The Tet New Year holidays are starting to take effect and have already closed down commercial activity within Vietnam, where concentration is now upon the celebrations of the start of the Year of the Rooster. This is likely to limit the levels of producer price fixation selling volumes above the London market and leave the rudder of this market, very much in the hands of the funds and the speculative sectors of the market through to the second half of next week.

The question is will this with the fundamental of longer term tightening overall global robusta coffee supply tend to uncap the London market as while one would think that post Tet holiday lacklustre Vietnam selling would do so, but with the Fund and Speculative sectors of the market holding record net long positions as at Tuesday last week, this may not be the case. Thus, one might think that for the short term and until there is more clarity as to the direction in terms of selling activity that the internal market in Vietnam shall take post the Tet holidays, that the London market might tend to track the fortunes of the volatile and higher volume New York arabica coffee market.

Presently aside from some concerns over the prospects for the next Brazil arabica coffee crop in terms of the many suggestions that biennial bearing following last year’s bumper crop, there have not yet been any striking weather related threats to global arabica coffee production for the year. However, with many forecasts from within Brazil indicating something in excess of a 5 million bags dip in Brazil arabica coffee production this year and with the prospects for little in the way of carryover stocks from the last crop, it does partially assist to buoy speculative spirits within the New York market.

The issue of the carryover arabica coffee stocks or the potential lack of them ahead of the start of the delivery of the new Brazil arabica coffee crop in five months’ time, is not only related to the modest stock levels that were carried into the last year’s crop, but also to the modest nature of last year’s deficit Brazil conilon robusta coffee crop. This has increased domestic market demand for Brazil arabica coffees and somewhat eradicated the small surplus supply of Brazil arabica coffees for the export markets, while with the reports of the hot and dry conditions within the leading conilon robusta state of Espirito Santo and forecasts for another dismal conilon crop this year, the increased internal market demand for Brazil arabica coffees is likely to continue through to the middle of 2018.

One might suggest therefore, that if what many might still suggest to be pessimistic forecasts for the forthcoming new Brazil arabica coffee crop are even partially correct, that with a continued increased internal market demand for arabica coffees, that it might tip the new arabica coffee crop from being just enough to something of a modest deficit crop. Perhaps good reason to see some logic, for the extensive net long positions that the funds and speculative sectors are holding within the New York arabica coffee market.

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 53.56 usc/Lb., while this equates to a 34.48% price discount for the London robusta coffee market. This relatively narrow arbitrage is now becoming less of an attractive factor for the roasters who have considered robusta coffees to be an opportunist discount component, within their mostly arabica coffee blends.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 8,849 bags yesterday; to register these stocks at 1,290,189 bags. There was meanwhile a smaller in number 6,435 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 38,921 bags.

The commodity markets were mixed in trade yesterday, but with many markets tending to soften and to see the overall macro commodity index taking a softer track for the day. The Natural Gas, Coffee, Cotton, Orange Juice and Corn markets nevertheless had a day of modest buoyancy, while the Oil, Sugar, Cocoa, Copper, Wheat Soybean, 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 0.22% lower, to see this Index registered at 431.75. The day starts with the U.S. dollar near to steady and trading at 1.265 to Sterling and 1.075 to the Euro, while North Sea Oil is showing modest buoyancy and is selling at $ 54.45 per barrel.

The London and New York markets started the day yesterday on a softer note and with both markets maintaining a soft stance, into the early afternoon trade. However, as the afternoon progressed and with some degree of confidence returning to the New York market with the ability of the market to limit its earlier losses of the day there was a renewed confidence that the market moved back into positive territory, with the London market following suit. Both markets made significant gains and with the New York market at one stage posting gains of 3.25 usc/Lb. for the day, while the London market was up by $ 39.00 per metric ton, but late in the day the markets started to falter and to limit the gains for the London market while the New York market continued post the London close on a downside track. The London market ended the day on a positive note and with 48.7% of the earlier gains of the day intact, while the New York market ended the day on a nervously very modest positive note and with only 16.9% of the earlier gains of the day intact. The uncertain nature of the close in the New York market during late trade yesterday might not assist to buoy confidence and one might expect to see only a hesitant near to steady start for early trade today, against the prices set yesterday, as follows:

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

JAN 2243 + 16
MAR 2231 + 19                                              MAR 152.90 + 0.55
MAY 2244 + 22                                              MAY 155.35 + 0.55
JUL 2250 + 21                                                  JUL 157.65 + 0.55
SEP 2254 + 22                                                  SEP 159.85 + 0.50
NOV 2254 + 22                                               DEC 162.85 + 0.45
JAN 2252 + 22                                                MAR 165.70 + 0.40
MAR 2251 + 22                                              MAY 167.30 + 0.40
MAY 2253 + 22                                                JUL 168.85 + 0.45
JUL 2263 + 22                                                  SEP 170.30 + 0.35