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

Coffee Market Report

26 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 1.28% over the week of trade leading up to Tuesday 19th. July; to register a net long position of 35,603 Lots. Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 3.4%, to register a net long position of 33,011 Lots on the day.

Over the same week the Non Commercial Speculative sector of this market increased their long position within the market by 3.32%, to register net long position of 36,489 Lots. This net long position which is the equivalent of 10,344,470 bags is most likely to have been since reduced, following the period of mixed but overall softer 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 2.26% during the week of trade leading up to Tuesday 19th. July; to register a long position of 21,303 Lots. This net long position which is the equivalent of 3,550,500 bags has most likely been little changed to perhaps marginally reduced, following the period of mixed but overall softer trade that has since followed.

The Coffee Export Centre of Nicaragua have reported that the countries coffee exports for the month of June were 17% higher than the same month last year, to total 250,453 bags. This positive volume has contributed to the countries cumulative coffee exports for the first nine months of the present October 2015 to September 2016 coffee year to be 5.3% higher than the same period in the previous coffee year, at a total of 1,486,410 bags.

These figures might suggest with still three months of the present coffee year to go, that Nicaragua are on track for improved exports for the present coffee year of approximately 1.9 million bags. There are however conflicting forecasts for the prospects for Nicaragua for their new crop and exports for the coming 2016/2017 coffee year, as the United States Department of Agriculture have forecasted a possible 13% dip in production from the new harvest as a result of poor weather, while there are other forecasts that foresee little change in volume for the countries new October 2016 to March 2017 harvest.

The Brazil governments Crop Supply Agency CONAB have announced that they shall resume auctions of the aged government arabica coffee stocks on Friday, with an offer of 67,000 bags of these coffees. These auctions that are targeting the price sensitive domestic market roasters they say are intended to be held twice a month from here on, but the question is over the minimum prices that might be set. Making note of the fact that the previous auction programs over the past year and half have tended to falter, due to a lack of buying interest at the minimum prices set.

The September to September contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 60.09 usc/Lb., while this equates to a 42.59% 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 2,264 bags yesterday; to register these stocks at 1,300,350 bags. There was meanwhile a smaller in volume 1,665 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 16,430 bags.

The commodity markets seemingly continued to struggle with the relatively firm U.S. dollar yesterday, with most markets under pressure for the day and with the overall macro commodity index taking a softer track for the day. The Sugar and Orange Juice markets nevertheless had a day of buoyancy, while the Oil, Natural Gas, Cocoa, Coffee, Cotton, Copper, Wheat, Corn, Soybean, Gold and Silver markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.13% lower; to see this Index registered at 420.68. The day starts with the U.S. dollar steady and trading at 1.311 to Sterling and 1.101 to the Euro, while North Sea Oil is steady in early trade and trading at 43.80 per barrel.

The London and New York markets started the day on a hesitantly softer note yesterday and took a negative track into the afternoon trade and while there was a brief respite for the markets and particularly the London market, both markets slipped back into negative territory and with the New York market perhaps further influenced by the negative nature of the overall commodity index, taking a rather steeper track south. Both markets did however stabilise and start on a late in the day recovery track, which was particularly strong for the London market and to see the markets settle with only relatively modest losses for the day. The London market ended the day on a marginally softer note and having recovered 91.3% of the earlier losses of the day, while the New York market ended the day on a softer note and having recovered 71.9% of the earlier losses of the day by the close. This late in the day partial recovery for the markets might inspire some hesitation on the part of the bears within the market, but with the overall technical picture not looking strong for the present, 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 1778 – 2
SEP 1786 – 2                                        SEP 141.10 – 0.80
NOV 1808 – 5                                     DEC 144.20 – 0.80
JAN 1825 – 5                                      MAR 147.05 – 0.75
MAR 1835 – 5                                    MAY 148.70 – 0.70
MAY 1849 – 5                                      JUL 150.00 – 0.60
JUL 1860 – 5                                        SEP 151.25 – 0.45
SEP 1871 – 5                                       DEC 153.00 – 0.35
NOV 1890 – 5                                    MAR 154.70 – 0.30
JAN 1899 – 5                                      MAY 155.60 – 0.30