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

Coffee Market Report

12 Feb 2019

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 3.36% over the week of trade leading up to Tuesday 8th. January; to register a new net short sold position of 56,427 Lots. Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 0.83%, to register a net long position of 38,075 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 4.16%; to register a new net short sold position of 62,435 Lots. This net short-sold position which is the equivalent of 17,700,046 bags has most likely been further increased, following the period of mixed but overall softer trade that has since followed and likewise, that of the Managed Money Fund sector of the market.

These reports from the New York market have been delayed by the U.S. Federal Governments shut down, which included the U.S. Commodity Futures Trading commission, who are steadily catching up and shall announce late today the status of the Commitment of Traders up to the 15th. January. Planning to steadily catch up through the month of February and to be up to date, with their report on the 8th. March and with the figures for the 5th. March. So long as there is an agreement on Friday with President Trump, who is threatening to once again pull the funding from the Federal Government and to renew the shutdown.

The Brazilian Coffee Exporters Association Cecafé have reported that the countries coffee exports for January were 20.3% higher than the same month last year, at a total of 3,285,302 bags. The report relating these exports to approximately 2.91 million bags of arabica coffees, along with 138,537 bags of conilon robusta coffees and the equivalent of 236,644 bags of coffee in the form of value added, soluble coffees.

The report from Cecafé does though note that while the coffee exports for the month of January were 20.3% higher than the same month last year, the value of the exports were in U.S. dollar terms 17.04% lower than the same month last year. This dip in value well illustrating the problems being encountered by global coffee producers, who are having to live with the soft nature of the reference prices of the coffee terminal markets.

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 33.99 usc/Lb., while this equates to 32.9% 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 1,225 bags yesterday; to register these stocks at 2,480,858 bags. There was meanwhile a larger in number 1,360 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 50,894 bags.

The commodity markets encountered a firming U.S. dollar yesterday, which impacted negatively upon many markets, to see the overall macro commodity index taking a softer track for the day. The Natural Gas, Cocoa and Wheat markets nevertheless ended the day on a positive note, while the Oil, Sugar, Coffee, Cotton, Copper, Orange Juice, 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 0.55% lower; to see this index registered at 396.48. The day starts with the U.S. Dollar steady and trading at 1.286 to Sterling, at 1.128 to the Euro and with the US Dollar buying 3.758 Brazilian Real.

The London market started the day yesterday trading with some modest buoyancy, while the New York market started the day trading marginally south of par and with the markets retaining this stance, into the early afternoon trade. As the afternoon progressed the New York market and with some influence coming from the negative nature of the overall macro commodity index and the weaker Brazil Real, started to increase its losses and with the London market slipping back to trade around par. The markets coming under further pressure in late trade and with sell stops being triggered, to set the markets on track for a soft close for the day.

The London market ended the day on a negative note and with 84.6% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 85.2% of the earlier loses of the day intact. This close will paint a negative picture for the charts and is likely to impact negatively upon confidence, but with the markets having had the ability to remain within the prevailing trading range so far this year and an indication that the funds are once more heavily sold short within the New York market, there might be some degree of caution. To make one think that there shall be something of a hesitant near to steady start due for early trade today, against the prices set yesterday, as follows:

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

MAR 1504 – 26                                           MAR 100.20 – 2.40
MAY 1528 – 22                                           MAY 103.30 – 2.30
JUL 1544 – 22                                              JUL 106.00 – 2.30
SEP 1562 – 21                                              SEP 108.75 – 2.20
NOV 1580 – 21                                            DEC 112.55 – 2.20
JAN 1598 – 20                                             MAR 116.30 – 2.20
MAR 1618 – 19                                           MAY 118.75 – 2.15
MAY 1638 – 18                                            JUL 121.00 – 2.05
JUL 1654 – 18                                              SEP 123.20 – 1.90
SEP 1671 – 18                                              DEC 126.40 – 1.70