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

Coffee Market Report

06 Jun 2016

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 long position within the market to instead be holding a net short in the market, for the week of trade leading up to Tuesday 31st. May; to register a net short position of 7,078 Lots on the day. This net long position which is the equivalent of 2,006,581 bags has most likely been trimmed, following the period of mixed but overall positive trade, which has since followed.

The September to September contracts arbitrage between the London and New York markets widened on Friday, to register at 53.39 usc/Lb., while this equates to a 41.37% 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 increase by 2,440 bags on Friday; to register these stocks at 1,316,109 bags. There was a 3,968 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 12,200 bags.

It was a mostly positive day for the commodity markets on Friday, with the U.S. nonfarm payroll data released during the course of the day reporting a positive figure of 38,000, nevertheless much lower than was anticipated by the markets. This news was received negatively and interpreted as an indication that the U.S. Federal Reserve bank would be less likely to raise interest rates in June. The softer U. S. Dollar provided a boost for commodities however, with a positive day for Sugar, Cotton, Coffee, Copper, Orange Juice, Wheat, Corn, Gold, Silver, Platinum and Palladium. It was a softer day for the Oil markets, Cocoa and Soybean. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.12% higher at 420.86. The day starts with the U.S. Dollar trading at 1.4362 to Sterling and 1.1338 to the Euro, while North Sea Oil is steady in early trade at 48.96 per barrel.

The coffee markets started the day on Friday with London slightly softer and New York in modestly positive territory. The morning session continued on a similar track with spreads bolstering volumes in New York to narrowly positive, whereas London maintained a modest negative position into the afternoon in this latter market. The afternoon session found additional speculative buying support and short cover taken as the U.S. Dollar took a softer turn and the New York market gapped higher, almost in tandem with the Brazil Real that registered a firmer day against the softer U.S. Dollar and likely lead a degree of seller resistance from this sector, as the afternoon progressed toward the close. It was a substantive volume day for both markets although a stronger performance in New York, London similarly gapped higher toward the end of the session, having posted a recovery from the earlier softer track into positive territory, the markets set the close in on Friday after a buoyant session that finished just off the days’ highs, as follows:

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

JUL    1641 + 9                           JUL   127.10 + 4.10
SEP    1668 + 12                         SEP   129.05 + 4.05
NOV  1682 + 14                         DEC  131.55 + 4.00
JAN    1695 + 15                        MAR 134.20 + 4.00
MAR  1705 + 17                        MAY  135.95 + 4.00
MAY  1717 + 18                        JUL    137.65 + 4.00
JUL    1728 + 20                        SEP    139.35 + 4.05
SEP    1741 + 20                        DEC   141.50 + 4.05
DEC   1760 + 20                        MAR 143.40 + 4.05
MAR  1756 + 20                        MAY 144.40 + 4.05