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

Coffee Market Report

22 Dec 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 21.96% over the week of trade leading up to Tuesday 15th. December; to register a net short sold position of 11,409 Lots. Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 2.59%, to register a net long position of 26,221 Lots on the day.

Over the same week the Non Commercial Speculative sector of this market increased their net short sold position within the market by 7.31%, to register a net short position of 15,864 Lots. This net short sold position which is the equivalent of 4,497,374 bags has most likely been little changed, following the mixed but overall mostly sideways trade that has since followed and likewise, that of the net short sold position of the Managed Money Funds.

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market increase their net short sold position within the market by 17.52% over the week of trade leading up to Tuesday 15th. December; to register a net short sold position of 25,958 Lots on the day. This net short sold position that is the equivalent of 4,326,333 bags has most likely been little changed over the period of mixed but overall sideways trade, which has since followed.

One might comment that the relatively modest increase in the net short sold positions of the Managed Money Fund and Speculative sectors of the New York market as at the 15th. December provides an indicator that the funds have the potential to still go further short, which is not really supportive for market sentiment. Especially so against the latest report from the United States Department of Agriculture report that has somewhat disputed the perspective that there shall be a deficit coffee supply for the present October 2015 to September 2016 coffee year and ahead of the prospects so far, that Brazil shall be due a larger new crop in the coming year.

This contributes presently to an early start for the holiday mood within the markets at present, with trade remaining lacklustre and thin and with industry buying interest muted. While many producers such as Mexico, Central America, Vietnam and India are no doubt now looking to the incoming new and mostly larger new crops, which they shall be obliged to sell against the relatively soft price dictates of the reference prices of the New York and London terminal markets. Many producers do however continue to show some degree of price resistance and are holding back for positive differentials for new business, which is further restraining consumer market industry and trade buying interest, to contribute to the lack of trade within the markets. With perhaps the exception of Brazil where the steadily declining currency that is now trading at 4.01 real to the U.S. dollar, is assisting to inspire some volumes of internal market selling activity.

The March on March contracts arbitrage between the markets broadened yesterday, to register this at 51.35 usc/Lb., while this equates to a 42.88% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, but is perhaps due to widen further in time and when Vietnam stocks start to impact in more volume upon the fortunes of the London market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 2,959 bags yesterday; to register these stocks at 1,752,872 bags. There was meanwhile a smaller in volume 378 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 43,498 bags.

The Certified Robusta coffee stocks held against the London market were seen to decline by 2,667 bags on Friday 18th. December; to see these stocks registered at 3,313,667 bags.

The commodity markets had a mixed but generally steady day yesterday against a degree of stability for the presently robust U.S. dollar and with the overall macro commodity index showing a degree of buoyancy, but doing little to buoy spirits within many markets. The Natural Gas, Copper, Gold, Silver and Platinum markets had a day of buoyancy, while the Oil, Sugar, Cocoa, Coffee, Cotton, Orange Juice, Wheat, Corn and Soybean markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.40% higher to see this Index registered at 373.68. The day starts with the U.S. Dollar steady in early trade and trading at 1.489 to Sterling and 1.092 to the Euro, while North Sea Oil is steady in early trade and is selling at 35.75 per barrel.

The London and New York markets had a near to steady start for early trade yesterday, with both markets posting modest losses and remaining below par into the afternoon trade, but within an environment of thin and lacklustre trade and with further losses being encountered for both markets However as the afternoon progressed the New York market recovered to move back towards par, while the London market moved back to marginally above par. This recovery was however not sustained and both markets once again fell back into negative territory and while the London market showed some late in the day buoyancy to limit its losses, the New York market took something of a sideways track at the base of the day’s trading range. The London market continued to end the day on a modestly softer note and with 50% of the losses of the day intact, while the New York market ended the day on a soft note and with 68.9% of the earlier losses of the day intact. This close does little to inspire and one can expect little better than a 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 1482 – 5
MAR 1508 – 5                                         MAR    117.50 – 1.50
MAY 1534 – 5                                         MAY    119.75 – 1.55
JUL 1558 – 5                                             JUL    121.85 – 1.55
SEP 1580 – 4                                             SEP    123.80 – 1.55
NOV 1601 – 3                                          DEC    126.65 – 1.50
JAN 1619 – 5                                           MAR   129.30 – 1.50
MAR 1639 – 5                                         MAY   131.05 – 1.40
MAY 1662 – 5                                           JUL   132.70 – 1.30
JUL 1688 – 5                                             SEP   134.30 – 1.05