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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

25 Jul 2016
The latest Commitment of Traders report from the New York arabica coffee market has seen the Non Commercial Speculative sector of this market increase their net long position within the market by 3.32% during the week of trade leading up to Tuesday 19th. July; to register a net long position of 36,489 Lots on the day. This net long position which is the equivalent of 10,344,470 bags has most likely been since reduced, following the period of mixed but overall softer trade which has since followed.

The Colombian government and the countries trucking union announced on Friday that they had come to an agreement, which shall bring the month and half long strike to an end. This shall be good news for the consumer market industries, which had been experiencing some long delayed shipments of fine washed arabica coffees from Colombia, which contribute to a very important blend component for the majority of the quality consumer market blends.

This news came to the fore relatively early in the day in terms of the American time zone and took some of the wind out of the sails of the speculative bulls within the volatile New York market which was something of a surprise, in terms of the fact that the strike had not had a noticeable effect upon sentiment within this market in recent weeks. However it has to be noted that with Colombian port coffee stocks very much depleted and that is shall take some weeks for internal market mill stocks to catch up with their stalled deliveries to the ports, before there shall be good volumes of catch up exports of forward contract commitments from Colombia.

The Brazil governments Crop Supply Agency CONAB have reported that the countries end March 2016 coffee stocks to have been at a relatively low 13.59 million bags, but is nevertheless a significantly higher figure than many of the trade and industry had envisaged. Thus in light of the fact that this number is ahead of the impact of the overall larger new crop that is now in peak harvest, it might be seen to be news that is not really market supportive in nature.

More of a concern in terms of the Brazil stocks is that there is no doubt that the carryover stocks into the new crop have been much depleted by the past two years of fill in stocks being utilised to counter for the two deficit arabica coffee crops, which will mean that even with a larger new modest surplus crop now coming to the market, that the country shall need to have another large crop in 2017, if there is not to be tightening supply of Brazil arabica coffee on the longer term. A factor that with the frost threat now becoming less likely, shall bring much focus upon the late September and October rain reports at the start of the next spring and summer rain season, which shall relate to the quality of the flowering for the next 2017 crop.

The September to September contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 60.80 usc/Lb., while this equates to a 42.85% 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 550 bags on Friday; to register these stocks at 1,298,086 bags. There was meanwhile a larger in volume 2,395 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 18,095 bags.

The commodity markets were mixed in trade on Friday but with many markets reacting to the pressure that came with the continued muscle of the U.S. dollar, to contribute to a softer track for the overall macro commodity index for the day. The Natural Gas, Sugar and Wheat markets nevertheless had a day of buoyancy, while the Oil, Cocoa, Coffee, Cotton, Copper, Orange Juice, Corn, Soybean, 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 0.20% lower; to see this Index registered at 421.24. The day starts with the U.S. dollar steady and trading at 1.313 to Sterling and 1.097 to the Euro, while North Sea Oil is steady in early trade and trading at 44.40 per barrel.

The London and New York markets started the day on a hesitantly softer note on Friday and with both markets remaining lacklustre in nature and maintaining this track into the afternoon, ahead of the later in the day’s selling pressure that came to the New York market. This had the effect of triggering sell stops and with the added volume assisting to swiftly accentuate the losses for the New York market, which finally had its influence and with the London market following New York into lower price levels. The London market continued to end the day on a soft note and with 76.9% of the earlier losses of the day intact, while the New York market ended the day on a very soft note and with 76.2% of the earlier losses of the day intact. This close does little to inspire and with the technical picture for the markets not looking supportive, one might expect to see an unsteady to perhaps marginally softer start for early trade today against the prices set on Friday, as follows:


JUL 1780 – 30
SEP 1788 – 30                                      SEP 141.90 – 4.95
NOV 1813 – 28                                   DEC 145.00 – 4.90
JAN 1830 – 27                                    MAR 147.80 – 4.90
MAR 1840 – 28                                  MAY 149.40 – 4.85
MAY 1854 – 28                                    JUL 150.60 – 4.90
JUL 1865 – 27                                       SEP 151.70 – 4.95
SEP 1876 – 29                                      DEC 153.35 – 4.85
NOV 1895 – 29                                   MAR 155.00 – 4.75
JAN 1904 – 20                                    MAY 155.90 – 4.65