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

 

I. & M. Smith (Pty) Ltd.

Coffee Market Report

05 Jun 2018

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 decrease their net short sold position within the market by 2.29% over the week of trade leading up to Tuesday 29th. May; to register a new net short sold position of 45,115 Lots. Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 0.75%, to register a net long position of 34,558 Lots on the day.

Over the same week, the Non-Commercial Speculative sector of this market decreased their net short sold position within this market by 3.17%, to register a net short sold position of 45,231 Lots. This net short sold position which is the equivalent of 12,822,788 bags has most likely been further decreased, following the period of mixed by overall more positive trade that has since followed and likewise, that of the managed money fund sector of the market.

The Indonesian government trade data from Sumatra which is the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month of May were 205,780 bags or 73.5% lower than the same month last year, at a total of 74,193 bags. This number and following a similarly modest export performance for the previous months has contributed to the cumulative coffee exports for the first eight months of the present October 2017 to September 2018 coffee year to be 1,940,986 bags or 68.71% lower than the same period in the previous coffee year, at a total of 884,096 bags.

There is however a new and potentially larger Sumatra robusta coffee crop harvest that has started to be harvested and due to pick up in volume, in the coming month. However, with strong domestic market demand to take in the early crop coffees and to inflate prices, one might not expect to experience any increase in export volumes until late August and thereon, for the rest of the year.

The National Coffee Institute in Honduras have reported that due mainly to internal transport and to shipping delays, that the countries coffee exports for the month of May were 20% lower than the same month last year, at a total of 805,166 bags. These exports the Institute report, have contributed to the countries cumulative coffee exports for the first eight months of the present October 2017 to September 2018 coffee year to be 4.96 million bags, while they forecast exports for this present coffee year to well exceed 7 million bags.

The respected U.S. Department of Agriculture Global Agricultural Network USDA have reported that they had reduced their earlier coffee production forecast for Costa Rica for the present October 2017 to September 2018 coffee year by 2.58%, to now assess the crop for the presently being exported crop at 1.51 million bags. While in terms of the forthcoming new crop that shall fuel coffee supply for the October 2018 to September 2019 coffee year, they forecast that this shall be 9.93% lower at a more modest 1.36 million bags.

This decline in coffee production forecast for Costa Rica the USDA have appropriated to biennial bearing factors, but one might also expect that with new crop coffees selling against the soft reference prices of the New York market this year, that this might also have impacted upon the levels of farm inputs towards the next crop. A factor that is likely to be the case for the countries neighbours in Central America and one that might well contribute to an overall decline in production for the Central American producer bloc, which may prove to be a supportive factor market sentiment later on in the year.

The September 2018 to September 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 45.19 usc/Lb., while this equates to 36.52% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 4,730 bags yesterday; to register these stocks at 2,023,681 bags. There was meanwhile a larger in number 5,515 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 45,475 bags.

The commodity markets mostly took a softer track yesterday, to see the overall macro commodity index taking a downside track for the day. The Copper market did however have a day of buoyancy, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.37% lower; to see this index registered at 432.68. The day starts with the U.S. Dollar steady and trading at 1.331 to Sterling, at 1.169 to the Euro and with the dollar buying 3.746 Brazilian Real, while North Sea Oil is tending softer in early trade and is selling at US$ 73.75 per barrel.

The London and New York markets started the day yesterday trading either side of par and with the London market modestly south of par, while the New York market was showing modest buoyancy, into the early afternoon trade. As the afternoon progressed the New York market started to come under pressure and slipped back into negative territory, while the London market posted more modest losses and with the markets ending the day in line with the softer nature of the overall macro commodity index.

The London market ended the day on a negative note and with 75% of the earlier modest losses of the day intact, while the New York market ended the day on a likewise negative note and with 68.6% of the earlier losses of the day intact. This close does little to inspire and one would think that the markets are due for only a near to steady start for early trade today, against the prices set yesterday, as follows:

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

JUL 1745 – 5                                                    JUL 121.50 – 1.26
SEP 1732 – 6                                                   SEP 123.75 – 1.20
NOV 1736 – 6                                                 DEC 127.25 – 1.20
JAN 1743 – 5                                                  MAR 130.75 – 1.15
MAR 1755 – 5                                                MAY 133.00 – 1.15
MAY 1766 – 4                                                 JUL 135.05 – 1.10
JUL 1778 – 4                                                  SEP 136.85 – 1.10
SEP 1792 – 4                                                  DEC 139.40 – 1.05
NOV 1806 – 4                                                 MAR 141.95 – 1.05
JAN 1816 – 4                                                  MAY 143.55 – 1.05