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 long position within the market by 2,375.92% during the week of trade leading up to Tuesday 25th. August; to liquidate their modest net long position and to register a net short sold position of 19,846 Lots. This net short sold position which is the equivalent of 5,626,253 bags has most likely been modestly reduced, following the period of mixed but overall slightly more positive trade which has since followed.
The European Coffee Federation have reported that the declared coffee stocks held in the ports of Antwerp, Bremen, Hamburg, Genova, Le Havre and Trieste declined by 580,017 bags or 4.79% during the month of June, to register the stocks at 11,524,233 bags as at the end of the month. These stocks fuel not only the Western European markets but also the Eastern European market, which total a demand of approximately 52 million bags, or approximately 1 million bags per week. However if one is to consider that the stocks do not include bulk container transit coffees, roaster on site inventories and private stocks held in non-declared warehouses and thus one might look to add at the very least 2 million bags and possibly as much as 3 million bags to the number above. This would indicate that the overall coffee stocks within Europe as at the end of June would have been close to 13.5 million to 14.5 million bags as at the end of June and sufficient in number, to fuel a very safe in excess of 13.5 weeks of roasting demand. A factor that would have also contributed to the bearish nature of the coffee markets, over the past couple of months. The International Coffee Organisation have reported that global coffee exports for the month of July were 3.6% lower than the same month last year, at 9.59 million bags. This having contributed to the cumulative coffee exports for the first ten months of the present October 2014 to September 2015 coffee year having been 2.8% lower than the previous coffee year, at a total of 92.85 million bags. It is noted in terms of the cumulative exports for these first ten months of the coffee year, that while the cumulative arabica coffee exports dipped by 2.4% from the previous coffee year, that the cumulative robusta coffee exports had dipped by 3.4% for the present coffee year. This is hardly surprising, following the past seven months of internal market price resistance within Vietnam, which has retarded sales and exports of the past crop robusta coffees and resulted in the country holding unusually high stocks for this time of the year. The Association of Indonesian Coffee Exporters have reported that due to the negative effects of the prevailing El Nino phenomenon within the Pacific Ocean, they have sharply reduced their earlier forecast for a new crop of between 10 million and 10.8 million bags, to a more modest number of 8.33 million bags. There is of course no doubt that there is a mild El Nino in play and somewhat drier weather resulting from this phenomenon, but one has to with so many other more positive forecasts on the table and looking to the prevailing relatively soft international coffee prices, see some degree of market manipulation influencing this rather dramatically lower forecast from this association. The Economic Development Ministry in Honduras have announced plans to encourage coffee farmers within districts hardest hit by the Roya or Leaf Rust infestation, to look to start replacing coffee with cocoa trees post new crop harvest and during next year. In this respect they talk of an initial target next year to plant out approximately 20,000 hectares of coffee farms with cocoa trees, with a longer term target of 60,000 hectares of cocoa. This is in terms of the approximate 264,000 hectares of land presently under coffee a relatively modest short term replacement target and furthermore one might think that rather than uproot coffee to plant cocoa, that in a bid to keep land financially productive that initially the farmers would inter-plant coffee seedlings and only remove coffee once the trees start to mature. Thus one might suggest that for the medium term, this program shall not negatively impact upon the coffee production from Honduras. The arbitrage between the markets broadened on Friday to register this at 50.98 usc/Lb., while this equates to a 41.10% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, but is perhaps due to widen further in time and when Vietnam stocks start to impact upon the fortunes of the London market. The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 6,399 bags on Friday; to register these stocks at 2,083,466 bags. There was meanwhile a smaller in volume 825 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 30,523 bags. The commodity markets were mixed on Friday but with the Oil markets leading the way with strong gains, to buoy the overall macro commodity index for the day. The Oil, Natural Gas, Copper, Orange Juice, Soybean, Gold, Silver and Platinum markets had a day of buoyancy and the Corn market was steady, while the Sugar, Cocoa, Coffee, Cotton and Wheat markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.15% higher to see this Index registered at 396.09. The day starts with the U.S. Dollar near to steady and selling at 1.543 to Sterling and 1.125 to the Euro, while North Sea Oil is tending softer in early trade and is selling at 48.10 per barrel. The London and New York markets started the day yesterday on a relatively steady note and took this stance within an environment of thin and lacklustre trade, into the afternoon. However as the afternoon progressed and with volumes remaining relatively thin, both markets started to lose some weight and take a negative track. The London market ahead of today’s Bank Holiday long weekend closure continued on a steady downside track, while the New York market in relatively thin trade took an erratic modestly negative track for the rest of the day. The London market ended the day on a soft note and with 63.8% of the losses of the day intact, while the New York market ended the day on a modestly softer note and having recovered 70.6% of the earlier losses of the day by the close. The London market shall be closed for the day and the New York market is due a late start for this afternoon our time, with the probability that it shall encounter a hesitant near to steady start for early trade against the prices set on Friday, as follows: LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb. SEP 1581 – 26 SEP 120.45 – 0.60 |
