to slip back towards par, while the New York market took a steady positive track through to the close.  The London market ended the day on a modestly positive note and with only 5.3% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 37% of the earlier gains of the day intact.    This close does however assist to paint something of a positive technical picture within the New York market and could be seen to be a supportive factor for sentiment and thus one might expect a near to steady start for early trade today, against the prices set yesterday, as follows: 

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

JAN      2154 – 5 

MAR     2141 + 1                                                 MAR   144.20 + 1.35

MAY     2146 + 3                                                 MAY   146.55 + 1.40

JUL      2152 + 6                                                 JUL     148.85 + 1.40

SEP      2156 + 6                                                SEP     150.95 + 1.45

NOV     2158 + 6                                                 DEC    153.95 + 1.50

JAN      2160 + 6                                                 MAR   156.75 + 1.50

MAR     2160 + 6                                                 MAY   158.45 + 1.50

MAY     2165 + 6                                                 JUL    160.05 + 1.50

JUL      2175 + 6                                                 SEP    161.70 + 1.55