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 28.57% during the week of trade leading up to Tuesday 5th. June; to register a net short sold position of 48,050 Lots on the day. This net short-sold position which is the equivalent of 13,621,196 bags has most likely been trimmed slightly, following the period of mixed but overall buoyant trade, that has since followed.
The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 135,030 bags or 2% during the month of May, to register these stocks at 6,867,594 bags at the end of the month. These stocks include the coffees being held in American Certified warehouse stocks, which at end May which were reported a relatively low contribution to the overall total, at 437,528 bags. The overall Green Coffee stocks reported, do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 570,000 bags per week, would conservatively have been at least 1.1 million bags. If one is to consider the additional unreported stocks the end month stocks, this would equate to more than 13 weeks of roasting activity, which most would consider to be a safe reserve.
The respected U.S. Department of Agriculture Global Agricultural Network USDA have published their latest Coffee World Markets Trade and Overview for 2018/2019, to forecast world coffee production for the coming year to potentially be 11.40 million bags higher than the previous year. The year on year increase is reasoned in part by increased production foreseen in the robusta sector with both Indonesia and Vietnam anticipated to register a respective 5% and 2% increase in production for the coming year. The greatest contribution to the overall forecast increase in production is primarily the year on year biennial production to come from Brazil for their new July 2018 to June 2019 crop that is forecast to register a cumulative increase of 9.30 million bags of combined arabica and conilon robusta production, to reach a forecast 60.20 million bags.
The prospects of an overall larger production to come from Brazil is a factor that has already had an influence upon sentiment within the coffee futures markets. This new crop harvest has begun in the robusta coffee growing regions and is soon to start within the arabica regions and is a crop that is anticipated to sufficiently contribute toward Brazil’s local consumption, as well as fuel increased shipments to consumer markets in the next couple of months and bolster internal inventory within Brazil that is generally considered to be at a low ahead of this crop and that will lead into the next biennial bearing lower crop to come in July 2019.
The USDA report has included their forecast global coffee consumption for the same period to reach a new record at 163.20 million bags.
The September 2018 to September 2018 contracts arbitrage between the London and New York markets widened yesterday, to register this at 40.89 usc/Lb., while this equates to 34.79% price discount for the London Robusta coffee market.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 2,705 bags yesterday; to register these stocks at 2,047,779 bags. There was meanwhile a decrease of 4,520 bags in the number of bags pending grading for this exchange; to register these pending grading stocks at 25,556 bags.
The commodity markets were mixed and mostly lower on Friday, following announcements from the largest consumer economy U.S.A., that new tariffs would be imposed on Chinese goods. Separately the leading in influence Oil markets registered a softer day on speculation of future production increases from the Middle East and Russia. With the Oil markets lower on the day and the US Dollar mildly positive, it was a softer day across the board, to include Gold, Silver, Platinum and Palladium, Sugar, Coffee, Corn, Wheat, Cotton and Copper, the few exceptions in the basket of commodities, Cocoa and Orange Juice, which bucked the overall lower macro trend, to finish on a positive note. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.177% lower, to see this index registered at 427.50. The day starts with the U.S. Dollar steady and trading at 1.326 to Sterling, at 1.159 to the Euro, with the US Dollar buying 3.73 Brazilian Real, while North Sea Oil is steady in early trade and selling at US$ 71.02 per barrel.
The coffee markets started the day marginally below par in London and on a softer track in New York. The lower trend in New York mirrored in London as the morning progressed, with both markets setting a new, lower floor for the early morning session. The Brazil Real regained a degree of value against the US Dollar ahead of the America’s opening for business and resistance at the lows inspired a marginal recovery that was still below par in New York. The afternoon session flitted around unchanged in London but with trade volumes picking up pace toward the latter end of the day, a softer close but off of the days lows and in the middle of the trading range for this market. The New York market seemed similarly rangebound at midsession with speculative selling pressure met later in the session by underlying buyer support and this market registered another hefty volume day, with a close on the day, at the upper end of the trading range for the day, to set the close in both markets on a buoyant note on Friday, as follows:
London Robusta US$/MT New York Arabica Usc/Lb.
JULY 1,706 – 7 JULY 115.20 – 0.50
SEPT 1,690 – 11 SEPT 117.55 – 0.40
NOV 1,695 – 12 DEC 121.00 – 0.50
JAN 1,704 – 12 MAR 124.50 – 0.50
MAR 1,716 – 13 MAY 126.85 – 0.50
MAY 1,728 – 14 JULY 129.05 – 0.45
JULY 1,735 – 16 SEPT 131.00 – 0.45
SEPT 1,748 – 15 DEC 133.80 – 0.40
NOV 1,762 – 15 MAR 136.60 – 0.35
JAN 1,765 – 16 MAY 138.30 – 0.35
