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

Coffee Market Report

05 Jul 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 8.42% over the week of trade leading up to Tuesday 28th. June; to register a net long position of 29,788 Lots. Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 0.99%, to register a net long position of 33,044 Lots on the day.

Over the same week the Non Commercial Speculative sector of this market increased their long position within the market by 7.54%, to register net long position of 29,036 Lots. This net long position which is the equivalent of 8,231,577 bags has most likely been further increase, over the period of overall 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 78.03% during the week of trade leading up to Tuesday 28th. June; to register a long position of 11,775 Lots. This net long position which is the equivalent of 1,962,500 bags has most likely to have been further increased, following the period of mixed but overall positive trade that has since followed.

The National Coffee Institute in Costa Rica has reported that the country’s coffee exports for the month of June were 3,979 bags or 2.43% lower than the same month last year, at a total of 159,655 bags. This lower performance does not however detract from the fact that there have been improved export performances in the previous months and the countries cumulative coffee exports for the first nine months of the present October 2015 to September 2016 coffee year are 32,367 bags or 3.38% higher than the same period in the previous coffee year, at a total of 990,097 bags.

Thus it would seem that Costa Rica is presently well on track to meet the forecasts for exports for the present coffee year that shall get close to 1.2 million bags, to contribute towards an improved overall export performance from Mexico and Central America, which is likely to exceed 15 million bags. Adding approximately 1 million bags of fine washed arabica coffees from this important producer bloc, in comparison to the bloc’s performance in the previous coffee year.

Meanwhile at the other end of the global coffee quality spectrum the robusta coffee supply remains steady, with Vietnam having the ability with its combination of a good new crop and record carryover stocks into this crop, allowing for a constant flow of robusta coffees into the consumer markets. Albeit that the internal market within Vietnam being very conscious of the lessening competition that has come with the lower Brazil conilon robusta coffee and Indonesian robusta coffee crops this year, continue to show price resistance and to force the countries exporters to maintain positive asking price differentials for new business. New business in recent weeks and with the much improved trading range for the reference prices of the London market, proving to be beneficial for the Vietnam coffee farmers who are starting to look to the fore and their new crop that shall start being harvested in four months’ time.

The September to September contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 66.20 usc/Lb., while this equates to a 45.22% 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 unchanged yesterday, with the market closed for the Independence Day holiday, but were seen to decrease by 1,575 on Friday; to register these stocks at 1,304,181 bags. There was meanwhile a similar in number 1,642 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 4,858 bags.

Many of the commodity markets closed yesterday, with the Independence holiday that was in play for the important U.S.A. markets, but with those markets that were operating yesterday tending to maintain a positive stance, with the Oil, Sugar, Cocoa, London robusta Coffee, Copper, Gold and Silver markets having a positive day’s trade, ahead of today’s post-holiday return to the field of play by the U.S.A. markets. With many markets closed there was no change to the Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets was 0.91% higher; to see this Index registered at 436.89. The day starts with the U.S. dollar showing modest buoyancy and trading at 1.326 to Sterling and 1.113 to the Euro, while North Sea Oil is tending softer in early trade and trading at 47.45 per barrel.

The London market started the day yesterday on a predictably softer note in thin solo trade, with the more volatile New York market off the field of play for the Independence Day holiday. The London market did however show some degree of buoyancy as the afternoon progressed and to start to add some value. This added value did attract some light volumes of producer price fixation selling but this was absorbed and the market continued to take an erratic and positive track for the day, to see the London market end the day on a positive note and with 82.1% of the earlier gains of the day intact. This close is perhaps positive for market sentiment ahead of the return of the more volatile New York market today and assists to contribute to the positive nature of the charts, which should assist towards a cautiously steady start for early trade today against the prices set in London yesterday and in New York on Friday, as follows:

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

JUL 1763 + 29                                      JUL 144.85 + 0.75
SEP 1768 + 23                                      SEP 146.40 + 0.75
NOV 1781 + 23                                   DEC 149.15 + 0.85
JAN 1790 + 23                                   MAR 151.65 + 0.90
MAR 1799 + 23                                 MAY 153.10 + 0.95
MAY 1810 + 21                                   JUL 154.40 + 1.05
JUL 1822 + 21                                      SEP 155.50 + 1.00
SEP 1835 + 21                                     DEC 157.20 + 0.95
DEC 1854 + 21                                   MAR 158.75 + 0.95
MAR 1850 + 21                                  MAY 159.50 + 0.95