Coffee Market Report January 24 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 increase their net long position within the market by 63.38% over the week of trade leading up to Tuesday 17th. January; to register a net long position of 22,163 Lots.   Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 1.56%, to register a net long position of 34,718 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market increased their long position within the market by 70.35%, to register net long position of 18,802 Lots.   This net long position which is the equivalent of 5,330,284 bags has most likely been further increased, 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 18.11% during the week of trade leading up to Tuesday 17th. January; to register a record high net long position of 46,220 Lots.  This net long position which is the equivalent of 7,703,333 bags has most likely been increased further, following the period of mixed but overall more positive trade that has since followed. 

The week-long Tet New Year holidays to celebrate the Year of Rooster are now only a couple of days to the fore in Vietnam which with the traditional pre-holiday selling of new crop coffees on the part of the farmers to finance their celebrations is seemingly continuing to cap the related London market, while the lacklustre consumer industry buying activity this week, is contributing to the lack of excitement within this market.  

On the other hand, the concerns over the prospects for the new Brazil crop later in the year, is assisting to buoy speculative spirits and the fortunes of the New York market.   One might comment though that while there is reality to the fundamental of medium term tightening supply of robusta coffee and likewise for buoyancy within the London market on the medium term, one might still question the reality the many internal market reports within Brazil, which are pointing to the possible 10% to 12% dip in the prospects of the new Brazil arabica coffee crop. 

This would make one think that perhaps the New York market that has been steadily rising and despite managing this with relatively modest volumes of trade and with the funds and speculative sectors of this market once again holding significant net long positions, might soon suffer from a degree of exhaustion.  Thinking that if this market should start to falter, that it would attract the negative influences of catch up new crop Central American producer price fixation selling activity.  

The March to March contracts arbitrage between the London and New York markets broadened on Friday, to register this at 53.43 usc/Lb., while this equates to a 34.38% price discount for the London robusta coffee market.  This relatively narrow 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 6,696 bags yesterday; to register these stocks at 1,296,573 bags.  There was meanwhile a smaller in number 496 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 28,757 bags. 

The commodity markets were mixed in trade yesterday, but with the softer nature of the U.S. dollar having something of an influence in selected markets to see the overall macro commodity index maintaining a positive stance for the day.   The Natural Gas, Sugar, Cocoa, New York arabica Coffee, Cotton, Copper, Wheat, Gold and Silver markets had a day of buoyancy, while the Oil, London robusta Coffee, Orange Juice, corn and Soybean markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.44% higher, to see this Index registered at 431.71.   The day starts with the U.S. dollar tending a little softer and trading at 1.250 to Sterling and 1.075 to the Euro, while North Sea Oil is showing some degree of buoyancy and is selling at $ 54.85 per barrel. 

The London and New York markets started the day yesterday on a steady note, but with the New York market soon attracting support, while the London market struggled to remain close to par.   The New York market continued to take a positive upside track in the early afternoon trade, but with the London market lacking industry support slipped further into negative territory.    The London market did however bounce back off the lows and headed to close to par before falling back towards the close, while the New York market shed some of its impressive gains in late trade.   The London market ended the day on a soft note and with 54.2% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 62% of the earlier gains of the day intact.    This mixed close and with producers and industry presently side-lined from the main activity in both markets might contribute to some degree of uncertainty and a degree of caution and therefore, perhaps only 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      2261 – 13   

MAR     2248 – 13                                               MAR   155.40 + 2.20

MAY     2253 – 9                                                 MAY   157.80 + 2.20

JUL      2260 – 4                                                  JUL    160.10 + 2.20

SEP      2264 – 2                                                 SEP    162.30 + 2.20

NOV     2264 – 2                                                  DEC   165.25 + 2.20

JAN      2264 – 2                                                 MAR   168.10 + 2.25

MAR     2260 – 2                                                 MAY   169.65 + 2.20

MAY     2262 – 2                                                 JUL    171.20 + 2.20

JUL      2272 – 2                                                 SEP    172.65 + 2.15