I. & M. Smith (Pty) Ltd. since 1915
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I. & M. Smith (Pty) Ltd.

Coffee Market Report

09 Aug 2016

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 5.22% over the week of trade leading up to Tuesday 2nd. August; to register a net long position of 32,616 Lots. Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 0.24%, to register a net long position of 32,689 Lots on the day.

Over the same week the Non Commercial Speculative sector of this market decreased their long position within the market by 6.37%, to register net long position of 32,898 Lots. This net long position which is the equivalent of 9,326,437 bags is most likely to have been modestly buoyed, following the period of mixed but overall more positive trade that has since followed and likewise, that of the Managed Money Fund sector within this 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 11.93% during the week of trade leading up to Tuesday 2nd. August; to register a long position of 24,546 Lots. This net long position which is the equivalent of 4,091,000 bags has most likely been little changed to perhaps marginally increased, following the period of mixed but overall steady trade that has since followed.

The Coffee Federation in Colombia have reported that the country’s coffee production for the month of July was 361,000 bags or 24.68% lower than the same month in the previous year, at a total of 1,102,000 bags. This performance does however follow many months of improved production and has contributed to the countries cumulative production for the first ten months of this new October 2015 to September 2016 coffee year to being 775,000 bags or 7.04% higher than the same period in the previous coffee year, at a total of 11,786,000 bags.

In terms of exports, the Coffee Federation in Colombia have reported that the country’s coffee exports for the month of June were 732,000 bags or 60.25% lower than the same month in the previous year, at a total of 483,000 bags. This lower performance contributes to the countries cumulative exports for the first ten months of the present October 2015 to September 2016 coffee year to being 101,000 bags or 1% lower than the same period in the previous coffee year, at a total of 9,997,000 bags.

These figures with Colombian coffee production tailing off over the past couple of months, does confirm the expectations that the overly dry conditions that came with the El Nino phenomenon within the Pacific Ocean for the last quarter of last year and the first quarter of this year, has impacted negatively within many coffee districts in Colombia and the output from the countries Mitaca coffee crop. While the more dramatic dip in the July export performance was not as much related to the dip in production for the month, but more so to the disruptive influences of the forty-five days of trucker’s strike, which did not allow for new coffees to make their way to the export ports.

The strike is however over in Colombia and the exporters are in the process of catch up exports, which is likely to see Colombia reporting coffee exports of in excess of 1.2 million bags for the month of August. Just in time exports one might comment, in terms of the main northern hemisphere roasters needing to build up stocks of these fine washed arabica coffees in time for the higher volume winter roasting season.

The November to December contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 60.66 usc/Lb., while this equates to a 41.89% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, continues to inspire support for the robusta coffee sector of the industry.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 156 bags yesterday; to register these stocks at 1,291,130 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 14,592 bags.

The commodity markets were mixed in trade yesterday, but with the recovery of the Oil markets having an influence to buoy the overall macro commodity index for the day. The Oil, Sugar, London robusta Coffee, Copper, Wheat, Soybean and Silver markets had a day of buoyancy, while the Natural Gas, Cocoa, New York arabica Coffee, Cotton, Orange Juice, Corn and Gold markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.09% higher; to see this Index registered at 422.84. The day starts with the U.S. dollar showing some degree of buoyancy and trading at 1.299 to Sterling and 1.107 to the Euro, while North Sea Oil is near to steady in early trade and trading at 43.10 per barrel.

The London and New York markets started the day yesterday with a degree of buoyancy, within and environment of thin trade. The markets did however start to lose their way as the afternoon progressed and with the London market falling back towards par, while the New York market slipped back into negative territory. The London market continued to end the day on a very modestly positive note and with only 15.4% of the earlier gains of the day intact, while the New York market ended the day on a soft note and with 62.8% of the earlier losses of the day intact. This overall softer end to the day is unlikely to inspire confidence and one would think to see little better than a near to steady start for the London market and a steady start for the New York market for early trade today against the prices set yesterday, as follows:

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

SEP 1825 + 2                                SEP 141.10 – 1.40
NOV 1855 + 2                              DEC 144.80 – 1.35
JAN 1874 + 3                               MAR 147.95 – 1.35
MAR 1885 + 3                             MAY 149.75 – 1.30
MAY 1898 + 4                               JUL 151.55 – 1.15
JUL 1910 + 6                                 SEP 153.20 – 1.10
SEP 1922 + 6                                DEC 155.40 – 1.10
NOV 1935 + 6                             MAR 157.55 – 1.05
JAN 1944 + 6                               MAY 158.85 – 0.90
MAR 1951 + 6                                JUL 160.10 – 0.65