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

Coffee Market Report

17 Nov 2015
The latest Commitment of Traders report from the New York arabica coffee market has seen the Non Commercial Speculative sector of this market increase their net short sold position within the market by 22.25% during the week of trade leading up to Tuesday 10th. November; to register a net short sold position of 29,201 Lots. This net short sold position which is the equivalent of 8,278,354 bags has most likely been increased further, following the mixed but overall negative trade that has since followed.

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 33.54% over the week of trade leading up to Tuesday 10th. November; to register a net short sold position of 5,991 Lots on the day. This net short sold position that is the equivalent of 998,500 bags has most likely been further increased over the period of mixed but overall little changed, over the period of mixed but overall negative trade that has since followed.

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 168,880 bags or 2.76% during the month of October, to register these stocks at 5,948,228 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 530,000 bags per week, would conservatively have been at least 1.1 million bags.

Therefore if one is to consider the additional unreported stocks and look to end October stocks in North America of at the very least 7.1 million bags, it would have equated to something in the order of 13.4 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 Colombia that are already coming to the market and soon followed, by the new crop coffees from Mexico, Central America, Vietnam 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 Vietnam customs authorities have reported that their latest data has shown that coffee exports of mostly robusta coffee for the month of October totalled 1,483,333 bags, which was a 2.6% increase on the exports of the previous month. This figure is at the lower end of the earlier predictions on the part of the countries exporters, who had been expecting exports to have been between 1.33 million and 2.3 million bags. But the modest levels of coffee exports out of Vietnam and despite the significantly high internal past crop robusta coffee stocks are being influenced by the continued price resistance that is being shown by the farmers and the internal traders within the country.

Following the forecasts on Friday that indicated a new 2016 Brazil crop of around 60 million bags, the brokers International F C Stone have forecasted a more modest figure of 55 million bags, but which would be a number that would only provide a small surplus from the forthcoming crop next year. While it would be a number that would not fuel a significant rebuilding of the by then much depleted Brazil coffee stocks, it is nevertheless a positive number and joins to others to dampen speculative spirits within the international markets.

The second month arbitrage between the markets broadened yesterday, to register this at 47.44 usc/Lb., while this equates to a 40.14% 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 in more volume upon the fortunes of the London market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 8,470 bags yesterday; to register these stocks at 1,863,602 bags. There was meanwhile a smaller in volume 413 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 29,464 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to decline by 3,000 bags on Friday 13th. November; to see these stocks registered at 3,336,667 bags on the day.

The commodity markets were mixed in trade again yesterday, but with the overall commodity index remaining on the back foot and taking only a near to steady track for the day. The U.S. Oil, Natural Gas, Sugar, Coffee, Cotton, Orange Juice, Soybean and Gold markets had a day of buoyancy and the Silver market was steady, while the Brent Oil, Cocoa, Copper, Wheat, Corn and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.06% lower to see this Index registered at 384.11. The day starts with the U.S. Dollar showing some muscle in early trade and trading at 1.517 to Sterling and 1.066 to the Euro, while North Sea Oil is steady in early trade and is selling at 41.65 per barrel.

The London and New York markets started the day yesterday with a degree of buoyancy, to see both markets adding some value in early afternoon trade. The New York market continued to add value as the afternoon progressed, but with the London market hitting a ceiling and coming off the boil later near to the close of the day. The London market continued to end the day on a modestly buoyant note and with only 28.6% of the earlier in the day’s gains intact, while the New York market ended the day on a positive note and with 78.7% of the earlier in the day’s gains intact. This overall positive close is perhaps supportive for sentiment as would be the news of the extended net short sold position within the New York market, but perhaps countered by the muscle of the U.S. dollar and one might expect little better than a steady start for early trade today against the prices set yesterday, as follows:

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

NOV 1536 + 18                                        DEC    114.35 + 2.20
JAN 1560 + 8                                           MAR   118.20 + 2.40
MAR 1575 + 8                                         MAY   120.40 + 2.40
MAY 1596 + 8                                           JUL   122.45 + 2.35
JUL 1616 + 8                                             SEP   124.40 + 2.35
SEP 1635 + 8                                            DEC   127.30 + 2.30
NOV 1655 + 9                                         MAR   130.20 + 2.35
JAN 1671 + 11                                        MAY   132.20 + 2.35
MAR 1689 + 11                                        JUL    134.10 + 2.25
MAY 1709 + 11                                        SEP    135.90 + 2.20