Coffee Market Report
| 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 15.88% during the week of trade leading up to Tuesday 19th. January; to register a net short sold position of 32,078 Lots. This net short sold position which is the equivalent of 9,093,971 bags has most likely been little changed to perhaps marginally reduced, following the period of mixed but overall mostly sideways trade, which has since followed.
One might suggest however that following this further increase in the net short sold speculative position within the New York market that came with the general downside track taken by commodities for the first half of last week that it might inspire some corrective short covering, albeit that the past two days of trade have most probably already bought back some small volume of this net short position. Thus there is a potential for a further modest recovery for the New York market, during trade this week. The prospects for a smaller conilon robusta crop from Brazil from the new crop this year and with these conilon robusta coffees due to start being harvested in May, is resulting in internal market price resistance and relatively buoyancy in the prices for conilon robusta coffees within the consumer markets. This is of course mostly within the North American market where the relatively unique conilon robusta crop is a familiar cup profile and has been the traditional market for these coffees, but it is nevertheless on the cards that roasters shall start to draw down on the approximate 1.3 million bags of now price competitive conilon robusta certified coffee stocks that are presently being held against the London market. This activity to perhaps assist to underpin the London market, which has tended to see its lustre fade and price levels dip, in the recent months. On the short term however with only two weeks of trade before Vietnam shall close down for approximately ten days for the Tet New Year (Year of the Monkey) holidays, it is expected that there shall be some more active internal market selling of past crop robusta coffee stocks and new crop coffees, to raise finance for the holidays. This might provide a short term limit to upside potential for the London market, but a factor that is due to fade by late next week. The four day Indian International Coffee Festival came to a close this weekend, with the slow but steady growth of the Indian domestic coffee market being highlighted as a positive factor for the future. This growth being particularly positive, as it is mostly related to the non-traditional coffee markets in the central and northern urban centres of the country, on the back of the popular coffee shop culture. There was also a positive factor noted for the Indian coffee industry, in that the 35% of the country’s coffee exports are now related to value added processed coffees, which brings more value to the industry and especially welcome, in terms of the prevailing soft international coffee prices. The March on March contracts arbitrage between the markets broadened on Friday, to register this at 52.72 usc/Lb., while this equates to a 45.45% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, with the good discount most likely due to remain in place for the foreseeable future, in line with steady robusta shipments out of Vietnam. The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 10,936 bags on Friday; to register these stocks at 1,624,203 bags. There was meanwhile a smaller in volume 3,452 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 42,533 bags. The commodity markets along with the equity markets gained some degree of support for sentiment on Friday, with the news that the Chinese government were committed to provision of support for their market and likewise, with the further commitment from the European Central bank to continue to pump money into the European economy. Thus with the Oil markets taking the lead for the day, the overall macro commodity index continued on its positive track of the previous day. The Oil, Natural Gas, Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn and Platinum markets had a day of buoyancy, while the Sugar, 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 1.42% higher; to this Index registered at 363.84. The day starts with the U.S. Dollar steady in early trade and trading at 1.430 to Sterling and 1.081 to the Euro, while North Sea Oil is showing buoyancy in early trade and is selling at 31.70 per barrel. The London and New York markets opened the day with buoyancy on Friday, to maintain this positive track into the afternoon trade and with the further inspiration that came with the positive nature of the overall macro commodity index, both markets added volume and value as the afternoon progressed. The markets did however start to attract some selling pressure at the mid-afternoon highs and to lose some weight for later in the day’s trade. The London market continued to end the day on a positive note and with 56.8% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 51.6% of the earlier gains of the day intact. This positive close and accompanied by the evidence of the somewhat oversold nature of the markets that comes with the increased speculative net short sold position in New York and likewise a well sold London market, is likely to inspire a follow through steady to buoyant start for the markets for early trade today against the prices set on Friday, as follows: LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb. JAN 1352 + 25 MAR 116.00 + 1.60 |
