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

Coffee Market Report

18 Aug 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 decrease their net short sold position within the market by 80.12% over the week of trade leading up to Tuesday 11th. August; to register a net short sold position of 3,575 Lots on the day. Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 0.46%, to register a net long position of 27,385 Lots on the day.

Meanwhile the Non Commercial Speculative sector of this market decreased their net short sold position within the market by 59.87% over the same week; to register a net short sold position of 9,751 Lots. This net short sold position which is the equivalent of 2,764,365 bags has most likely been marginally increased again, over the period of mixed but overall softer trade that has since followed 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 reduce their net long position within the market by 98.10% over the week of trade leading up to Tuesday 11th. August; to register a net long of 104 Lots on the day. This net long that is the equivalent of 17,333 bags has most likely been changed to a modest net short position, over the period of mixed but overall negative trade that has since followed.

One might suggest that it is not unsurprising that the speculative sector of the London market is tending to take a more bearish view to the medium term fortunes of this market, as it is quite clear that with Vietnam holding relatively high levels of internal market farm and internal trade robusta coffee stocks, that the nearby pending start to the larger new crop harvest is likely to pressure much of these stocks to start coming to the market. Stocks which would not have an immediate home with the consumer market roaster inventories and therefore, with a good percentage quite likely to need to find a home within the certified robusta coffee stocks that are held against the London exchange.

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 373,235 bags or 6.77% during the month of July, to register these stocks at 5,883,349 bags at the end of the month. These stocks do not of course include the in transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is fed by these stocks of 500,000 bags per week, would conservatively have been at least 1 million bags.

Therefore if one is to consider the additional unreported stocks and look to end August stocks in North America of at the very least 6.88 million bags, it would have equated to close to 14 weeks of roasting activity and still a safe reserve, in terms of the potential for a steady flow of new crop coffees from Brazil and Indonesia that are already due to come to the market and soon followed, by the new crop coffees from Colombia and Vietnam. These coffees to be followed by the end of the year, buy the impact of larger new crops and fresh coffees, from Central America and India. Crops that in terms of short term volume availability and competition to find a home, shall tend to limit the possibilities for individual producers to show strong price resistance to the price dictates of the still relatively soft terminal markets.

The arbitrage between the markets narrowed yesterday to register this at 60.76 usc/Lb., while this equates to a 43.85% 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 upon the fortunes of the London market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,508 bags yesterday; to register these stocks at 2,082,853 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 22,655 bags.

The commodity markets have had a soft start to the week and with the buoyancy of the U.S. dollar tending to dampen spirits within many markets, while the negative nature of the overall macro commodity index added to a soft and lacklustre day’s trade. The Cotton, Gold, Silver and Platinum markets had a day of buoyancy, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Copper, Orange Juice, Wheat, Corn and Soybean markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.68% lower to see this Index registered at 399.13. The day starts with the U.S. Dollar steady and selling at 1.568 to Sterling and 1.105 to the Euro, while North Sea Oil is near to steady in early trade and is selling at 47.35 per barrel.

The London and New York markets started the day yesterday on a marginally softer note and with both markets taking a softer track into the afternoon trade, which was hardly surprising with the evidence of the liquidation of much of the net speculative and managed money fund short positions within the influential New York market. There was however a spell of recovery back up towards par for the markets during the afternoon, but with the combination of the negative influences of the negative nature of the macro commodity index and a degree of speculative and fund selling and accompanied by light producer price fixation selling into both markets, the markets once again lost some weight. The London market continued to end the day on a soft note and with 44% of the losses of the day intact, while the New York market ended the day on a much softer note and with 86.7% of the earlier losses of the day intact. This soft close and with the New York market tending to lose heart late in the day, is unlikely to inspire little better than a steady to soft start for early trade today, against the prices set yesterday, as follows:

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

SEP 1704 – 9                                        SEP    134.75 – 2.75
NOV 1715 – 11                                    DEC   138.55 – 2.60
JAN 1731 – 12                                     MAR  141.95 – 2.55
MAR 1750 – 13                                    MAY 144.00 – 2.55
MAY 1771 – 13                                      JUL 145.95 – 2.50
JUL 1793 – 10                                        SEP  147.65 – 2.45
SEP 1809 – 10                                       DEC  150.05 – 2.45
NOV 1827 – 10                                     MAR 152.40 – 2.45
JAN 1846 – 10                                      MAY 153.80 – 2.50
MAR 1861 – 10                                      JUL 155.30 – 2.55