Coffee Market Report February 13 2017

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 long position within the market by 20.61% during the week of trade leading up to Tuesday 7th. February; to register a net long position of 19,881 Lots on the day.  This net long position which is the equivalent of 5,636,175 bags has most likely been since increased, following the period of mixed but overall more positive trade, which has since followed. 

The Vietnam government has reported that while the countries coffee exports for the month of January were 20.5% lower than the same month last year, the value of these coffee exports of 2,338,333 bags was 3.5% higher than the same month last year, at a total of US$ 318,800,000.00.     This improved performance having contributed to the countries trade surplus for the month of January to have been 30.5% higher than the same month last year, at a total of 1.15 billion U.S. dollars and related to exports for the months, at a value of 14.34 billion U.S. dollars. 

Weather reports from the leading conilon robusta coffee state of Espirito Santo in Brazil continue to forward disturbing news, with the forecasted rainfall for last week proving to be lower than expected.   This supports the earlier forecasts for Brazil to encounter another dismal and potentially deficit conilon robusta coffee crop this year, but so far, the decision by the Brazil government on the possibility of allowing imports of robusta coffees to supplement their domestic roaster demands for these coffees, has been further delayed. 

Meanwhile the Brazil government continue with their auctions of aged retention coffee stocks that are targeted towards the countries domestic roasters, with Thursdays action selling 100% of the 148,772 bags on offer.   These coffees sold at an average price of 108.25 usc/Lb., which is a competitive price in terms of the prices being demanded for conilon robusta coffees within the internal market in Brazil at present. 

Despite some earlier reports of concerns over the unseasonal rains that were encountered within Nicaragua and Costa Rica at the end of last year and during the harvesting season for the lower grown coffees within these countries, the latest reports from Nicaragua are indicating that the resulting ripe cherry drop is unlikely to have severely damaged the new crop potential for the country.   With the latest forecasts for this new crop now indicating that the new crop harvest shall match the previous year’s crop, at in excess of 2 million bags. 

There are however concerns being raised within East Africa, following the partial failure of the short rains in the last quarter of last year in many parts of Uganda and Kenya.   This with the main rain season only due to start late next month, has resulted in the Kenya government declaring a drought to be in place in many districts within the country and headlining the report as a National Disaster for 23 out of the nation’s 47 counties.   The report does not however note any threat to the countries forecasted coffee production for the present October 2016 to September 2017 coffee year, which is foreseen to be approximately between 700,000 and 800,000 bags.  

The May to May contracts arbitrage between the London and New York markets widened on Friday, to register this at 50.22 usc/Lb., while this equates to 33.90% 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 decrease by 3,437 bags on Friday; to register these stocks at 1,307,969 bags.  There were meanwhile a larger 9,603 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 44,668 bags. 

It was a mixed but overall positive day for the commodity markets on Friday, with the overall macro commodity index taking a positive track for the day.  The Oil, New York arabica Coffee, Cotton, Copper, Wheat, Corn, Soybean and Silver markets had a positive day’s trade and the London robusta Coffee market was steady for the day, while the Natural Gas, Sugar, Cocoa, Orange Juice and Gold markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.246% higher, to see this Index registered at 432.83.  The day starts with the U.S. Dollar steady and trading at 1.249 to Sterling and at 1.062 to the Euro, while North Sea Oil is near to steady and is selling at $ 55.00 per barrel. 

The London and New York markets started the day on a near to steady note on Friday, but while the London market stuttered along at near to par into the afternoon trade, the New York market soon attracted support and started on a modest positive track for the day.   There was however little in the way of excitement within the markets and as the afternoon progressed both markets continued on a sideways narrow trading range and with the New York market remaining mostly to the positive side of par, while the London market remained mostly on par for the day.   The London market ended the day on a steady note and with only 16.7% of the earlier gains of the day intact, while the New York market ended the day on a modestly positive note and with 34.4% of the earlier gains of the day intact.   This somewhat hesitant close albeit leaning towards the positive is unlikely to inspire much in the way of confidence and one might expect to see little better than a hesitant steady start for early trade today against the prices set on Friday, as follows: 

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

MAR     2128 + 2                                                MAR   145.75 + 0.55

MAY     2159 + 2                                                MAY   148.15 + 0.55

JUL      2171 + 4                                                JUL     150.45 + 0.65

SEP      2179 + 6                                                SEP    152.65 + 0.65

NOV     2183 + 6                                                 DEC   155.90 + 0.65

JAN      2187 + 6                                                MAR   158.80 + 0.55

MAR     2189 + 4                                                MAY   160.50 + 0.55

MAY     2188 + 3                                                JUL    162.05 + 0.55

JUL      2190 + 3                                                SEP    163.55 + 0.55

SEP      2199 + 2                                                DEC   165.75 + 0.55