Coffee Market Report May 19 2017

The Food Supply and Statistics Agency in Brazil Conab have with the new crop in Brazil starting, forecasted that the new Brazil crop shall potentially be 11.3 million bags lower than the last year’s crop, at approximately 45.6 million bags.  The report is however quite open to variances, in that it indicates that the new arabica coffee crop might be as low as 35 million bags and as high as 37.88 million bags, while the new conilon robusta coffee crop that is already in full harvest, shall be 10.1 million bags.   Thus, indicating the new crop at between 45.1 million and 47.98 million bags, while one might note that the higher end of the forecast is more in line with many other private trade and industry forecasts.  

This report though had little impact upon market sentiment for the day as the focus rather was on the renewed political problems and the resulting sharp decline in the value of the Brazil Real that fell from the previous day’s value of 3.11 to the U.S. dollar to dip to below 3.4 to the dollar and end the day at 3.35 to the dollar.   This sharp decline bringing forth speculation of increasing coffee selling activity out of Brazil and having a negative impact upon the fortunes of the New York market, which lead the coffee markets back onto a bearish track for the day.   As did the dip in the value of the Brazil real and with Brazil a leading commodity exporter, have an impact upon most markets that relate to commodities coming out of Brazil in volume.     

The well-respected United States Department of Agriculture Foreign Agricultural Service have published their report on the Colombian coffee crop within which they have forecasted that coffee production for the present October 2016 to September 2017 coffee year shall be 14.5 million bags, which will be followed by a 0.68% increase for the follow-on October 2017 to September 2018 coffee year, which they forecast at 14.6 million bags. 

This the USDA anticipate shall fuel green coffee exports for the present coffee year of 12.2 million bags for the present coffee year of 12.2 million bags, which shall be followed by green coffee exports of 12.25 million bags for the October 2017 to September 2018 coffee year.   They have likewise forecasted value added soluble coffee exports for the present coffee year of the equivalent of 850,000 bags, which they anticipate to remain unchanged for the follow-on October 2017 to September 2018 coffee year. 

Thus, with unforeseen negative weather issues aside, the USDA remain positive in terms of the contribution from Colombia for the foreseeable future, which is heartening news for the countries coffee industry.  An industry that has recovered from coffee production that dipped below 8 million bags, as recently as the October 2011 to September 2012 coffee year.  Albeit that the Coffee Federation of Colombia are still targeting even higher production levels for the countries coffee industry and its over 560,000 coffee farming families, in the coming five years.   

The well-respected United States Department of Agriculture Foreign Agricultural Service have published their report on the Indonesian coffee crop for the coming October 2017 to September 2018 coffee year, which they foresee shall bring forth and unchanged arabica coffee crop of 1.3 million bags and 300,000 bags or 3.23% larger robusta crop of 9.6 million bags.   This resulting in an overall 300,000 bags or 2.83% larger new crop for the coming coffee year, of 10.9 million bags.  

Added to this production the USDA anticipate that Indonesia shall also import 300,000 bags of green coffee in the coming coffee year and along with imports of the equivalent of 400,000 bags of coffee in the form of soluble coffees, to fuel overall coffee supply for the coming October 2017 to September 2018 coffee year of 11,649,000 bags of coffee.  This they foresee with an anticipated domestic consumption of for the coming coffee year of 3.4 million bags, shall allow for 160,000 bags or 1.99% increase in coffee exports for the coming coffee year made up from 7.3 million bags of green coffees, 50,000 bags of value added roast and ground coffees and the equivalent of 850,000 bags of value added soluble coffee exports.  

The July to July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 39.66 usc/Lb., while this equates to 30.59% 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 1,123 bags yesterday; to register these stocks at 1,444,314 bags.    There were meanwhile a larger in number 2,509 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 44,180 bags. 

The commodity markets had a mixed but overall softer day yesterday, with overall macro commodity index taking a softer track for the day.  The Oil, Natural Gas and Cocoa markets had a day of buoyancy, while the Sugar, Coffee, Cotton, Copper, Orange Juice, 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 0.69% lower, to see this Index registered at 409.49.  The day starts with the U.S. Dollar steady and trading at 1.294 to Sterling and at 1.111 to the Euro, while North Sea Oil is showing some degree of buoyancy and selling at $ 52.15 per barrel. 

The London and New York markets started the day yesterday on the back foot, with both markets moving back into negative territory and taking softer track into the early afternoon trade.   As the afternoon progressed and most certainly with the issues of the Brazil real very much a headline, the New York market continued to lose weight and the London market to a lesser extent and while the New York market tended to steady at the lows and take a sideways soft track, the London market did manage to recover from the lows and to limit the losses of the day. 

The London market ended the day on a soft note but having recovered 64.9% of the earlier losses of the day, while the New York market ended the day on a very soft note and with 93.1% of the earlier losses of the day intact.   This close does little to inspire and one might expect that there can be little better than 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     1958 – 12                                               MAY   127.40 – 4.80

JUL      1984 – 13                                               JUL    129.65 – 4.75

SEP      2003 – 14                                              SEP    132.05 – 4.70

NOV     2012 – 14                                              DEC    135.50 – 4.70

JAN      2010 – 17                                              MAR   138.90 – 4.70

MAR     2007 – 17                                              MAY   141.15 – 4.70

MAY     2007 – 18                                              JUL    143.25 – 4.65

JUL      2007 – 18                                              SEP    145.15 – 4.65

SEP      2035 – 18                                              DEC   147.60 – 4.65

NOV     2042 – 18                                              MAR   150.00 – 4.65