Coffee Market Report January 16 2017

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non-Commercial Speculative sector of this market increase their net long position within the market by 116.24% during the week of trade leading up to Tuesday 10th. January; to register a net long position of 11,037 Lots on the day.  This net long position which is the equivalent of 3,128,941 bags has most likely been marginally increased, following the period of mixed but overall more positive trade, which has since followed. 

The March to March contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 49.42 usc/Lb., while this equates to a 33.10% 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. 

Last week ended for the coffee markets with nothing in the way of new fundamental news for the markets, which are presently trading with the view to even supply and demand of coffee for the medium term and with the deficit supply of robusta coffee, being countered by the surplus supply of arabica coffee.  This has already been partially factored in with the narrowing of the arbitrage between the New York and London markets, but one might think that post the Tet holidays and with reduced volumes of Vietnam selling pressure, that this might narrow further.  

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 819 bags on Friday; to register these stocks at 1,279,208 bags.  There was meanwhile a smaller in number 99 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 44,499 bags. 

The commodity markets had something of a directionless day on Friday ahead of the long weekend that comes with today’s Martin Luther King holiday in the U.S.A. and with the overall macro commodity index, taking a slightly softer track for the day.    The Natural Gas, London robusta Coffee, Copper and Soybean markets had a day of buoyancy, while the Oil, Sugar, Cocoa, Cotton, Orange Juice, Wheat, Corn, Gold and Silver markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.11% lower; to see this Index registered at 432.22.   The day starts with the U.S. dollar showing a degree of buoyancy and trading at 1.203 to Sterling and 1.063 to the Euro, while North Sea Oil is steady and is selling at $ 54.40 per barrel. 

The London and New York markets started the day on Friday on a softer note and carried this through into the afternoon trade and as the afternoon progressed, to see the New York market attracting increased selling pressure and slipping deeper into negative territory.   This market did however soon bounce off the lows and head back to join the London market in modest positive territory and with late in the day book squaring pre-long weekend profit taking, to recover close to par, while the London market that is fundamentally in terms of the prospects of tightening robusta coffee supply, had moved back into modest positive territory.   The London market ended the day on a modestly positive note and with 50% of the gains of the day intact, while the New York market ended the day on a modestly negative note but having recovered 86.7% of the earlier losses of the day by the close.    The New York market shall be closed today and leaving the London market to trade solo and one would think that the stability of the close, should be supportive for the London market.  However, with Vietnam’s Tet New Year holiday due at the end of last week and with active internal market selling in play, it is possible that this might bring to the London market some price fixation selling pressure and perhaps at best a near to steady start for early trade today against the prices set on Friday, as follows: 

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

JAN      2214 + 4  

MAR     2202 + 4                                                 MAR   149.30 – 0.30

MAY     2207 + 2                                                 MAY   151.70 – 0.30

JUL      2214 + 2                                                 JUL     154.00 – 0.30

SEP      2218 unch                                            SEP     156.25 – 0.25

NOV     2218 – 3                                                 DEC    159.30 – 0.25

JAN      2216 – 5                                                 MAR   162.20 – 0.25

MAR     2215 – 5                                                 MAY   163.85 – 0.30

MAY     2217 – 5                                                 JUL    165.40 – 0.35

JUL      2227 – 5                                                 SEP    166.90 – 0.40