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

Coffee Market Report

28 Jun 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 increase their net long position within the market by 35.77% over the week of trade leading up to Tuesday 21st. June; to register a net long position of 27,475 Lots. Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 1.99%, to register a net long position of 33,373 Lots on the day.

Over the same week the Non Commercial Speculative sector of this market increased their long position within the market by 41.09%, to register net long position of 27,000 Lots. This net long position which is the equivalent of 7,654,380 bags has most likely been reduced, over the period of mixed but overall negative 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 decrease their net long position within this market by 180.14% during the week of trade leading up to Tuesday 21st. June; to register a long position of 6,614 Lots. This net long position which is the equivalent of 1,102,333 bags has most likely to have been marginally reduced, following the period of mixed but overall negative trade that has since followed.

With most of the months coffee export registrations in hand the Vietnamese authorities have estimated that the country shall export 45.8% more coffee during the month of June than the same month last year, at an estimated total of mostly robusta coffees of 2.67 million bags. Should this number prove to be correct they say that it shall extrapolate to the countries cumulative coffee exports for the first nine months of the present October 2015 to September 2016 coffee year to be 32% higher than the same period in the previous coffee year, at a total of approximately 22 million bags.

This relatively good performance by the coffee sector in Vietnam over the past months has contributed to the countries forecast that agricultural exports for the first six months of this year shall register an overall 5.4% growth in value, to total approximately 15.05 billion U.S. dollars. This improved performance by the agricultural sector of the economy, contributing to the country estimating and overall trade surplus for the first six months of this year, of approximately 4.01 billion U.S. dollars.

Thus with agricultural exports performing well, albeit that it is the countries manufacturing sector that dominates the countries well performing economy, it is likely to assist the Vietnam government to confidently continue with their plans to finance some ambitious plans to improve the roads within the Central Highlands coffee and pepper districts of the country. Noting in this respect, that Vietnam is a close second to Brazil in terms of global coffee supply, while the country remains the world’s leading pepper supplier.

The September to September contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 60.57 usc/Lb., while this equates to a 44.52% 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 1,650 yesterday; to register these stocks at 1,312,485 bags. There was meanwhile a larger in number 2,495 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 6,196 bags.

The commodity markets were mixed in trade yesterday against a relatively steady U.S. dollar, but with the influential Oil markets taking a negative track and contributing to a likewise softer track for the overall macro commodity index for the day. The Natural Gas, Sugar, Cotton, Copper, Soybean, Gold and Silver markets had a day of buoyancy, while the Oil, Cocoa, Coffee, Orange Juice, Wheat and Corn markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.16% lower; to see this Index registered at 422.34. The day starts with the British pound remaining under some pressure against a steady U.S. Dollar which is trading at 1.330 to Sterling and 1.106 to the Euro, while North Sea Oil is showing a degree of buoyancy in early trade and trading at 45.90 per barrel.

The London market started the day yesterday on a modestly softer note, while the New York market showed a degree of uncertain but modest early buoyancy with the London market taking a brief pip up to the positive side of par, but with both markets losing their way in early afternoon trade and registering some sharp losses. The markets did however recover during the afternoon and head back to par, before once again coming under pressure and to see the markets struggle along towards a softer close for the day. The London market ended the day on a modestly softer note but having recovered 73.7% of the earlier losses of the day by the close, while the New York market ended the day on a softer note but likewise, having recovered 56.9% of the earlier losses of the day by the close. This was nevertheless a softer close and with the evidence of the longs held within both markets perhaps not encouraging for further strong support, albeit that the prevailing thin volumes of producer price fixation selling is somewhat supportive for the markets, one might expect to see little better than a steady start for early trade today, against the prices set yesterday, as follows:

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

JUL 1639 – 4                                        JUL 134.50 + 0.15
SEP 1664 – 5                                        SEP 136.05 – 1.10
NOV 1682 – 4                                     DEC 138.95 – 0.95
JAN 1695 – 4                                      MAR 141.65 – 0.85
MAR 1710 – 4                                    MAY 143.10 – 0.80
MAY 1727 – 4                                      JUL 144.35 – 0.75
JUL 1739 – 4                                        SEP 145.50 – 0.70
SEP 1753 – 4                                       DEC 147.20 – 0.70
DEC 1772 – 4                                     MAR 148.70 – 0.65
MAR 1768 – 4                                    MAY 149.55 – 0.65