Coffee

Market Watch: 10/2/2017


                            SEASONS CHANGE, WILL OUR MARKETS?
As we now move into autumn and experience the change of seasons, might it also be time for the markets to experience some changes too?
Let’s take a brief look at some of the technical, fundamental and global economic factors that may dictate market movement.

                                           New York Arabica Market
Having broken the formidable down trend line formed since November of 2016, the Arabica market recovered 30 cents per pound on both fundamental news (lack of available coffee in the mid-summer) and technical factors (a short covering rally where speculators betting on lower prices liquidated large positions after the market found a bottom). Having found good support for fall and winter roastings between 1.3000 and 1.2500, the market seems to have settled down and may now be poised for a neutral market of range bound prices.

                                           London Robusta Market
Having “starred” some of the extreme price movement in the chart, one can see that the London price movement has been contracting within a range of roughly 1900 to 2200 since the spring. The tighter ranges indicate that the market (perhaps like what we may see for New York) is moving “sideways” or “more neutral” rather than an explicit up or down trend. One last note, on Thursday, June 29th, the London market breached the 200D MA. The last time this market breached the 200DMA to the upside was April of 2016 basis 1550 in the spot month. It crossed back down a year later (April 2017) at 2050.
Momentum indicators (on a daily basis) are approaching oversold conditions at the time of this report.

SAME OLD STORY: The certified stock numbers (above) have been building since the lows of end 2016/beginning of 2017. The monthly GCA USA stock numbers (below) continue to show us that exporting countries prefer to destock into consuming countries. Total stocks are at their highest levels since 1994.

MACRO-ECONOMIC COMMENTS:

The Brazilian currency has been flat to higher and one could
say on a slow and steady uptrend.  With
the US Dollar weaker and having made a recent 2 ½ year low, we should see continued
stability in the global commodity market in general as the CRB index would
prove.

ORIGIN NOTES:

·  Brazil:  Brazil differentials have tightened slightly
over the past 2 months with the start of new crop.  This tightness can be attributed to a
consistently low “New York C” price with producers/exporters holding back on
large volume offers with the hope of seeing a market recovery.

·  Colombians:  Differentials remains firm, as there is not
much offered currently as producers/exporters wait for the new crop which is
just around the corner for October/November.  Market prices do not present Colombia a
motivation to sell at this time.  Producers
do speak of potential good yields for this coming crop cycle.

·  Ethiopia:  Ethiopia still has some coffee to sell as we have
seen the prices trimmed for lower quality coffees and more so for better
quality coffees.  New crop picking in
some areas will probably start by the middle of November.   Stay tuned.

·   Sumatra:  Prices remain firm.  In
the wake of the recent downturn in the “New York C” there has
been little if any ease in the internal market price.  New crop demand is strong, in addition to the
reduced yields in the remaining Indonesia archipelago causing an overall tight
supply.

·   Robustas:  With the focus now off the volatile spot
month spread for Sept London, premiums have been tampered a bit and so we watch
to see if supply can catch up to demand as we remain in backwardation through
Jan of 2018.


                                                    CONCLUSION:

The market is forecasting that Brazil
will resume a somewhat normal rainfall pattern and with that news we should see
roasters participating at the support levels outlined in the charts above.  Producers will of course be fixing their
supply on rallies and as we get closer to First Notice Day for December which
is November 21, 2017.

Once
again, this outline is intended to promote thought and an exchange of ideas.  If you have an interest to share your point
of view, please do not hesitate to call me.

Something to
think about when trading:

      “One of the hardest things to do is to
take less when you think you can get            more.”

Good luck,

      Fred Schoenhut

      Royal Coffee New York, Inc.

      (908) 756-6400

*The risk of
loss in trading futures and/or options is substantial and each investor and/or
trader must consider whether trading is a suitable investment.  We do not guarantee that such information is
accurate or complete and it should not be relied upon as such.
  

Anthony Chango