Coffee traders commercial net long position showed concern over low inventories : Coffee prices may not have much more room to fall after a year-long rout, importers said this week, noting that a record-high commercial net long position showed concern over low inventories and a still-uncertain production outlook in top producer Brazil.
The bullish bet among coffee producers, roasters and physical traders, who have held a consistent net short position for years, reflects growing expectations that the 23-month price low hit earlier this month may represent a bottom for the market, the importers said.
That strategy sent commercial participants' gross long position to a record-high 102,226 contracts in March, and the position has hovered near those record-highs since then as prices have tumbled more than 20 percent, hitting near two-year lows at $1.158 a lb earlier this month.
Commercial traders reverted to a net short in October, but last week switched back to a bullish bet totaling 4,805 lots, the largest on record, according to U.S. Commodity Futures Trading Commission data.
With last week’s dip in value within the New York market having been quickly countered at the end of the week and with added buoyancy for the first half of this week, there would appear to be a degree of confidence coming to the markets that while the upside might be limited by large volumes of new crop arabica coffees soon due to come to the market, that perhaps this volatile market has seen its short to medium term lows. This more positive sentiment is perhaps assisting to bring consumer market industry buyers to the market and to take advantage of dips, to buy into the market to cover for medium term needs and to further add to the prevailing hesitant buoyancy.
It is however not so much the case for the London robusta coffee market, which still has the dark cloud of the significant carryover stocks of Vietnam robusta coffees hanging over the market, which does little to inspire much confidence within this market.
Especially so as these robusta coffee stocks are poised to come to the market over and above what is generally perceived to be a larger new crop that is already in harvest and thus while the New York market is tending to show some sign of stability, the London market is looking fragile and susceptible to increased medium term selling pressure.
The question does however have to be and with the leading U.S.A. market on holiday today and with many players due to take a long weekend tomorrow, what might be the reaction within New York to the latest commitment of traders report next week, when one can expect to have seen the Speculative and the shorter term Managed Money fund sectors of the market to have reduced their net short positions within the market, if this shall once again dampen some spirits within the market.
While one might guess that should the market once again stall that it shall bring with it increased volumes of producer price fixation hedge selling of the market out of Colombia and Central America, which might well be modestly negative for the market for the coming week. But only time can tell and one might not expect too much guidance from tomorrows trading activity during a shortened day of trade, post today’s Thanksgiving holiday in New York.
The March on March contracts arbitrage between the markets broadened yesterday, to register this at 54.70 usc/Lb., while this equates to a 43.57% 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 1,689 bags yesterday; to register these stocks at 1,841,330 bags. There was meanwhile a larger in volume 3,922 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 7,855 bags.
The bullish bet among coffee producers, roasters and physical traders, who have held a consistent net short position for years, reflects growing expectations that the 23-month price low hit earlier this month may represent a bottom for the market, the importers said.
That strategy sent commercial participants' gross long position to a record-high 102,226 contracts in March, and the position has hovered near those record-highs since then as prices have tumbled more than 20 percent, hitting near two-year lows at $1.158 a lb earlier this month.
Commercial traders reverted to a net short in October, but last week switched back to a bullish bet totaling 4,805 lots, the largest on record, according to U.S. Commodity Futures Trading Commission data.
With last week’s dip in value within the New York market having been quickly countered at the end of the week and with added buoyancy for the first half of this week, there would appear to be a degree of confidence coming to the markets that while the upside might be limited by large volumes of new crop arabica coffees soon due to come to the market, that perhaps this volatile market has seen its short to medium term lows. This more positive sentiment is perhaps assisting to bring consumer market industry buyers to the market and to take advantage of dips, to buy into the market to cover for medium term needs and to further add to the prevailing hesitant buoyancy.
It is however not so much the case for the London robusta coffee market, which still has the dark cloud of the significant carryover stocks of Vietnam robusta coffees hanging over the market, which does little to inspire much confidence within this market.
Especially so as these robusta coffee stocks are poised to come to the market over and above what is generally perceived to be a larger new crop that is already in harvest and thus while the New York market is tending to show some sign of stability, the London market is looking fragile and susceptible to increased medium term selling pressure.
The question does however have to be and with the leading U.S.A. market on holiday today and with many players due to take a long weekend tomorrow, what might be the reaction within New York to the latest commitment of traders report next week, when one can expect to have seen the Speculative and the shorter term Managed Money fund sectors of the market to have reduced their net short positions within the market, if this shall once again dampen some spirits within the market.
While one might guess that should the market once again stall that it shall bring with it increased volumes of producer price fixation hedge selling of the market out of Colombia and Central America, which might well be modestly negative for the market for the coming week. But only time can tell and one might not expect too much guidance from tomorrows trading activity during a shortened day of trade, post today’s Thanksgiving holiday in New York.
The March on March contracts arbitrage between the markets broadened yesterday, to register this at 54.70 usc/Lb., while this equates to a 43.57% 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 1,689 bags yesterday; to register these stocks at 1,841,330 bags. There was meanwhile a larger in volume 3,922 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 7,855 bags.
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