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

Coffee Market Report

23 Jun 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 108.69% over the week of trade leading up to Tuesday 16th. June; to register a net short sold position of 7,302 Lots on the day. Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 4.38%, to register a net long position of 27,545 Lots on the day.

Meanwhile the Non Commercial Speculative sector of this market increased their net short sold position within the market by 60.45% over the same week; to register a net short sold position of 12,096 Lots. This net short sold position which is the equivalent of 3,429,162 bags has most likely been little changed over the period of mixed but mostly sideways 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 increase their net long position within the market by 36.4% over the week of trade leading up to Tuesday 16th. June; to register a net long of 14,809 Lots on the day. This net long that is the equivalent of 2,468,167 bags has most likely been further buoyed over the period of mixed but overall steady trade, which has since followed.

The State run Coffee Board of India have forecasted that weather conditions have so far been positive over the main coffee districts of the country and that this is likely to see the countries coffee production and supply for the next October 2015 to September 2016 coffee year increase by close to 9% over the present coffee year, to total 5,926,667 bags. This improved coffee crop to be made up from a 69 to 31 ratio of robusta and arabica coffees, with the new arabica coffee crop forecasted to increase by 12.5% and the new robusta coffee crop forecasted to be 7.12% higher than the last harvest. However within the same report the Coffee Board voiced their fears the negative effects that the dictates of the prevailing soft international coffee markets, should value not come back into play for the start of the sales of the new crop coffees by the end of this year.

The U.S. Department of Agriculture has forecast that following years of steady coffee consumption growth within the U.S.A. that the rising market share of single serve coffee capsules and pods is having its effect and that while it is not impacting upon the numbers of cups of coffee being consumed, this parsimonious portion controlled method of brewing coffee is going to reduce overall coffee consumption. The figures quoted are not dramatic in terms of they foresee that coffee demand for the coming October 2015 to September 2016 coffee year shall fall by only 1.25% to total 23.7 million bags, but it is a trend that has been noticed already within many other traditional high volume coffee consumer markets and is one that shall slow overall world coffee consumption growth.

The arbitrage between the markets has broadened yesterday to register this at 50.76 usc/Lb., while this equates to a still attractive to roasters 38.31% price discount for the London robusta coffee market. This arbitrage continues to inspire some degree of consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparatively firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 935 bags yesterday; to register these stocks at 2,132,909 bags. There was meanwhile a larger in volume 3,210 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 53,197 bags.

The commodity markets had another mixed day yesterday but with sufficient buoyancy within selected markets, to assist the overall macro commodity index to show a degree of buoyancy. The Sugar, Cocoa, Coffee, Cotton, Orange Juice, Wheat, Corn and Soybean markets had a day of buoyancy and the Copper and Silver markets were steady, while the Oil, Natural Gas, Gold and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.51% higher to see this Index registered at 420.46. The day starts with the U.S. Dollar showing a degree of early buoyancy and selling at 1.578 to Sterling and 1.128 to the Euro, while North Sea Oil is steady in early trade and is selling at 61.05 per barrel.

The London and New York markets started the day yesterday on a steady to buoyant note, to take a hesitantly erratic track into the afternoon trade. As the afternoon progressed the New York market continued to attract underlying short covering and industry price fixation support as against low volume of selling pressure above the market, to add to its value, while the London market continued to maintain its buoyancy and start on a slow upside track. The volumes were however relatively thin and the London market continued on its upside track to end the day on a positive note and with 93.5% of the gains of the day intact, while the New York market seemingly hit something of a ceiling but nevertheless ended the day on a positive note and with 90.6% of the earlier gains of the day intact. This positive close is perhaps for the present more of an indicator for a sideways stance for the market rather than a positive stance and one might expect that the markets shall experience little better than a steady start for early trade today against the price set yesterday, as follows:

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

JUL 1857 – 9                               JUL   130.35 + 3.20
SEP 1802 + 29                             SEP   132.50 + 2.40
NOV 1812 + 29                           DEC  136.30 + 2.40
JAN 1825 + 31                            MAR 140.00 + 2.40
MAR 1844 + 32                          MAY 142.15 + 2.40
MAY 1860 + 32                            JUL 143.95 + 2.40
JUL 1878 + 32                              SEP 145.65 + 2.45
SEP 1897 + 32                             DEC 147.80 + 2.45
NOV 1916 + 32                           MAR 150.00 + 2.45
JAN 1939 + 32                            MAY 151.40 + 2.45