Coffee Market Report May 18 2017

The well-respected United States Department of Agriculture Foreign Agricultural Service have published their report on the Peru coffee crop within which and with the new crop harvest now starting, they foresee 300,000 bags or 7.14% increase in the volume of this new crop, which they estimate shall be 4.5 million bags.   These coffees entering the market at a time when the shipments of the new crops from Mexico and Central America will have peaked, to join the new Mitaca crop coffees from Colombia and to assure the consumer market buyers of a steady flow of fine washed arabica coffees through to the start at the end of the year of the new Mexican and Central American crops.  

There are however reports still coming out of Colombia on the unseasonal heavy rains within some of the coffee districts, which is tending to interfere with the progress of the new Mitaca crop coffee harvest for many farmers and in some instances, to delay cherry maturity and harvest.   This is with most mills and exporters holding significant forward sales commitments, causing some problems in terms of shipping on time.   It is however the start of the slower summer roasting season for the main stream consumers and thus one might speculate, that these delays might for the present, not have any serious impact. 

The well-respected United States Department of Agriculture Foreign Agricultural Service have published their report on the Indian coffee crop for the coming October 2017 to September 2018 coffee year, which they foresee shall bring forth 60,000 bags or 4.22% larger arabica coffee crop of 1.48 million bags and 220,000 bags or 5.87% larger robusta crop of 3.97 million bags.   This resulting in an overall 280,000 bags or 5.52% larger new crop for the coming coffee year, of 5.45 million bags.  

The United States Department of Agriculture do however note that the Indian domestic coffee consumption is approximately 1.215 million bags, but they anticipate that India shall import approximately 1.18 million bags in the coming coffee year, to supplement the estimated 1,583,000 bags of coffee that the country exports in terms of value added soluble coffees.    Thus, indicating that the new crop should be able to fuel green coffee exports of approximately 3.8 million bags. 

In terms of Indian domestic coffee consumption, one has to note that the price sensitive main stream coffee brands have high percentages of chicory added to the coffees, which would in terms of the estimated domestic coffee market volumes, most probably double up the quoted figures in terms of actual consumption under the coffee banner.    Some brands the Coffee Board of India comments, can have in excess of 60% chicory added and is a factor that the Board is trying to counter, so as to encourage improved domestic market support for the countries coffee farmers. 

The July to July contracts arbitrage between the London and New York markets broadened yesterday, to register this at 43.82 usc/Lb., while this equates to 32.6% 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 increase by 5,462 bags yesterday; to register these stocks at 1,443,191 bags.    There were meanwhile a smaller in number 3,036 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 46,689 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 16.833 bags or 0.59% over the week of trade leading up to Monday 15th. May, to see these stocks registered at 2,849,500 bags, on the day.  

The commodity markets unlike the equity markets and with the U.S. dollar under some degree of pressure, had generally good day yesterday and with the overall macro commodity index taking a positive track for the day.   The Oil, Sugar, Cocoa, Coffee, Grains, Gold and Silver markets had a day of buoyancy, while the Copper market had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.61% higher, to see this Index registered at 412.344.  The day starts with the U.S. Dollar steady and trading at 1.294 to Sterling and easier at 1.113 to the Euro, while North Sea Oil is near to steady and selling at $ 51.45 per barrel. 

The London and New York markets started the day yesterday with modes buoyancy but soon coming under pressure and with the both markets dipping back into negative territory for the early afternoon trade, but this was short lived and with the assistance of thin producer selling pressure over both markets and the positive nature of the overall macro commodity index, there was soon a recovery.   This started both market on a steady upside track for the rest of the day and particularly so for the New York market, which attracted buy stop on it way north. 

The London market ended the day on a positive note and with 77.6% of the earlier gains of the day intact, while the New York market ended the day on a very positive note and with 92.2% of the earlier gains of the day intact.  This close might assist to buoy confidence a little but many might remain uncertain and wish to see if the recovery shall be sustained, before buying into the halt to the recent downside track of the markets.  Thus, one might expect to see little better than a hesitantly steady to modestly buoyant start for early trade today against the prices set yesterday, as follows: 

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

MAY     1970 + 39                                              MAY   132.20 + 2.95

JUL      1997 + 38                                              JUL    134.40 + 2.95

SEP      2017 + 37                                              SEP    136.75 + 2.90

NOV     2026 + 38                                              DEC    140.20 + 2.90

JAN      2027 + 36                                              MAR   143.60 + 2.80

MAR     2024 + 35                                              MAY   145.85 + 2.75

MAY     2025 + 33                                              JUL    147.90 + 2.65

JUL      2045 + 33                                              SEP    149.80 + 2.70

SEP      2053 + 33                                              DEC   152.25 + 2.75

NOV     2060 + 33                                              MAR   154.65 + 2.75