Coffee Market Report
The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector raise their net long position by 14.88% within the market over the week of trade leading up to Tuesday 16th. November: to register a net long position of 46,585 lots, which is the equivalent of 13,284,035 bags. This net long position has most likely been increased further following the period of mixed but overall firmer trade that has since followed.
The latest Commitment of Traders report from the London Robusta coffee market has seen the Speculative Managed Money Sector of this market raise their net long position by 1.09% within the market over the week of trade leading up to Tuesday 16th. November: to register a new net long position of 32,738 Lots which is the equivalent of 5,456,333 bags. This net long position has most likely been increased further following the period of mixed but overall firmer trade that has since followed.
The analysts Safras & Mercado have reported that Brazil coffee farmers have sold around 26% of the estimated total production of 63 million bags from the July 2022 to June 2023 Brazil Coffee crop. This selling activity is seen somewhat lower when compared to the same time in 2019, ahead of the 2020/21 record crop year, where Safras & Mercado had foreseen sales of this larger crop to come, to be in the region of 64% sold forward. There remains a reticence on the part of producers to participate fully in forward sales activity, with prior outright price commitments already pegged against a lower New York arabica futures market, together with the prevailing volatility in the higher value seen in the New York Coffee futures market, producer hesitation with, according to Safras & Mercado’s report, an expectation that internal Brazil prices may move slightly higher ahead of the next biennially bearing larger crop to come from Brazil.
The weather conditions within Brazil meanwhile have been reported to have remained, for the most part, hot conducive to set the flowering for the next biennial bearing upcycle crop to come. With the summer rainfall patterns a point of focus that will be closely monitored through December.
The respected U.S. Department of Agriculture Global Agricultural Network USDA have revised their forecast for the production from the predominantly Robusta coffee producing nation of Indonesia for the current April 2021 to March 2022 coffee marketing year, marginally down by 0.47%, to now reach an overall 10,580,000 bags, or 1.12% lower than the previous coffee marketing year in April 2020 to March 2021, with production that is reported at 10,700,000 bags. The production figures for the April 2021 to March 2022 coffee year are forecast to be made up of 9,300,000 bags Robusta coffee and 1,280,000 bags Arabica Coffee.
Of this new crop, the forecast is that Indonesia will export 8.75% or 566,000 bags less than the previous marketing year at a total of 5,900,000 bags of green coffee. This number proving less than the 6,466,000 bags of green coffee exported by Indonesia during the April 2020 to March 2021 Coffee marketing year.
The January 2022 to March 2022 contract arbitrage between the London and New York markets widened on Friday to register this at 131.47 usc/Lb. This equates to 56.35% price discount for the London Robusta coffee market. This wide arbitrage will likely be viewed by price sensitive roasters as an attractive alternative discount for robusta against the comparatively higher value arabica coffee.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 19,267 bags on Friday, to register these stocks at 1,775,232 bags, with 95.97% of these certified stocks being held in Europe at a total of 1,703,637 bags and the remaining 4.03% being held in the USA at a total 71,595 bags. Of this, a total 908,014 bags, or 51.15% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 42.95% of these certified coffees, originating from Honduras. There was meanwhile a decrease of 4,292 bags to the number of bags pending grading to the exchange; to register zero bags pending grading on the day.
It was a softer day on the commodity markets on Friday, weighed by the US Dollar which gained ground against a basket of other currencies. After the US Federal Reserve indicated early tapering of economic support. A stronger US Dollar is seen to be a bearish factor for many of the US Dollar based commodity markets when trading in other currencies. The Coffee and Wheat markets ended the day on a firmer note, while the Sugar, Cocoa, Corn, Soybean, Gold, Silver, Palladium and Platinum market ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.344 Sterling, at 1.127 the Euro and with the US Dollar buying 5.614 Brazil Real.
The New York and London markets started the day on Friday trading on a firmer note. The markets briefly traded to the south of par during the early morning session before the New York market started to attract a degree of buying support to see the market trend in a positive direction, with the London market following suit albeit in a more sedate manner. As the afternoon progressed the New York market started to add more value and quickly trigger buy stops along the way to accentuate the gains for the day.
The London market followed suit with the influence of further weight being added within the New York market, to likewise add more value, gaining momentum throughout the session. Both the New York and the London markets were seen to encounter resistance late in the day to see the markets drop back from the highs of the day and lose momentum into the late afternoon session. The New York and London markets dropped back late in the day to settle far from the highs of the day, albeit on a firmer note at the close.
The London market ended the day on a positive note and with 58.93% of the gains of the day intact, while the New York market ended the day on a likewise positive note and with 40.87% of the earlier gains of the day intact. This firmer close might inspire some degree of follow through support albeit that the markets were seen to drop back from the highs of the day, one might think that the markets are due for a steady start to early trade today, against the prices set on Friday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
JAN 2245 + 33 MAR 233.30 + 4.25
MAR 2197 + 30 MAY 233.40 + 4.00
MAY 2173 + 31 JUL 233.20 + 3.90
JUL 2168 + 31 SEP 233.00 + 3.80
SEP 2163 + 31 DEC 233.25 + 3.75
NOV 2165 + 32 MAR 233.55 + 3.70
JAN 2174 + 34 MAY 233.65 + 3.70
MAR 2172 + 34 JUL 233.65 + 3.70
