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

Coffee Market Report

05 Apr 2016
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 decrease their net long position within the market by 3.14% over the week of trade leading up to Tuesday 29th. March; to register a net long position of 25,222 Lots. Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 1.27%, to register a net long position of 32,703 Lots on the day.

Over the same week the Non Commercial Speculative sector of this market decreased their net long position within the market by 2.33%, to register a net long position of 19,068 Lots. This net long position which is the equivalent of 5,405,693 bags has most likely been decreased, over the period of relatively steady but with a significant sell off yesterday and likewise, that of the Managed Money fund sector of the market.

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market decrease their net short sold position within the market by 38.49% over the week of trade leading up to Tuesday 29th. March; to register a net short sold position of 6,491 Lots on the day. This net short sold position that is the equivalent of 1,081,833 bags is most likely little changed to perhaps have been slightly decreased, over the period of mixed but overall sideways trade, which has since followed.

The Uganda Coffee Development Authority has reported that the countries coffee exports for the month of February were 18,534 bags or 6.38% lower than the same month last year, at a total of 271,941 bags. This small dip in export volumes does however follow some positive export months and the countries cumulative coffee exports for the first five months of the present October 2015 to September 2016 coffee year are still 145,389 bags or 11.4% higher than the same period in the previous coffee year, at a total of 1,420,882 bags.

Meanwhile the Uganda Coffee Development Authority and with some detail of the March exports readily at hand, have forecasted that the countries coffee exports for the month of March shall be approximately 21,747 bags or 6.98% lower than the same month last year, at a total of 290,000 bags. In the meantime, and with no real problems foreseen for production for the rest of the year, the official and trade and industry forecasts in general still point to Uganda exporting in excess of 3.5 million bags for this present coffee year.

The reports from the export trade in Vietnam are forecasting that following a good export performance during March this year that they foresee exports of mostly robusta coffees for the month of April to be between 2.3 million and 2.5 million bags. These good export volumes are despite the positive price differentials that prevail for new business out of Vietnam, as the consumer markets lacking and degree of volume of competitive priced robusta coffees from other producers, are obliged to pay up for the price resistant Vietnam coffees.

The July on July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 56.64 usc/Lb., while this equates to a 45.33% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, with the good discount most likely due to remain in place for the foreseeable future, in line with steady robusta shipments out of Vietnam.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,133 bags yesterday; to register these stocks at 1,419,366 bags. There was meanwhile a larger in volume 12,014 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 20,757 bags.

The Certified Robusta coffee stocks held against the London market are seen to have declined by 395,500 bags or 12.01% over the first three months of this year, to register these stocks at 2,897,500 bags at the end of the month of March. These stocks with the prevailing inflated export price differentials that robusta coffee producers continue to attract are likely to continue to steadily decline, as the year progresses.

The commodity markets gained little support from the softening of the U.S. dollar yesterday which would usually have been a supportive factor, to see the overall macro commodity index take a softer track for the day. The Natural Gas market did nevertheless have a day of buoyancy, while the Oil, Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, 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 1.24% lower; to see this Index registered at 378.59. The day starts with a degree of early buoyancy for the U.S. Dollar which is trading at 1.424 to Sterling and 1.138 to the Euro, while North Sea Oil is showing a degree of buoyancy in early trade and is selling at 35.50 per barrel.

The London and New York markets started the day yesterday on a steady note, but while the London market retained some support the New York market soon came under pressure and to take a negative track into the afternoon trade. The London market with some influence from the negative nature of the New York market bearing upon it lost its way as the afternoon progressed, while the New York market and with the negative influences of the soft overall macro commodity index assisting to provide pressure, continued to extend its losses. The London market did however encounter support within modest negative territory and to take a sideways softer track for the rest of the day, while the New York market continued on its downside track. The London market continued to end the day on a softer note and with 92.9% of the earlier losses of the day intact, while the New York market ended the day on a soft note and with 91.7% of the earlier losses of the day intact. This close contributes to a soft technical picture for the markets but one might expect to see producer selling stalled and some degree of hesitant caution to contribute to a near to steady start for early trade today against the price set yesterday, as follows:

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

MAY 1474 – 11                                       MAY 122.80 – 4.45
JUL 1506 – 13                                            JUL 124.95 – 4.40
SEP 1528 – 10                                            SEP 126.75 – 4.30
NOV 1544 – 9                                           DEC 128.70 – 4.10
JAN 1559 – 10                                         MAR 130.55 – 4.00
MAR 1576 – 11                                       MAY 132.05 – 3.95
MAY 1598 – 9                                           JUL 133.20 – 3.75
JUL 1621 – 6                                             SEP 133.95 – 3.65
SEP 1641 – 6                                            DEC 135.10 – 3.60
DEC 1661 – 6                                          MAR 136.55 – 3.60