Coffee Market Report February 14 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 26.32%% over the week of trade leading up to Tuesday 7th. February; to register a net long position of 20,090 Lots.   Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 1.96%, to register a net long position of 34,424 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market decreased their long position within the market by 20.61%, to register net long position of 19,881 Lots.   This net long position which is the equivalent of 5,636,175 bags has most likely been marginally 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 decrease their net long position within this market by 6.25% during the week of trade leading up to Tuesday 7th. February; to register a record net long position of 43,501 Lots.  This net long position which is the equivalent of 7,250,167 bags has most likely been further decreased, following the period of mixed but overall more negative trade that has since followed. 

The debate over the possibility of Brazil allowing for the import of robusta coffees to supplement the supply of the low stocks of conilon robusta coffees to the countries soluble coffee industry continues, with the countries Agricultural Ministry having asked the country’s Foreign Trade Chamber to support the importation of up to 1 million bags of robusta coffees and at minimal 2% import tariff.   This request is scheduled to be debated on Monday next week, but in terms of the relatively modest number of bags that have been indicated and even if approved, it might not be seen to be significantly market supportive.  

The potential for Brazil robusta coffee imports aside, the global robusta coffee supply with exporters in Vietnam holding fair stocks in hand is fairly stable for the present.  However, reports indicate that with farmers and internal traders in Vietnam already well sold and at mostly profitable price levels, that the internal market for new crop robusta coffees in Vietnam is experiencing rising price resistance.   One might suggest that with limited competition from other robusta coffee producers in Asia and Africa and on the back of a smaller new crop in Vietnam, that price resistance shall continue to prevail through to the last quarter of the year and with the advent of the still to be quantified new Vietnam crop.   

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 49.53 usc/Lb., while this equates to 33.80% 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 2,070 bags yesterday; to register these stocks at 1,310,039 bags.  There were meanwhile a larger in number 2,521 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 47,189 bags. 

It was a mixed but overall softer day for the commodity markets yesterday, as against a positive day for the equity markets, to see the overall macro commodity index taking a softer track for the day.    The Cotton, Copper, Wheat, Corn and Soybean markets nevertheless had a day of buoyancy, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Orange Juice, 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 0.849% lower, to see this Index registered at 429.15.  The day starts with the U.S. Dollar tending softer and trading at 1.254 to Sterling and at 1.062 to the Euro, while North Sea Oil is steady and is selling at $ 54.30 per barrel. 

The London and New York markets started the day on a hesitantly steady note but this was short lived and both markets slipped back to take a marginally softer track into the early afternoon trade, which was the start for the London market to take a negative dip prior to taking a softer sideways track for the rest of the day’s trade, while the New York market was more erratic in trade.    The latter New York market took a sharp swing south during the afternoon prior to recovering to close to par, but to falter and to retreat to join the London market on a negative track through to the close.   The London market ended the day on a soft note and with 74.1% of the earlier losses of the day intact, while the New York market ended the day on a likewise soft note and with 69.6% of the earlier losses of the day intact.   This close that contributes towards something of a negative technical picture does little to inspire confidence and one might expect to see little better than a hesitant near to steady start for early trade today against the prices set yesterday, as follows: 

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

MAR     2107 – 21                                              MAR   144.25 – 1.50

MAY     2139 – 20                                              MAY    146.55 – 1.60

JUL      2152 – 19                                               JUL    148.85 – 1.60

SEP      2161 – 18                                              SEP    151.05 – 1.60

NOV     2166 – 17                                               DEC   154.35 – 1.55

JAN      2171 – 16                                              MAR   157.25 – 1.55

MAR     2173 – 16                                              MAY   158.95 – 1.55

MAY     2172 – 16                                              JUL    160.50 – 1.55

JUL      2172 – 18                                              SEP    162.00 – 1.55

SEP      2181 – 18                                              DEC   164.20 – 1.55