Coffee Market Report April 27 2017

The Australian weather service have reported that conditions within the Pacific Ocean are presently neutral, but they do foresee a 50% chance for an El Niño phenomenon to develop in the coming months, which would threaten partial drought conditions for the Pacific rim coffee countries such as Colombia and Indonesia.   It would however bring with it further afield, the potential for increased rainfall for the coffee districts in South East Brazil.  

Therefore, mixed signals for the coffee markets, in terms of its potential to damage coffee production for some countries, but to assist to support the forecasts for a large new Brazil coffee crop for the coming year.   While if the El Niño should it occur only proves to be modest in nature, it is unlikely that it would have a marked affect upon global coffee supply for the coming year, which is so far looking to increase.  

Thus, for the present and with the prevailing generally normal weather conditions being experienced over most of the major coffee producer blocs and with forecasts for an improved year end crop from Vietnam and a larger new 2018 crops for Brazil and Indonesia, while Colombia and Central America are potentially due for follow on good coffee crop levels, the fundamental of the prevailing modest deficit coffee supply is seemingly not sufficient to counter the technical chart directed bearish sentiment that has come to the coffee markets.    

The July to July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 43.20 usc/Lb., while this equates to 33.05% price discount for the London robusta coffee market.  This still relatively low arbitrage remains not such an attractive factor for the many price sensitive roast and ground roasters who have considered robusta coffees to be an opportunist discount component, within their mostly arabica coffee blends. 

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 2,357 bags yesterday; to register these stocks at 1,408,331 bags.  There was meanwhile a larger in number 5,805 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 23,022 bags. 

The producer bloc of Mexico and Central America continue to dominate these stocks, with a 39.66% share of the stocks and followed by Colombia with a 21.68% share of the stocks and Peru, with a 16.85% share of the stocks.  The East African producer bloc of Burundi, Rwanda, Tanzania and Uganda have contributed to 14.58% of the stocks and with Brazil contributing 4.54%, India 2.15% and Papua New Guinea 0.54% of the stocks.   While the European warehouses of the exchange are presently holding 100% of the coffee pending grading for the exchange.   

The commodity markets while mixed in trade yesterday and with the U.S. dollar relatively steady for the day, but with the overall macro commodity index taking a softer track for the day.   The Natural Gas, Cocoa, London robusta Coffee, Copper and Orange Juice markets had a day of buoyancy and the Oil markets were steady for the day, while the Sugar, New York arabica Coffee, Cotton, Wheat, Corn, Soybean, Gold and Silver markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.23% lower, to see this Index registered at 408.45.  The day starts with the U.S. Dollar near to steady and trading at 1.289 to Sterling and at 1.091 to the Euro, while North Sea Oil is steady and is selling at $ 49.30 per barrel. 

The London market started the day yesterday on a very positive note and with the New York market starting the day with modest buoyancy and with the markets maintaining this stance, into the early afternoon trade.  However, as the afternoon progressed both markets started to come under pressure and to drift back to par, but while he London market managed to retain its buoyancy and to bounce back to take a sideways and modestly positive track for the day the New York market faltered and moved back south into negative territory. 

The London market ended the day on a positive note but with only 26% of the earlier gains of the day intact, while the New York market ended the day on a negative note and with 75.6% of the earlier losses of the day intact.   These closes assist to paint something of a negative picture for the charts and does little to inspire confidence and one might think that the markets are due only for a near to steady start for early trade today, against the prices set yesterday, as follows: 

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

MAY     1898 + 14                                              MAY   128.15 – 1.75

JUL      1929 + 13                                              JUL    130.70 – 1.70

SEP      1944 + 13                                             SEP    133.10 – 1.70

NOV     1951 + 13                                              DEC   136.70 – 1.65

JAN      1954 + 14                                             MAR   140.10 – 1.65

MAR     1955 + 15                                             MAY   142.25 – 1.70

MAY     1958 + 15                                              JUL    144.30 – 1.70

JUL      1965 + 15                                              SEP    146.25 – 1.75

SEP      1973 + 15                                              DEC   148.70 – 1.65

NOV     1980 + 15                                              MAR   151.00 – 1.65