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

 

I. & M. Smith (Pty) Ltd.

Coffee Market Report

12 Mar 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 increase their net short sold position within the market by 4.05% over the week of trade leading up to Tuesday 5th. March; to register a new net short sold position of 75,076 Lots. Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 0.21%, to register a net long position of 36,879 Lots on the day.

Over the same week, the Non-Commercial Speculative sector of this market increased their net short sold position within this market by 0.99%; to register a new net short sold position of 75,184 Lots. This net short-sold position which is the equivalent of 21,314,331 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.

Speculative sentiment within the New York market remains bearish, with the view being taken that despite the prospects for a smaller Brazil arabica coffee crop this year and this contributing towards a small deficit in global coffee supply for the coming October 2019 to September 2020 coffee year, that there are prospects for another bumper Brazil crop for 2020. This sentiment very obvious, in the significant short sold status of the market.

It is however very early days to be taking such a view as one might speculate that in addition to the possibility for in excess of 3 million bags in global coffee demand developing this year and further demand for 2020, that the soft prices shall have a negative effect upon production yields for the relative high cost washed arabica coffee producers. This is aside from the fact that there has to be uncertainty in terms of longer-term weather conditions within Brazil, which might after all, limit the potential for another large biennially bearing coffee crop in 2020. Thus, there is the potential that during the second half of this year and with new fundamental figures and forecasts in hand, that there could be speculation for a larger than expected deficit coffee supply for the coming 2019/2020 coffee year, which would be supportive for sentiment and would inspire a recovery for the coffee markets.

The Uganda Coffee Development authority have reported that the countries coffee exports for the month of January were 6,833 bags or 1.7% lower than the same month last year, at a total of 395,097 bags. This has contributed to the country’s cumulative coffee exports for the first four months of the present October 2018 to September 2019 coffee year to be 142,330 bags or 8.83% lower than the same period in the previous coffee year, at a total of 1,470,219 bags.

More notable though and reflecting the soft global coffee prices is the fact that the value of the Ugandan coffee exports for the first four months of the present October 2018 to September 2019 coffee year is US$ 30,655,260.00 or 17.08% lower than the value of coffee exports for the same period in the previous coffee year. A factor that remains a concern for all coffee producers, albeit that some like Brazil, do have some relief coming from the softer nature of their domestic currency.

The Indonesian government trade data from Sumatra which is the leading coffee producing island within Indonesia, has reported that they have revised their figures for the islands robusta coffee exports for last year. The now indicates that the islands robusta coffee exports for the 39,154 bags or 41,06% higher than the same month last year, at a total of 134,512 bags. This does however, follow some low volume export months and contributed to the islands cumulative robusta coffee exports for the first five months of the present October 2018 to September 2019 coffee year to be 306,467 bags or 25.62% lower than the same period in the previous coffee year, at a total of 889,852 bags.

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 27.71 usc/Lb., while this equates to 28.51% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to be unchanged yesterday; to register these stocks at 2,491,683 bags. There was meanwhile, 1,920 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 36,785 bags.

The commodity markets were mixed in trade yesterday, to see the overall macro commodity index taking something of a sideways track for the day. The Oil, Sugar, Cocoa, Copper and Orange Juice markets ended the day on a positive note and the London robusta Coffee market was steady for the day, while the Natural Gas, New York arabica Coffee, Cotton, 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 0.14% lower; to see this index registered at 398.46. The day starts with the U.S. Dollar tending a little softer and trading at 1.321 to Sterling, at 1.126 to the Euro and with the US Dollar buying 3.838 Brazilian Real.

The London and New York markets started the day yesterday trading within modest negative territory and with the markets holding this stance, into the early afternoon trade. As the afternoon progressed the New York market started to attract more selling pressure and to dip deeper into negative territory, while the London market bounced back from the lows and moved up into modest positive territory in late trade.

The London market ended the day on a steady note and with 40% of the modest gains of the day intact, while the New York market ended the day on a very negative note and with 86.7% of the earlier losses of the day intact. This mixed close and with the New York market despite the evidence of the market being significantly short sold, does little to inspire confidence. But perhaps with the Brazil Real a little firmer against the dollar, there shall be some caution and setting the markets for a hesitant steady start for early trade today, against the prices set yesterday, as follows:

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

MAR 1516 + 2                                             MAR 94.00 – 1.30
MAY 1532 + 2                                             MAY 97.20 – 1.30
JUL 1540 unch                                            JUL 100.00 – 1.20
SEP 1554 – 2                                               SEP 102.80 – 1.20
NOV 1570 – 3                                             DEC 106.65 – 1.20
JAN 1586 – 4                                               MAR 110.50 – 1.15
MAR 1604 – 4                                             MAY 112.90 – 1.20
MAY 1623 – 4                                             JUL 115.15 – 1.20
JUL 1642 – 4                                               SEP 117.35 – 1.20
SEP 1661 – 4                                               DEC 120.60 – 1.20