I. & M. Smith (Pty) Ltd. since 1915
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I. & M. Smith (Pty) Ltd.

Coffee Market Report

30 Jun 2015
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 increase their net short sold position within the market by 85.17% over the week of trade leading up to Tuesday 23rd. June; to register a net short sold position of 13,521 Lots on the day. Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 2.04%, to register a net long position of 28,106 Lots on the day.

Meanwhile the Non Commercial Speculative sector of this market increased their net short sold position within the market by 36.67% over the same week; to register a net short sold position of 16,533 Lots. This net short sold position which is the equivalent of 4,687,032 bags has most likely been marginally reduced over the period of mixed but overall more positive trade that has since followed and likewise, that of the Managed Money fund sector of the market.

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market increase their net long position within the market by 19.55% over the week of trade leading up to Tuesday 23rd. June; to register a net long of 17,704 Lots on the day. This net long that is the equivalent of 2,950,667 bags has most likely been further buoyed over the period of mixed but overall more positive trade, which has since followed.

The physical coffee markets continue to drift through the doldrums of the start of the summer holiday season for the main northern hemisphere coffee markets, with relatively dull consumer market buying interest and nothing in the way of fundamental news that would threaten longer term supply, to inspire buyers to take anything more than regular short to medium term stock cover. While in the meantime with most producers continuing to show some degree of price resistance to the price dictates of the relatively soft terminal markets and thus inflating asking export price differentials against these markets, there is little to inspire the consumer market traders to take on relatively expensive in terms of differentials, stocks of both arabica and robusta coffees.

This situation might suggest that for the present the consumers very much have the muscle within the market, as with many producers still holding good stocks of coffees and new crop coffees coming to the markets from Brazil, Colombia and Indonesia and with the new Vietnam, Central American, Indian and East African crops now only a few months away, there is little further that the producers can do to pressure prices higher. Therefore, this scenario leaves the consumers with the confidence that they are well able to play the waiting game, for the producers to have to finally come to the market in a more aggressive selling manner.

The arbitrage between the markets has broadened yesterday to register this at 51.12 usc/Lb., while this equates to a still attractive to roasters 38.61% price discount for the London robusta coffee market. This arbitrage continues to inspire some degree of consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparatively firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,777 bags yesterday; to register these stocks at 2,148,084 bags. There was meanwhile a smaller in volume 1,061 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 37,552 bags.

The commodity markets remained mixed in trade yesterday, with many markets reflecting the hesitancy that prevails within the world economic forum, as all eyes remain focused upon the developing crisis within Greece. One might comment that it is a country punching well above its weight in terms of its influence upon economic sentiment, as the reality is that it is a relatively small number in terms of the European economy let alone the world economy, which Greece is threatening to default on. The Natural Gas, Sugar, Wheat, Corn and Gold markets had a day of buoyancy and the Cocoa market was steady, while the Oil, Coffee, Cotton, Copper, Orange Juice, Soybean, Silver and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.09% higher to see this Index registered at 427.26. The day starts with the U.S. Dollar steady and selling at 1.572 to Sterling and 1.119 to the Euro, while North Sea Oil is steady and is selling at 59.10 per barrel.

The London and New York markets started the day on softer note yesterday and with both markets taking this soft track into the afternoon trade, which attracted increased selling pressure as the afternoon progressed and to see both markets taking a relatively sharp dip further south. There was however some buying support coming into play and this assisted both markets to reflect something of a bounce and with the markets posting more modest losses, but while the New York market held on to its partial recovery, the London market once again slipped back in value. The London market continued to end the day on a very soft note and with 74.3% of the losses of the day intact, while the New York market ended the day on a soft note and having recovered 76.1% of the earlier losses of the day by the close. The partial recovery for the New York market might prove to have some supportive influence upon sentiment and this might assist for a steady start for early trade today against the prices set yesterday, as follows:

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

JUL 1892 – 32                            JUL   130.80 – 0.90
SEP 1792 – 26                            SEP   132.40 – 1.05
NOV 1798 – 25                          DEC  136.00 – 1.00
JAN 1808 – 26                           MAR 139.65 – 0.90
MAR 1825 – 26                         MAY 141.70 – 0.90
MAY 1843 – 26                          JUL  143.45 – 0.90
JUL 1862 – 27                            SEP   145.00 – 0.85
SEP 1881 – 27                            DEC  147.15 – 0.80
NOV 1900 – 27                          MAR 149.20 – 0.85
JAN 1923 – 27                           MAY 150.45 – 0.95