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 2.09% during the week of trade leading up to Tuesday 11th. October; to register a net long position of 31,306 Lots on the day. This net long position which is the equivalent of 8,875,112 bags has most likely been increased again, following the period of mixed but overall more positive trade, which has since followed.
The International Coffee Organisation have revised upwards their assessment of global coffee production for the just completed October 2015 to September 2016 coffee year to 148 million bags, which they say equates to a global deficit of 3.3 million bags of the year. This number is however related to the input of often conservative producer member production numbers which the ICO by nature of its official capacity is obliged to register and thus one might suspect that this official number might be a couple of million bags light, to indicate production for the just completed coffee year at closer to 150 million bags.
The question is though as the new coffee year has started this month with what is seen to be good consumer market stocks within the main North American, European and Japanese markets, what are the prospects for medium to longer term production, as with consumer market stocks aside, this new coffee year has started with significantly lower producer stocks and there is a need to see these stocks to be rebuilt. Thus there is much focus upon the prospects for the next 2017 Brazil crop, as there is on the outcome of the slightly delayed new Vietnam crop.
In terms of the next 2017 Brazil crop there have been good flowerings recorded within many of the main coffee growing districts, but these need to be soon followed by good and regular rains so as to allow the flowerings to set and start to develop, towards a good crop. Likewise, good rains are required to trigger further flowerings, so as to increase the potential of the next years Brazil coffee crop, which shall see market focus very much upon the Brazil weather reports for the coming weeks.
So far the weather forecasts from Brazil do not indicate any reason for concern over the prospects for the new Brazil October to March summer rain season, but rains while wide spread for this month, have been erratic and there have been some internal market forecasts from Brazil for a biennially bearing smaller arabica crop for the coming year. Factors which have so far along with the forecasts for a smaller new Vietnam new crop, that have assisted to buoy speculative and fund sentiment, within the coffee markets.
The March to March contracts arbitrage between the London and New York markets broadened on Friday, to register this at 64.72 usc/Lb., while this equates to a 40.76% price discount for the London robusta coffee market. This arbitrage is perhaps becoming a less 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 increase by 3,246 bags on Friday; to register these stocks at 1,267,075 bags. There were meanwhile a smaller in number 2,737 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 30,848 bags.
The commodity markets encountered the negative pressure of a stronger U.S. dollar on Friday, which impacted within many markets but not sufficiently so, to stop the overall macro commodity index from showing modest buoyancy for the day. The Cocoa, Coffee, Cotton, Wheat, Corn and Soybean markets had a day of buoyancy, while the Oil, Natural Gas, Sugar, Copper, Orange Juice, 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 0.20% higher; to see this Index registered at 418.44. The day starts with the U.S. dollar steady and trading at 1.216 to Sterling and 1.098 to the Euro, while North Sea Oil is steady in early trade and trading at 49.15 per barrel.
The London market started the day on a modestly softer note on Friday, while the New York market showed some modest buoyancy in early trade. The London market with price fixation selling pressure out of Asia assisting to take more value out of the market took a softer track into the afternoon trade, while the New York market held on to its positive stance and with the London market bouncing off the lows and recovering to return to modest positive territory behind the positive track being taken in late trade in New York. The London market continued to end the day on a modestly positive note but with only 22.2% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 82.8% of the earlier gains of the day intact. This close and with the markets ending the day on a positive note and with the technical picture of the markets looking positive, is likely to inspire a relatively steady start for early trade today but with perhaps some degree of price fixation selling pressure due to remain over the London market, against the prices set on Friday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
NOV 2044 + 7 DEC 155.40 + 2.70
JAN 2074 + 4 MAR 158.80 + 2.65
MAR 2074 + 6 MAY 160.90 + 2.65
MAY 2073 + 6 JUL 162.80 + 2.65
JUL 2073 + 7 SEP 164.45 + 2.70
SEP 2076 + 12 DEC 166.70 + 2.80
NOV 2084 + 12 MAR 168.65 + 2.85
JAN 2094 + 12 MAY 169.70 + 2.85
MAR 2101 + 12 JUL 170.65 + 2.85
MAY 2104 + 12 SEP 171.60 + 2.90