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

Coffee Market Report

19 Jul 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 increase their net long position within the market by 8.5% over the week of trade leading up to Tuesday 12th. July; to register a net long position of 35,154 Lots. Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 1.31%, to register a net long position of 34,173 Lots on the day.

Over the same week the Non Commercial Speculative sector of this market increased their long position within the market by 7.69%, to register net long position of 35,314 Lots. This net long position which is the equivalent of 10,011,362 bags is most likely little changed to perhaps marginally increased, over the period of mixed but overall positive to buoyant trade that has since followed and likewise, that of the Managed Money Fund sector within this market.

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative Non Commercial sector of this market increase their net long position within this market by 24.68% during the week of trade leading up to Tuesday 12th. July; to register a long position of 20,833 Lots. This net long position which is the equivalent of 3,472,167 bags has most likely been little changed, following the period of mixed but overall steady trade that has since followed.

Historically the days around the full moon and with the often clear nights that accompany the full moon, have been the most frost threatening days within the Brazil coffee districts and with full moon due tonight, there were unexpected reports of mild frosts yesterday morning within some of the coffee districts in the Mogiana region of Sao Paulo state and the some of the southern areas in the Cerrado and Minas Gerais. These reports but with little detail as to how damaging the scattered incidences of frost might have been, did however come to the fore in time to buoy the softening New York market.

The concerns over what damage there might have been are for the present rather muted, as it would seem that the frosts were scattered rather than widespread and with the intensity of these incidences of frost likewise questioned by many within the Brazil coffee farming communities. While one must consider that most of the Brazil coffee districts have recently been in receipt of unseasonal spells of winter rains and with the fact that moist trees that would have benefited from the resulting fair ground water retention levels, that mild frosts would be less damaging than what they would be for dry trees.

There shall however be a keen interest shown for the early morning weather reports out Brazil later in the day today and again tomorrow, to establish if there might actually have been some degree of damage to coffee trees for their prospects for the next 2017 crop, ahead of the warmer conditions that are forecasted for the second half of this week.

The September to September contracts arbitrage between the London and New York markets broadened yesterday, to register this at 67.17 usc/Lb., while this equates to a 44.94% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, continues to inspire support for the robusta coffee sector of the industry.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 925 yesterday; to register these stocks at 1,299,745 bags. There was meanwhile a larger in volume 16,140 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 24,343 bags.

The commodity markets had a mixed day yesterday but with the Oil markets coming off the boil once again, the overall commodity index struggled to take a near to steady track for the day. The Natural Gas, Sugar, Cocoa, New York arabica Coffee, Cotton, Orange Juice, Wheat, Corn, Soybean and Gold markets nevertheless had a day of buoyancy, while the Oil, London robusta Coffee and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.09% lower; to see this Index registered at 431,05. The day starts with the U.S. dollar steady and trading at 1.322 to Sterling and 1.107 to the Euro, while North Sea Oil is near to steady in early trade and trading at 45.45 per barrel.

The London market started the day yesterday on a softer note, but followed by early buoyancy for the New York market. This positive stance being taken within the New York market assisted for a recovery for the London market and to see both markets taking a hesitant positive track into the early afternoon trade but with both markets coming under pressure and heading south into negative territory, as the afternoon progressed and prior to the talk of frost coming to the fore from Brazil. This talk of frost albeit somewhat questionable data did however assist to take the New York market back out of negative territory and to take a cautiously steady upside track for the rest of the day, but while the London market followed suit it faltered near the end and slipped back into modest negative territory. The London market ended the day on a modestly negative note but having recovered 77.3% of the earlier losses of the day by the close, while the New York market ended the day on a positive note and with 86.4% of the earlier gains of the day intact. This mixed close and the positive nature of the New York market along with the talk of Brazil frosts is likely to bring to the fore a cautious but perhaps modestly positive start for early trade today against the prices set yesterday, as follows:

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

JUL 1805 – 5                                        JUL 147.80 + 2.10
SEP 1814 – 5                                        SEP 149.45 + 1.90
NOV 1836 – 5                                      DEC 152.40 + 1.90
JAN 1852 – 5                                      MAR 155.10 + 1.95
MAR 1862 – 5                                    MAY 156.60 + 2.05
MAY 1874 – 5                                      JUL 157.75 + 2.05
JUL 1884 – 7                                         SEP 158.80 + 2.05
SEP 1897 – 7                                        DEC 160.35 + 2.05
NOV 1916 – 7                                     MAR 161.90 + 2.10
JAN 1912 – 7                                      MAY 162.70 + 2.10