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 decrease their net short sold position within the market by 49.26% during the week of trade leading up to Tuesday 8th. March; to register a net short sold position of 13,711 Lots. This net short sold position which is the equivalent of 3,887,008 bags has most likely been further decreased again, following the period of mixed but overall positive trade, which has since followed.
The commodity brokers Marex Spectron forecasted the forthcoming new Brazil crop to be 13% higher than last years crop, at 56.5 million bags on Friday. This crop to contribute to the global coffee supply for the next October 2016 to September 2017 coffee year to post a modest 1.03 million bags surplus supply, as against what they see to be a modest 1.97 million bags deficit supply for the present coffee year. This report did not however impact upon market sentiment for the coffee markets for the day, as it followed some more modest forecasts from Rabobank that IBGE, while with the Brazil Real firming to 3.61 to the U.S. dollar and slowing Brazil selling activity and along with the positive nature of the overall macro commodity index, the coffee markets had a day of positive sentiment. The Brazil real continues to attract support and is this morning trading at 3.58 to the U.S. dollar and might be seen to be further supportive for the coffee markets, but with the evidence of the relatively sharp liquidation of the short sold position within the New York market as at Tuesday last week and the probability with Friday’s sharp rally that this short position might have been further liquidated, it might bring some selling activity to the fore for trade this week. One might nevertheless expect that with the firming of the Brazil real and the countries relatively high inflation rate that is close to 10% per annum, that the dictates of the reference prices of the still relatively soft New York market must be becoming something of a concern for Brazilian coffee farmers, which is likely unless there is a further recovery for the New York market, to inspire increasing price resistance within the internal market in Brazil. This is likely with many farmers and coffee cooperatives already holding relatively good volumes of forward sales commitments for their forthcoming new crop coffees, to slow overall Brazilian price fixation hedge selling into the New York and London markets, which even if there is a negative correction to the Friday rally, limit the downside potential for the markets. Albeit that there has been some added value to the fortunes of the London market during last week the recovery has been relatively modest and this is unlikely to change the prevailing price resistance within the internal market in Vietnam, where farmers and internal traders continue to pressure the short sold mills and exporters to pay up for much needed robusta coffee stocks. But nevertheless there is a large volume of unfixed coffee in Vietnam and even though internal market price resistance within Vietnam is modestly supportive for the London market as it is inspiring positive asking price differentials for new business out of Vietnam, the prospects for this selling still to come to the market has to create something of a nearby ceiling for the upside potential of the London market. The May on May contracts arbitrage between the London and New York markets broadened on Friday, to register this at 61.07 usc/Lb., while this equates to a 48.55% 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 20,128 bags on Friday; to register these stocks at 1,471,736 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 25,965 bags. The commodity markets had a mixed day on Friday, but with most markets taking on a positive stance for the day and with the news of further stimulus due from the European Central Bank for the Euro zone countries along with buoyancy for the influential Oil markets, assisting to buoy confidence and the overall macro commodity index for the day. The Oil, Natural Gas, Sugar, Coffee, Cotton, Copper, Corn, Soybean and Silver markets had a positive day’s trade, while the Cocoa, Orange Juice, Wheat and Gold markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.57% higher; to see this Index registered at 385.65. The day starts with the U.S. Dollar near to steady and trading at 1.437 to Sterling and 1.117 to the Euro, while North Sea Oil is near to steady in early trade and is selling at 39.25 per barrel. The London and New York markets started the day on Friday with early buoyancy and maintained this stance into afternoon trade and with the positive support of the overall macro commodity index and a firmer Brazil real in play, the markets started to add value and to trigger supportive buy stops to accentuate the gains as the afternoon progressed. The London market did however limit its gains and to flatten out for the rest of the day’s trade, but with the New York market maintaining its muscle and adding value through the day. The London market ended the day on a positive note and with 83.3% of the gains of the day intact, while the New York market ended the day on a very positive note and with 89% of the earlier gains of the day intact. This close and with the charts tending to indicate technical support for the market might well be supportive for some degree of follow through buoyancy for the markets for early trade today, but the added value might also start to attract some producer price fixation selling pressure to limit the gains, against the prices set on Friday as follows: LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb. MAR 1402 + 25 MAR 124.40 + 3.80 |
