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

Coffee Market Report

14 Aug 2017

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 short sold position within the market by 69.05% during the week of trade leading up to Tuesday 8th. August; to register a net short sold position of 4,560 Lots on the day. This net short-sold position which is the equivalent of 1,292,740 bags has most likely increased again, with the mixed but overall more negative trade, which has since followed.

While the New York arabica coffee market has bounced back a little on Friday from the sharp sell off on Thursday last week, the London robusta coffee market encountered a complete positive correction and recovering all of it Thursday’s losses for the active front month positions. This recovery being assisted by the lack of any selling aggression for the present, from the relatively well sold Vietnam and Indonesian markets. While there were apparently some volumes of consumer industry buying interest in play, for this latter market.

Physical coffee trade last week remained thin and is likely to remain so, until early next month and post the summer holiday season, while there really is very little in the way of striking fundamental news in terms of longer term supply coming to the markets. Thus, with little in the way of any threat to longer term coffee supply coming to the fore for the present, one finds it difficult to speculate upon medium terms direction for the markets. With most players now focused upon and awaiting the start of the spring and summer rain season in Brazil, at the end of September.

The November to December contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 47.10 usc/Lb., while this equates to a 32.74% 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 10,450 bags on Friday; to register these stocks at 1,585,419 bags. There were meanwhile a smaller in number 586 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 101,862 bags.

The commodity markets and against a weaker U.S. dollar, had a mostly positive day on Friday and with the overall macro commodity index taking an upside track for the day. The Oil, Natural Gas, Cocoa, Coffee, Cotton, Copper, Orange Juice, Corn, Soybean and Gold markets had a day of buoyancy and the Silver market was near to steady for the day, while the Sugar and Wheat markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.38% higher, to see this Index registered at 405.42. The day starts with the U.S. Dollar steady and trading at 1.301 to Sterling and at 1.181 to the Euro, while North Sea Oil is near to steady and is selling at $ 51.75 per barrel.

The London and New York coffee markets started the day on Friday close to par, but with both markets coming under some negative pressure for early trade. This was however short lived and as the afternoon progressed and with the positive influences of the overall macro commodity index providing for some positive sentiment, both markets recovered and moved back into positive territory. The London market was the feature for the day though as with buy stops being triggered and to accentuate the gains, the market continued to sparkle and to experience the strongest one-day rally in seven weeks.

The London market ended the day on a very positive note and with 86.3% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 78.7% of the earlier gains of the day intact. This close might be seen to be supportive for sentiment but one might think that with the news of the sharply reduced speculative short position within the New York market that there might be a degree of caution and therefore, little better than a hesitant near to steady start for early trade today against the prices set on Friday, as follows:

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

SEP 2139 + 49                                               SEP 140.30 + 1.80
NOV 2133 + 44                                            DEC 143.85 + 1.85
JAN 2112 + 38                                            MAR 147.40 + 1.85
MAR 2102 + 35                                          MAY 149.65 + 1.85
MAY 2109 + 34                                            JUL 151.85 + 1.85
JUL 2128 + 34                                              SEP 153.85 + 1.80
SEP 2137 + 34                                             DEC 156.80 + 1.85
NOV 2145 + 34                                           MAR 159.65 + 1.80
JAN 2151 + 34                                             MAY 161.25 + 1.80
MAR 2156 + 34                                             JUL 162.80 + 1.80