Coffee Market Report August 02 2017
The National Coffee Institute of Costa Rica have reported that the countries coffee exports for the month of July were 6,711 bags or 5.93% lower than the same month last year, at a total of 106,501 bags. This lower number has contributed to the countries cumulative coffee exports for the first ten months of the present October 2016 to September 2017 coffee year to being 15% lower than the same period in the previous coffee year, at a total of 937,367 bags.
The Trade Ministry in Brazil have reported that the countries coffee exports for the month of July were 137,458 bags or 7.91% lower than the same month last year, at a total of 1,599,948 bags. One would think that this dip in exports from Brazil for the month does not really reflect the fact that the new arabica coffee crop is lower than the crop last year, but is more related to the lacklustre nature of the consumer markets at present. With perhaps some influence coming from the past couple of months of soft prices for the New York market, which has dampened selling spirits within the internal market in Brazil.
Meanwhile the traditional frost season for Brazil has now less than two weeks to go and the issue of frost or the potential for a frost, is no longer an issue. With focus now upon the prospects for the forthcoming new spring and summer rain season for Brazil that is due to start in less than two months’ time and its influence upon the prospects for the next 2018 Brazil crop, which many are forecasting to be a significantly larger crop. So long as the rain season is normal.
Speculation on the prospects for the next Brazil rain season is however not bringing any price supporting fear to the market, as presently there is no reason to fear that it might not be a normal rain season. This is likewise the case for global coffee weather in general, with all of the main producer blocs generally in receipt of normal weather and for the present, the indications are for rising coffee supply due for the coming year. Albeit in terms of this year’s lower crop in Brazil being related to the forthcoming October 2017 to September 2018 coffee year, which would indicate steady and close to even coffee supply for the next coffee year.
This contributes along with the prevailing holiday season for the main northern hemisphere consumer markets and the still significant coffee stocks within the North American and European markets, to the dull and lacklustre nature of the physical coffee at present. Leaving short term market direction very much in the hands of the funds and speculative sectors of the markets, but with the potential for the physical trade to start to increase in volume and to have more influence in three to four weeks time.
The November to December contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 45.96 usc/Lb., while this equates to a 32.5% 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 5,468 bags yesterday; to register these stocks at 1,553,907 bags. There were meanwhile a larger in number 7,503 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 29,856 bags.
The commodity markets had a mixed but mostly softer day yesterday, to see the overall macro commodity index taking a softer track for the day. The Natural Gas, Cotton, Orange Juice and Gold markets had a day of buoyancy, while the Oil, Sugar, Cocoa, Coffee, Copper, Wheat, Corn, Soybean and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.77% lower, to see this Index registered at 406.99. The day starts with the U.S. Dollar steady and trading at 1.321 to Sterling and at 1.182 to the Euro, while North Sea Oil is steady and is selling at $ 50.95 per barrel.
The London market started the day yesterday on a steady note and the New York market marginally south of par, with the London market showing a degree of buoyancy and he New York market tending softer into the early afternoon trade. As the afternoon progressed the London market added some value, but with the New York market and perhaps influenced by the negative nature of the overall macro commodity index, continuing to trade within negative territory. The New York market maintained its softer stance for late trade but with something of a partial recovery at the end and joined by a reversal in the fortunes for the London market, which shed it gains and slipped back into negative territory.
The London market ended the day on a marginally softer note and with 62.5% of the losses of the day intact, while the New York market ended the day on a soft note and having shed the gains of the previous day, but having recovered 59.7% of the earlier losses of the day by the close. The ability of the New York market to bounce off the lows in late trade might be seen to be somewhat supportive for sentiment and one might expect to see a cautious steady start due for early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
SEP 2110 – 13 SEP 137.85 – 1.40
NOV 2104 – 10 DEC 141.40 – 1.35
JAN 2083 – 7 MAR 144.95 – 1.35
MAR 2072 – 2 MAY 147.15 – 1.40
MAY 2081 – 2 JUL 149.20 – 1.40
JUL 2097 – 3 SEP 151.20 – 1.45
SEP 2106 – 3 DEC 154.05 – 1.45
NOV 2114 – 5 MAR 156.75 – 1.50
JAN 2120 – 6 MAY 158.35 – 1.40
MAR 2125 – 6 JUL 159.75 – 1.50