Coffee Market Report June 21 2017

The European Coffee Federation have reported that the port ware house stocks held within the warehouses in the ports of Antwerp, Bremen, Hamburg, Genoa, Le Havre and Trieste increased by 284,733 bags or 2.64% during the month of March, to see these stocks registered at 11,060,317 bags as at the end of the month.   

These stocks do not however include the coffee stocks held within Europe in transit bulk containers, unreported private warehouses throughout Europe, as well as on site roaster industry inventory stocks and with the combination of Eastern and Western European consumption at approximately 1 million bags per week, it would more than likely add an additional 2.5 million bags to the coffee stocks within Europe. It would therefore appear that European coffee stocks for the end of March 2017, would have been sufficient to cater for a very safe number of around 14.5 weeks of roasting activity. 

The respected United States Department of Agriculture Service USDA have reported that they forecast that the new Tanzanian coffee crop shall increase by 9.52% to register a new crop of 1,150,000 bags, which shall be made up from a ratio of 52 to 48 arabica and robusta coffees.   This they foresee with the countries relatively modest domestic coffee consumption, shall allow for exports of close to 1.1 million bags for the forthcoming October 2017 to September 2018 coffee year. 

The report highlights that Tanzania has abundant land with appropriate conditions for significantly increased coffee production, but that due to the high percentage of aged coffee trees, poor agricultural practices and inputs and lack of inspiration from soft prices, there is very slow growth in the countries coffee production.   One might comment that the latter factor in terms of the prevailing soft reference prices within the volatile New York market does little to assist to inspire existing coffee farmers to invest in their farms, while it will do little to inspire further farmers to invest in coffee farming.   

Meanwhile the physical coffee in terms of arabica coffees in particular are somewhat stalled, with many consumer roasters stunned by the unforeseen negative nature of the speculative sector of the New York market, which has sold the market increasingly short and to completely unexpected lows.   Particularly so in terms of the generally accepted fact that there shall be a smaller Brazil arabica coffee crop this year, which had earlier in the year supported widespread belief in some degree of buoyancy due for the New York market for the second half of the year. 

Thus, with industry buyers tending to hold back for some perspective of where the bottom of the market might be, there is also the question as to how far short can the funds and speculative sectors of the market might be prepared to go.   While with the possibility of some degree of exhaustion coming into play on the part of the presently bearish Managed Money funds and the Speculative sectors of the volatile New York market, the other question might be how aggressive might be the recovery should some start to look to liquidate shorts and take profit out of the market and when this might take place.   Contributing for the present, a great degree of uncertainty within the physical coffee trade. 

The September to September contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 30.52 usc/Lb., while this equates to a 24.49% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 2,228 bags yesterday; to register these stocks at 1,514,522 bags.  There was meanwhile a larger in number 3,918 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 26,054 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 16,167 bags or 0.57% over the week of trade leading up to Monday 19th. June, to see these stocks registered at 2,781,667 bags on the day. 

The commodity markets had yet another dismal day yesterday and with a firmer U.S. dollar impacting negatively within many markets, with the overall macro commodity index taking a softer track for the day.  The Natural Gas, Sugar and Wheat markets nevertheless had a day of buoyancy, while the Oil, Cocoa, Coffee, Cotton, Copper, Orange Juice, 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 0.56% lower, to see this Index registered at 392.85.  The day starts with the U.S. Dollar steady and trading at 1.263 to Sterling and at 1.113 to the Euro, while North Sea Oil is steady and is selling at $ 44.35 per barrel. 

The markets started the day yesterday with the London market trading around par, while the New York market started the day on a softer note and with the London market soon slipping south of par and to see both markets taking a softer track into the early afternoon trade.   As the day progressed both markets came under further pressure and with stop losses being triggered, to see the both markets slip deeper into negative territory.   This was particularly the case with the more volatile and fundamentally soft New York market, which slipped back to set one year lows for the day, but with both markets managing to bounce off the lows and post a marginal recover in late trade. 

The London market ended the day on a negative note and with 65.4% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 60.6% of the earlier losses of the day intact.  This close and with the technical picture for both markets tending to look negative does little to support confidence but perhaps with the late in the day partial recovery for the markets it might provide for a degree of caution and something of a steady start for early trade today, against the prices set yesterday, as follows: 

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

JUL    2057 – 34                                            JUL     121.95 – 2.25 

SEP    2174 – 34                                            SEP    124.60 – 2.00

NOV   2056 – 31                                            DEC    128.10 – 1.95

JAN    2029 – 29                                            MAR   131.55 – 1.95

MAR   2008 – 27                                            MAY   133.90 – 1.95

MAY   2004 – 26                                            JUL    136.10 – 1.95

JUL    2019 – 25                                            SEP    138.20 – 2.00

SEP    2035 – 19                                            DEC   141.05 – 1.85

NOV   2044 – 19                                            MAR   143.95 – 1.55

JAN    2051 – 19                                            MAY   145.55 – 1.05