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

Coffee Market Report

23 Nov 2015
The latest Commitment of Traders report from the New York arabica coffee market has seen the Non Commercial Speculative sector of this market increase their net short sold position within the market by 23.64% during the week of trade leading up to Tuesday 17th. November; to register a net short sold position of 36,106 Lots. This net short sold position which is the equivalent of 10,235,891 bags has most likely been significantly decreased, following the relatively sharp positive correction that was experienced over trade on Thursday and Friday last week.

This relatively sharp turnaround in market sentiment that occurred during the last two trading days of last week for the New York market is perhaps justified by the evidence of exactly how far short sold the speculative sector of the market had taken the market, by the middle of last week. There is no doubt that the scenario that there is more than sufficient coffee available to the consumer markets for the short to medium term is still in play, but while it there is a short term surplus in line with the weight of new crops that are now coming to the markets, the longer term view is still for supply to be close to matching demand rather than being a significant surplus and in this respect, perhaps good reason for not going too far short into the terminal markets.

However one might suggest that while this possibly unforeseen sharp correction has seen the New York market snap back in volume and followed to a lesser degree by the relatively flat London robusta coffee market, there is still a weight of nearby selling of new crop coffees hanging over both markets. Thus unless there are some other striking and supportive fundamental news reports soon to come to the coffee markets, there has to be with the attraction of producer price fixation selling ahead of the markets a nearby ceiling due to start to develop for both markets.

Speculative activity within the coffee markets aside there is nothing in the way of striking fundamental news coming to the markets to inspire further positive direction, which is a concern for the producers for the present. There has however been some small recovery for the value of the Brazil real relative to the U.S. dollar which is slowing Brazilian selling activity and has partially assisted towards some degree of buoyancy within the coffee markets, but one might not foresee this to be anything more than a short term support factor.

The second month arbitrage between the markets broadened on Friday, to register this at 53.10 usc/Lb., while this equates to a 42.82% 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 2,082 bags on Friday; to register these stocks at 1,848,211 bags. There was meanwhile a larger in volume 3,745 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 18,177 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 167 bags on Thursday 19th. November; to see these stocks registered at 3,352,833 bags on the day.

The commodity markets were mixed in trade again on Friday and seemingly took little heart out of the news of improved Euro zone economic confidence data, which is mostly related to the continued Euro zone central bank financial stimulus program. Thus it was with perhaps the coffee and the Brent Oil markets aside another lacklustre day for the markets and with the overall commodity index, taking a marginally softer track for the day. The Oil, Sugar, Coffee and Cotton markets had s day of buoyancy and the Cocoa market was steady, while the Natural Gas, Copper, Orange Juice, Wheat, Corn, Soybean, Gold, 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 0.14% lower to see this Index registered at 383.34. The day starts with the U.S. Dollar showing buoyancy in early trade and trading at 1.517 to Sterling and 1.061 to the Euro, while North Sea Oil is tending softer in early trade and is selling at 41.95 per barrel.

The London and New York markets opened the day on Friday on a modestly buoyant note, following the positive move taken by the markets the previous day. This steady start inspired further support and follow through speculative short covering buying activity within the New York market, which took the market on a positive track in afternoon trade and with the London market following suit in a more erratic and cautious manner. Both markets maintained this positive track for the rest of the day’s trade but with the markets coming under some corrective pressure and advantageous producer selling and speculative profit taking in late trade, to see the markets come back off their new found highs. The London market continued to end the day on a modestly positive note and with 32.1% of the earlier gains of the day intact, while the New York market ended the day on a similarly hesitant positive note and with 50% of the earlier gains of the day intact. This close while assisting to maintain a positive view in terms of the charts for the New York market might however in terms of the faltering nature of the market late in the day and the renewed muscle for the U.S. dollar this morning, inspire some degree of caution and perhaps little better than a near to steady start for the markets in early trade today against the prices set on Friday, as follows:

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

NOV 1539 + 9                                          DEC    121.90 + 2.00
JAN 1572 + 9                                          MAR    124.40 + 2.20
MAR 1600 + 16                                      MAY    126.55 + 2.20
MAY 1623 + 18                                        JUL    128.65 + 2.15
JUL 1644 + 18                                          SEP    130.50 + 2.10
SEP 1664 + 18                                         DEC    133.35 + 2.05
NOV 1683 + 18                                      MAR    136.10 + 1.95
JAN 1702 + 18                                       MAY    137.95 + 1.90
MAR 1720 + 18                                       JUL    139.70 + 1.70
MAY 1744 + 18                                       SEP    141.35 + 1.55