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

Coffee Market Report

15 Sep 2015
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 short sold position within the market by 15.81% over the week of trade leading up to Tuesday 8th. September; to register a net short sold position of 21,300 Lots. Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 8.46%, to register a net long position of 23,613 Lots on the day.

Over the same week the Non Commercial Speculative sector of this market increased their net short sold position within the market by 17.29%, register a net short position of 28.991 Lots. This net short sold position which is the equivalent of 8,218,820 bags has most likely been little changed, following the period of mixed but with yesterday’s activity overall sideways trade which has since followed and likewise, that of the short position of the Managed Money Funds.

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market increase their net short sold position within the market by 72.71% over the week of trade leading up to Tuesday 8th. September; to register a net short sold position of 8,144 Lots on the day. This net long that is the equivalent of 1,357,333 bags has most likely been reduced a little, over the period of mixed but with yesterday’s correction overall more positive trade that has since followed.

The news of the extended short sold positions within the New York market somewhat predictably attracted some light consumer industry advantageous buying and speculative short covering against this market, which was seen to be somewhat over sold. This correction coming to the fore post many days of mostly bearish trade, which has been inspired by the combination of the negative nature of the overall macro commodity index and the host of negative fundamentals such as rising crop levels in Colombia and Vietnam and good early rains this month, over the main coffee districts in Brazil.

There are presently heavy rains over Vietnam but with little chance that these shall be damaging for the maturing cherries for the soon to start being harvested larger robusta coffee crop, but rather the rains shall assist to buoy the ground water retention levels within the coffee districts, ahead of the dry winter season from mid-October to April next year. Thus the rains rather than being a problem are somewhat constructive for the medium term prospects for the coffee farmers and so far as the dry harvest season is forthcoming in time next month, they might prove to be a negative factor for speculative sentiment within related London robusta coffee market.

The arbitrage between the markets broadened yesterday to register this at 48.21 usc/Lb., while this equates to a 40.11% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, but is perhaps due to widen further in time and when Vietnam stocks start to impact upon the fortunes of the London market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 565 bags yesterday; to register these stocks at 2,043,562 bags. There was meanwhile a larger in volume 1,650 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 42,974 bags.

The commodity markets were mixed in trade yesterday and with many players awaiting the next two days news from the meeting of the Federal Reserve Bank of the U.S.A. and with hesitancy coming with the speculation and mixed views, towards the potential for a hike in U.S. interest rates. In the meantime the softer Chinese economic figures tend to hang over sentiment, within many markets for the present. The Natural Gas, Cocoa, Coffee, Wheat, Corn, Soybean and Gold markets had a positive day’s trade, while the Oil, Sugar, Cotton, Copper, Orange Juice, Silver and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.09% higher to see this Index registered at 395.53. The day starts with the U.S. Dollar steady and trading at 1.543 to Sterling and 1.131 to the Euro, while North Sea Oil is steady in early trade and is selling at 45.85 per barrel.

The London market started the day yesterday with modest losses, but with the New York market starting the day with a degree of corrective buoyancy. The New York market started to add to its gains into the afternoon trade and had its influence upon a recovery into positive territory for the London market, while the New York market started to trigger buy stops and to extend its gains. The positive nature of the market and with the New York market having the ability to retain its new found muscle proved to be inspirational and the London market likewise added to its gains and with both markets taking an upside track, as the afternoon progressed. Both markets did however start to attract some producer selling and speculative profit taking and to run out of steam late in the day and come off their highs, with the markets settling back a little by the close. The London market nevertheless ended the day on a buoyant note and with 74.5% of the gains of the day intact, while the New York market likewise ended the day on a positive note and with 78.5% of the earlier gains of the day intact. This positive close is constructive for the markets but there would need to be good follow through support to inspire confidence and one might expect only a cautious and hesitant modest buoyancy for early trade today against the positive prices set yesterday, as follows:

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

SEP 1582 + 39                                       SEP    117.00 + 3.65
NOV 1587 + 35                                     DEC   120.20 + 3.65
JAN 1600 + 33                                      MAR  123.65 + 3.65
MAR 1614 + 29                                    MAY  125.95 + 3.65
MAY 1634 + 29                                      JUL  128.00 + 3.60
JUL 1653 + 28                                        SEP  129.90 + 3.50
SEP 1671 + 26                                       DEC  132.60 + 3.35
NOV 1691 + 26                                     MAR 135.25 + 3.20
JAN 1711 + 26                                      MAY 137.15 + 3.10
MAR 1733 + 26                                      JUL 139.10 + 3.05