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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

20 Mar 2018

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 5.33% over the week of trade leading up to Tuesday 13th. March; to register a new net short sold position of 56,884 Lots. Meanwhile the longer term in nature Index Fund sector of this market decreased their net long position within the market by 1.26%, to register a net long position of 40,008 Lots on the day.

Over the same week, the Non-Commercial Speculative sector of this market increased their net short sold position within this market by 3.25%, to register a net short sold position of 52,375 Lots. This net short sold position which is the equivalent of 14,848,080 bags has most likely been increased, following a period of mixed but overall more negative trade that has since followed and likewise, that of the managed money fund sector of the market.

Meanwhile with the new crop coffees from the Mexican and Central American producer bloc coffees chasing a somewhat complacent and lacklustre consumer market and selling against the soft reference prices of the New York market, there are many small-scale farmers within these countries who are struggling to break even with their new crop sales. This lack of or modest profitability from the present crop is going to make it difficult for many of these farmers to raise finance for fertilisers and chemical inputs for the development of their next crop, which is likely to impact negatively upon the yields for many farms for the next crop from this important fine washed arabica coffee producer bloc.

One might already with presently no signs of a short term recovery for the New York market and many farmers obliged to sell their new crop coffees at relatively modest price levels so as to cover their farm debts, speculate that while many of the financially more stable larger farms in the region might be able absorb this year’s soft prices and still invest with full inputs for the next crop, that the potential dip in production on the part of the smaller farmers might result in excess of a 5% dip in overall regional production for the next crop. But with the potential so long as there are no dramatic issues developing for Colombia during the year for a larger new Colombian crop to come to the fore for the last quarter of the year, a dip in volume in Central America might not be threatening for overall consumer market supply of washed arabica coffees for the next October 2018 to September 2019 coffee year.

It is a factor though should the Brazilian internal market look to show price resistant for new crop sales and rather rebuild arabica coffee stocks than flood the market with new crop sales, prove to contribute to some degree of market confidence. This along with the possibility for short covering buying coming into play within the New York market ahead of a potentially biennially bearing smaller 2019 Brazil crop, could well assist to buoy sentiment and prices within the presently soft New York market for the second half of the year.

The May 2018 to May 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 39.65 usc/Lb., while this equates to 33.22% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 2,005 bags yesterday; to register these stocks at 1,929,452 bags. There were meanwhile larger in number 6,620 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 19,407 bags.

The commodity markets and despite the U.S. dollar losing some weight were mostly on the back foot yesterday, to see the overall macro commodity index taking a softer track for the day. The Sugar, Coffee, Gold and Silver markets had a day of buoyancy, while the Oil, Natural Gas, Cocoa, Cotton, 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 0.95% lower; to see this index registered at 422.65. The day starts with the U.S. Dollar steady and trading at 1.403 to Sterling, at 1.234 to the Euro and with the dollar buying 3.285 Brazilian Real, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 65.20 per barrel.

The London and New York markets started the day yesterday with modest buoyancy and with both markets maintaining a positive stance, into the early afternoon trade. As the afternoon progressed the markets maintained their positive stance, to see both markets continue through towards a positive close for the day.

The London market ended the day on a positive note and with 75% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 72.2% of the earlier gains intact. This close is likely to inspire some degree of confidence and with the potential for some short covering buying support for the speculatively short sold New York market, a follow through steady start for early trade today, against the prices set yesterday, as follows:


MAR 1805 + 20                                              MAR 118.35 + 1.40
MAY 1757 + 12                                              MAY 119.35 + 1.30
JUL 1785 + 11                                                JUL 121.45 + 1.25
SEP 1786 + 10                                                SEP 123.60 + 1.20
NOV 1790 + 10                                              DEC 127.00 + 1.20
JAN 1795 + 10                                               MAR 130.40 + 1.10
MAR 1807 + 10                                              MAY 132.75 + 1.10
MAY 1820 + 10                                              JUL 134.80 + 1.00
JUL 1833 + 10                                                SEP 136.60 + 0.90
SEP 1844 + 10                                                DEC 139.25 + 0.90