Coffee Market Report September 17 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 decrease their net short sold position within the market by 1.3% over the week of trade leading up to Tuesday 10th. September; to register a new net short sold position of 53,318 Lots.  Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 1.5%, to register a net long position of 39,146 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market decreased their net short sold position within this market by 3.28%; to register a new net short sold position of 50,302 Lots. This net short-sold position which is the equivalent of 14,260,394 bags has most likely been decreased further, following the period of mixed but overall more positive trade that has since followed and likewise, that of the Managed Money Fund sector of the market. 

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 125,134 bags or 1.76% during the month of August, to register these stocks at 7,224,309 bags at the end of the month.   The overall Green Coffee stocks reported, do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 595,000 bags per week, would conservatively have been at least 1.2 million bags. 

Suggesting that if one is to consider the additional unreported stocks the end month stocks, this would equate to close to fourteen weeks of roasting activity, which most would consider to be a very safe reserve.    Especially so ahead of the further deliveries due from the pending large new Vietnam, Mexican and Central American crops and the new Peru crop, which are coming in over and above the steady deliveries from Colombia and Brazil. 

With the new crop coffees developing on the trees in South West India and with the perception that following the disaster of the excessive monsoon rains in 2018 that severely damaged the past coffee crop, that the new crop due to be harvested for the coming October 2019 to September 2020 coffee year would be possibly as much as 20% higher, some coffee farmers are starting to question this possibility.  In this respect, there are reports that many farms have once again experienced excessive rains over July and August and with many farms flooded for periods of time, which has caused damage to trees and with high incidences of immature cherry drop.  Suggesting albeit that in reaction to the prevailing soft coffee prices that there might be some degree of market manipulation related to these reports, that India might only bring to the fore a similar size new crop of around 5.7 million bags.  

The November to December contracts arbitrage between the London and New York markets broadened yesterday; to register this at 44.06 usc/Lb.   This equates to 42.24% 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 2,790 bags yesterday; to register these stocks at 2,312,923 bags.  There was meanwhile a smaller in number 906 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 27,020 bags. 

The commodity markets saw most markets showing some degree of buoyancy yesterday, to see the overall macro commodity index taking an upside track for the day.  The Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Copper market ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 1.95% higher; to see this index registered at 401.59.   The day starts with the U.S. Dollar steady and trading at 1.242 to Sterling, at 1.101 to the Euro and with the US Dollar buying 4.080 Brazilian Real. 

The London and New York markets started the day yesterday on a modestly negative note but with both markets soon recovering to take a modest positive stance, into the early afternoon trade.  As the afternoon progressed and with some influence coming from the positive nature of the overall macro commodity index, both markets started to add value and with buy stops being triggered, to accentuate the gains.   The London market did however hit a ceiling and attracted late in the day selling to limit the gains, while the New York market showed a little more resilience on its track towards a positive close for the day. 

The London market ended the day on a positive note and with 52.6% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 70.5% of the earlier gains of the day intact.  This close might assist towards some degree of confidence and to set the markets on track for a steady start for early trade today, against the prices set yesterday, as follows:  

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

SEP    1311 + 10                                                          SEP    100.80 + 1.30

NOV   1328 + 10                                                          DEC    104.30 + 1.55 

JAN    1355 + 11                                                          MAR   107.85 + 1.55 

MAR   1383 + 12                                                          MAY   110.20 + 1.60

MAY   1410 + 12                                                          JUL    112.30 + 1.55

JUL    1436 + 12                                                          SEP    114.20 + 1.55

SEP    1463 + 12                                                          DEC   117.10 + 1.50

NOV   1490 + 12                                                          MAR   119.95 + 1.45

JAN    1517 + 12                                                          MAY   121.85 + 1.40

MAR   1541 + 12                                                          JUL    123.70 + 1.45