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Coffee Market Report
May 07 2018

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non-Commercial Speculative sector of this market decrease their net short sold position within the market by 23.08% during the week of trade leading up to Tuesday 1st. May; to register a net short sold position of 45,485 Lots on the day. This net short-sold position which is the equivalent of 12,894 bags has most likely been increased again, following the period of mixed but overall more negative trade, which has since followed.

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative Non-Commercial sector of this market decrease their net short sold position within this market by 13.32% during the week of trade leading up to Tuesday 1st. May; to register a net short sold position of 12,420 Lots on the day. This net short sold position which is the equivalent of 2,070,000 bags has most likely been little changed, following the period of mixed but overall sideways trade, which has since followed.

The main Brazil coffee districts were reported to be mostly dry over the last week, which is very much expected for this dry winter season and with the new and forecast to be significantly larger new conilon robusta coffee crop harvest having started and expected to pick up in volume by the end of this month. To be followed by the new and likewise forecast to be a significantly larger arabica coffee crop harvest in June, but with this harvest only really expected to pick up in volume during the month of July.

The Ministry of Agriculture, Livestock, Rural Development, Fisheries and Food in Mexico are reported on Reuters to forecast that the countries next October 2018 to March 2019 coffee harvest shall be approximately 220,000 bags or 5.8% larger than their last crop, at a total of approximately 4 million bags. Much of this coffee does of course get consumed within the growing domestic market in Mexico, with the U.S.A. remaining the main market for Mexican coffee exports. The Ministry noting that this neighbouring market, accounts for close to 54% of the country’s coffee exports.

The analytical firm Technavio have forecast an approximate 5% Compound annual growth rated for the global instant coffee market, from 2018 to 2022. This is a positive report in terms of the robusta coffee producers, as the soluble coffee industry and products are dominated by a high percentage share of robusta coffees in the blends, with the report seemingly indicating that the demand for robusta coffees might increase by more than 10 million bags per annum, over the next four years. A factor if it proves to be correct and with the time it takes for new coffee tree plantings to come into production, which would tighten up robusta coffee supply and by nature, buoy robusta coffee prices for the medium term.

The July 2018 to July 2018 contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 40.36 usc/Lb., while this equates to 32.92% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 11,998 bags on Friday; to register these stocks at 1,986,339 bags. There were meanwhile a smaller in number 5,235 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 33,109 bags.

The commodity markets had another mixed day on Friday and with the U.S. dollar retaining its new-found muscle for the day, to see the overall macro commodity index taking a relatively flat track for the day. The Oil, Cotton, Gold and Silver markets ended the day on a positive track and the Copper market was steady on the close, while the Natural Gas, Sugar, Cocoa, Coffee, Orange Juice, Wheat, Corn and Soybean markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.06% lower; to see this index registered at 435.59. The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.354 to Sterling, at 1.194 to the Euro and with the dollar buying 3.530 Brazilian Real, while North Sea Oil is steady and is selling at US$ 75.40 per barrel.

The London market started the day on Friday trading marginally south of par, while the New York market started the day with modest buoyancy and to the north of par and with both markets trading around par, into the early afternoon trade. This steady stance was however short lived and both markets soon started to come under pressure and to fall back into negative territory and with sell stops being triggered to accentuate the losses, but with both markets managing to attract some support at the lows and to recover some of the losses by the close.

The London market ended the day on a negative note and with 72% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 81.4% of the earlier losses of the day intact. This close and accompanied by the news of the significantly reduced net short sold speculative and fund positions within the New York market over the past couple of weeks, does little to inspire confidence, as does the firmer nature of the U.S. dollar of late, threaten steady producer price fixation hedge selling for both markets. Thus, one might expect to see little better than a steady start due for early trade today, against the prices set on Friday.