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

Coffee Market Report

20 Oct 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 reduce their net short sold position within the market by 78.7% over the week of trade leading up to Tuesday 13th. October; to register a net short sold position of 2,860 Lots. Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 1.75%, to register a net long position of 25,607 Lots on the day.

Over the same week the Non Commercial Speculative sector of this market decreased their net short sold position within the market by 52.35%, register a net short position of 10,068 Lots. This net short sold position which is the equivalent of 2,854.233 bags has most likely been increased again, following the period of mixed but overall negative 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 reduce their net short sold position within the market by 13.19% over the week of trade leading up to Tuesday 13th. October; to register a net short sold position of 9,319 Lots on the day. This net long that is the equivalent of 1,553,167 bags has most likely been marginally increased, over the period of mixed but overall modestly negative trade that has since followed.

The latest weather forecasts from Brazil are indicating that the main coffee districts in South East Brazil shall be in receipt of rains by the end of this week, which shall be followed by more rains for the coming week. This news as it did on Friday, continued to dampen speculative spirits within the volatile New York market for yesterday’s trade, to fuel follow through selling for the day.

Estimates coming out of Vietnam are that in line with the firmer reference prices of the London market last week, that approximately 25% of the past crop robusta coffee stocks that were being held by farmers and internal traders might have been sold to the exporters. However there are estimates that despite some increase in sales of stocks last week, that there are still as much as 5 million bags of past crop stocks remaining within the hands of the farmers and internal traders, which with the new crop harvest having started, shall start to impact over and above the forecasts for this approximately 28.5 million bags crop.

Thus for the present the view that Vietnam has a lot of robusta coffee still to come to the market, has to remain a negative factor for the London market that while tracking to a degree the fortunes for the New York arabica coffee market, has these past and new crop coffee stocks creating something of a nearby ceiling to this market. Albeit that for the present, the internal traders in Vietnam are apparently still in receipt of good financial support from the banks, to enable them to carry stocks and to resist to a degree, the downside pressure from the London market.

The second month arbitrage between the markets narrowed yesterday, to register this at 54.73 usc/Lb., while this equates to a 42.99% 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 in more volume upon the fortunes of the London market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,429 bags yesterday; to register these stocks at 1,891,384 bags. There was meanwhile a larger in volume 4,037 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 66,913 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 1,000 bags on Friday 16th. October; to register these stocks at 3,401,500 bags on the day.

The commodity markets were mixed in trade yesterday, but with the lowering of the Chinese growth figures tending to dampen spirits within some markets and with the overall macro commodity index tending softer for the day. The Natural Gas, Cocoa, Orange Juice and Platinum markets had a day of buoyancy, while the Oil, Sugar, Coffee, Cotton, Copper, Wheat, Corn, Soybean, Gold and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.70% lower to see this Index registered at 404.30. The day starts with the U.S. Dollar steady and trading at 1.548 to Sterling and 1.133 to the Euro, while North Sea Oil is near to steady in early trade and is selling at 47.50 per barrel.

The London market and New York markets started the day yesterday with an initial positive correction within both markets, but this was short lived and the New York market soon attracted follow through selling pressure, to see the New York market move into the afternoon trade on a negative track and the London market taking an erratic sideways track below par. The New York market recovered some of its early afternoon losses but remained soft and took a sideways negative track for the rest of the day, while the London market finally succumbed to the negative pressure and settled back further in late afternoon trade, before bouncing marginally into the close. The London market ended the day on a soft note and with 55.9% of the losses of the day intact, while the New York market ended the day on a soft note and with 80.9% of the earlier losses of the day intact. This overall softer close does little to inspire and with the charts once again turning negative, one would expect little better than 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.

NOV 1582 – 31                                    DEC     123.90 – 1.95
JAN 1600 – 19                                     MAR    127.30 – 1.90
MAR 1615 – 18                                   MAY    129.35 – 1.80
MAY 1635 – 17                                     JUL    131.20 – 1.80
JUL 1655 – 16                                       SEP    132.95 – 1.90
SEP 1675 – 15                                       DEC   135.55 – 1.90
NOV 1695 – 14                                     MAR   138.05 – 1.90
JAN 1713 – 14                                      MAY   139.70 – 2.00
MAR 1731 – 14                                      JUL    141.15 – 2.20
MAY 1747 – 14                                      SEP    142.40 – 2.20