Coffee Market Report July 17 2017
14th. July, 2017.
The respected analysts Safras & Mercado have forecast that the new Brazil coffee crop is estimated so far at 56% of this new crop harvested, as against a 58% factor at the same time last year. This based on their estimate of the new crop to come, which is put at 51.1 million bags in total made up of 39.6 million bags arabica coffee which harvest is still under5way and 11.5 million bags conilon robusta, which harvest is near to complete. While sporadic rainfall in the growing areas may have contributed to a slight delay to harvest in the arabica areas, the weather is forecast to remain fine and dry, the arabica harvest and tail end of the conilon harvest is due to continue without any indication of delay, all very normal for this time of year.
There are concerns being raised within the interior meanwhile, regarding the size of the beans in the outturn thus far, with bolder screen 17 plus bean percentages from some of the arabica coffee districts, so far within the South Minas district in Brazil are seen to be overall smaller than average. There are many areas and farms that are still to be harvested and while it is a concern, there remains the possibility that the bolder bean percentages might improve as the harvest progresses. The weekly survey published by Safras & Mercado additionally estimates that around 26% of this harvest is already sold, compared to 32% at the same time last year.
With the month of June marking the end of the coffee year in Brazil and ahead of the new crop harvest and coffee year July 2017 to June 2018, the question of carryover stocks being retained with Brazil, is contributing toward the debate. The new crop harvest that is underway is estimated by various forecasts to be anywhere from the traditionally conservative government agency figure at 45.65 million bags, to other independent local and international forecasters estimates that are generally in the region of 51 to 55 million bags, while the export and local consumption demand potential of this new crop, should the next twelve months mirror the past year’s exports and local consumption demand performance, could be near to 50 million bags.
The carryover stocks that are being held within Brazil at this juncture heading into the new crop marketing year, is of some significance therefore to contribute to consumer demand for the next twelve months and sufficiently provide cover into the next 2018 crop to start harvest in April 2018 in the conilon robusta areas and July 2018 in the arabica areas. These stocks meanwhile; with the appreciation that conilon is all but absorbed by the local consumer roaster industry already, with two lower production years behind and minimal carryover stocks into the new robusta crop; is reported by the government coffee supply agency, CONAB, to be at a total 8.87 million bags of arabica coffee and less than a million bags of conilon robusta, nevertheless a fair estimated total 9.86 million bags of carryover of privately held coffee stocks at the start of this July 2017 to June 2018 coffee year.
The September to September contracts arbitrage between the London and New York markets widened yesterday, to register this at 33.90 usc/Lb., while this equates to 25.84% 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 803 bags yesterday; to register these stocks at 1,543,183 bags. There was a decline of 8,210 bags to the number of bags pending grading for this exchange; to register these pending grading stocks at 11,939 bags.
The commodity markets were mixed in trade yesterday, as the two day monetary policy testimony on the part of the US Federal Reserve Bank Chair rendered neutrality, while the US Dollar tempered earlier losses against other major currencies. It was a firm day in the Oil markets, Sugar, Cocoa and Coffee, while the rest of the board finished the day in softer territory with the Grain sector the biggest losers on the day, purportedly influenced by reports of longer term conducive weather forecasts for the main growing areas in U.S.A. and subjected to speculative liquidation. It was a lower close for Wheat, Soybean and Corn, as well as a lower day for Copper, Gold, Silver, Platinum and Palladium markets on the day. The Reuters Equal Weight Continuous Commodity Index registered a decrease of 0.3678% on the day to register at 399.53. The day starts with the U.S. Dollar steady and trading at 1.295 to Sterling and at 1.141 to the Euro, while North Sea Oil is steady and is selling at US$ 47.64 per barrel.
It was a buoyant day for the coffee markets yesterday, with London starting the day on a positive note, closely followed by a mildly positive start in New York. The supportive sentiment swelling the ranks as the morning progressed in both markets to trigger stops along the way, with New York triggering the high of the day as the business day got underway in America, and in London in mid-afternoon. The higher reach in New York brought sellers back to the floor by midsession although the firming Brazil Real to the U.S. Dollar would have been a limitation to the volume of selling activity from this producer and in general a lack of active origin selling from Vietnam and Indonesia. The coffee markets mostly regained the ground that was lost through midsession, to see both markets recover and finish the session at the highs of the day, to set the close in both markets on a firm note and after a good volume day, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
JUL 2164 + 33 JUL 129.35 + 3.35
SEP 2145 + 48 SEP 131.20 + 3.60
NOV 2123 + 46 DEC 134.80 + 3.65
JAN 2100 + 44 MAR 138.25 + 3.65
MAR 2083 + 44 MAY 140.45 + 3.60
MAY 2085 + 44 JUL 142.65 + 3.55
JUL 2101 + 44 SEP 144.75 + 3.55
SEP 2111 + 44 DEC 147.65 + 3.55
NOV 2118 + 44 MAR 150.45 + 3.60
JAN 2125 + 44 MAY 152.00 + 3.55