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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

15 Sep 2020

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 long position by 13.78% within this market over the week of trade leading up to Tuesday 8th. September; to register a new net long position of 48,450 lots. Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 3.12%, to register a net long position of 63,737 Lots on the day.

Over the same week, the Non-Commercial Speculative sector of this market increased their net long position within the market by 13.17% to register a new net long position of 33,092 Lots which is the equivalent of 9,381,435 bags. This net long position has most likely been further increased, following the period of positive trade that has since followed.

The Vietnam Customs Authority have reported that Vietnam’s coffee exports for the month of August are down by 8.9% from the previous month, to total 1,669,800 bags. This number proving to be slightly below the 1.83 million bags that had been initially forecast for the month’s coffee exports. The report also states that for the first eight months of 2020, Vietnam coffee exports are 2.1% lower than the same period last year at a total of 19,166,667 bags.

The November to December contract arbitrage between the London and New York markets narrowed yesterday; to register this at 60.14 usc/Lb. This equates to 48.87% 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 70 bags yesterday to register these stocks at 1,117,471 bags, with 93.5% of these certified stocks being held in Europe at a total of 1,045,242 bags and the remaining 6.5% being held in the USA at a total of 72,229 bags. There is meanwhile a larger in number 1,830 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 4,509 bags.

It was a softer day overall on the commodity markets yesterday, to see the overall macro commodity index taking something of a soft sideways track for the day. The Cocoa market ended the day on a positive note, while the Sugar and Coffee markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.0017% higher; to see this index registered at 412.1250. The day starts with the U.S. Dollar steady, trading at 1.286 to Sterling, at 1.898 to the Euro and with the US Dollar buying 5.270 Brazilian Real.

The London and New York markets started the day yesterday trading on a softer note, both markets continued this softer path into the early morning trade. The early morning volumes were relatively thin though volumes of trade increased into the latter half of the session and markets soon attracting a large degree of speculative selling pressure as the liquidation of long positions assisted to break through technical gaps and trigger stop losses along the way. As the afternoon progressed the London and New York markets steadied in lower territory, and in a narrow range which toward the close gave way to additional selling pressure. It was a relatively heavy volume day, to see both New York and London markets close at the lows on the day.

The London market ended the day with 93.88% of the earlier losses of the day intact, while the New York market ended the day with 87.04% of the earlier losses of the day intact. This somewhat unforeseen speculative liquidation activity within the New York market does little to inspire confidence and may contribute to a negative technical picture for the market with measured underlying industry support. There may be a degree of corrective buoyancy, with the Brazil Real starting the day firmer against the US Dollar, the coffee markets could be in for a steady start in early trade today, against the prices set yesterday, as follows:

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

NOV 1387 – 46                                                                  DEC 123.05 – 9.40
JAN 1401 – 44                                                                   MAR 124.30 – 9.10
MAR 1416 – 42                                                                 MAY 125.40 – 8.95
MAY 1430 – 41                                                                  JUL 126.50 – 8.85
JUL 1443 – 41                                                                    SEP 127.40 – 8.85
SEP 1457 – 41                                                                    DEC 128.35 – 8.70
NOV 1471 – 40                                                                  MAR 129.30 – 8.55
JAN 1482 – 40                                                                   MAY 129.90 – 8.50