Coffee Market Report

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 decrease their net short sold position within the market by 1.86% over the week of trade leading up to Tuesday 27th. February; to register a new net short sold position of 56,520 Lots. Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 1.95%, to register a net long position of 40,801 Lots on the day.

Over the same week, the Non-Commercial Speculative sector of this market decreased their net short sold position within this market by 8.88%, to register a net short sold position of 53,355 Lots. This net short sold position which is the equivalent of 15,125,906 bags has most likely been increased, following a period of mixed but overall more negative trade that has since followed and likewise, that of the managed money fund sector of the market.

The National Coffee Growers Federation in Colombia have reported that the country’s coffee production for the month of February was 81,000 bags or 6.26% lower than the same month last year, at a total of 1,212,000 bags. This has contributed to the countries cumulative production for the first five months of the present October 2017 to September 2018 coffee year to be 665,000 bags or 9.59% lower than the same period in the previous coffee year, at a total of 6,270,000 bags.

The National Coffee Growers Federation in Colombia have also reported that the country’s coffee exports for the month of February were 91,000 bags or 7.67% lower than the same month last year, at a total of 1,096,000 bags. This has contributed to the countries cumulative coffee exports for the first five months of the present October 2017 to September 2018 coffee year to be 362,000 bags or 5.76% lower than the same period in the previous coffee year, at a total of 5,921,000 bags.

This dip in both production and exports over the past five months in Colombia and as the third largest coffee producer would most usually have had a been supportive for sentiment within the New York arabica coffee market, but with many foreseeing the prospects for rising Central American and Brazil arabica coffee supply for the year, this has not been the case so far. While in the meantime at the end of last month and despite the evidence of a more modest start for the new coffee year in Colombia, the National Coffee Federation have voiced their opinion that they do not after all foresee a serious overall dip in production and exports for the coming months and that production for the present coffee year shall still be significant and able to satisfy consumer market demand for fine washed arabica Colombian coffees.

The New York market seemingly shrugged off the latest report from the respected Rabobank, which came to the fore with a new Brazil crop forecast of relatively modest 56.8 million bags. This related to their forecast for a relatively large new conilon robusta coffee crop of 15.8 million bags and a new arabica coffee crop of 41 million bags. With the New York market continuing to trade yesterday under the negative cloud of the many prior new crop forecasts that talk a crop of between 58 million and 60 million bags, to see this market maintaining a softer stance in yesterday’s trade.

The May 2018 to May 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 41.49 usc/Lb., while this equates to 34.26% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,410 bags yesterday; to register these stocks at 1,892,773 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 51,602 bags.

The commodity markets were mostly showing a degree of buoyancy yesterday, to see the overall macro commodity index taking a positive track for the day. The Oil, Sugar, Cocoa, London robusta Coffee, Cotton, Copper, Wheat, Corn and Soybean markets had a day of buoyancy and the Natural Gas market was steady, while the New York arabica Coffee, Orange Juice, 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 1.04% higher; to see this index registered at 433.84. The day starts with the U.S. Dollar steady and trading at 1.384 to Sterling, at 1.235 to the Euro and with the dollar buying 3.242 Brazilian Real, while North Sea Oil is steady and is selling at US$ 65.90 per barrel.

The London market started the day yesterday marginally south of par, while the New York market started the day on a softer note and in modest negative territory, with the London market remaining close to par and the New York market in modest negative territory into the early afternoon trade. As the afternoon progressed the London market took a steady sideways track, while the New York market started to trigger sell stops and to extend its losses but to finally bounce back off its lows, while the London market moved marginally north of par for the day.

The London market ended the day on a positive note and with 50% of the earlier gains of the day intact, while the New York market ended the day on a negative note but having recovered 51.1% of the earlier losses of the day by the close. This close does little to inspire, but perhaps with the evidence of the still extensive net short positions within both markets and the ability of the New York market to bounce back partially yesterday, it shall bring with it some hesitant support and set the markets for a steady to perhaps even modestly buoyant start for early trade today against the prices set on Friday, as follows:

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

MAR 1802 + 6                                                MAR 119.20 – 1.15
MAY 1755 + 4                                                MAY 121.10 – 1.10
JUL 1782 + 4                                                  JUL 123.35 – 1.05
SEP 1784 + 4                                                  SEP 125.60 – 1.00
NOV 1785 + 4                                                DEC 128.95 – 0.95
JAN 1790 + 4                                                 MAR 132.30 – 0.95
MAR 1801 + 4                                                MAY 134.40 – 0.90
MAY 1814 + 3                                                JUL 136.25 – 0.85
JUL 1829 + 2                                                  SEP 137.95 – 0.75
SEP 1849 + 10                                                DEC 140.50 – 0.75