Coffee Market Report August 11 2017
The respected Brazilian analysts Safras & Mercado who have forecasted the new Brazil crop at 51.1 million bags and made up by 40.7 million bags of arabica coffee and 11.5 million bags of conilon robusta coffees, have estimated that 86% of this new crop has already been harvested. In this respect, they estimate that so far 32.6 million bags of the new arabica coffee crop has been harvested and 11.4 million bags of the conilon robusta coffee crop has been harvested, while with harvesting in full swing at present, that one might soon see the new crop harvest completed.
There is however a new cold front forecasted for south east Brazil for next week and can be expected to bring with it some wet weather for the some of the southern coffee districts, but this cold front is not expected to be frost threatening. Thus, one might guess that the frost threat season is now over and that focus shall be now, upon the prospects for the forthcoming spring and summer rain season, which would usually come into play by late in September.
Meanwhile internal market trade of new crop coffees within Brazil remains slow and was illustrated by the modest export volumes reported from Brazil last month, which tends to indicate that this month shall also report relatively modest exports. While the Brazil export performance for the twelve months from August 2016 to July 2017 was 32.8 million bags and combined with approximately 21 million bags of domestic consumption, would indicate a 54 million bags absorption of Brazil coffee for the year. A figure that would indicate that with the smaller crop this year, that export volumes shall continue to be somewhat restrained for the next eleven months, but more than likely to be sufficient to satisfy consumer market demand for Brazil coffees.
With coffee stocks in both Vietnam and Indonesia now very much depleted, the Asian coffee trade is likewise slow for the present. But this is not only related to the low stock levels, as the lacklustre nature of consumer market demand has tended to lessen demand for new business from the region.
The U.S. National Weather Service’s Climate Prediction centre has reported that they do not foresee any chance for either a new El Niño or a new La Niña weather phenomenon due for the Pacific Ocean over the next seven months, which would indicate that weather is unlikely to play a part in sentiment for the coffee markets for the short to medium term. However, the report does indicate that this does not say that the situation can change and that the present perception of neutral conditions for the Pacific for the coming months might not change, by early in the coming year.
The November to December contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 47.24 usc/Lb., while this equates to a 33.27% 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 3,850 bags yesterday; to register these stocks at 1,574,969 bags. There were meanwhile a larger in number 8,800 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 101,276 bags.
The commodity markets had a mostly negative day yesterday, with the overall macro commodity index taking a downside track for the day. The Natural Gas, Orange Juice, Gold and Silver markets did however buck the trend, while the Oil, Sugar, Cocoa, Coffee, Cotton, Copper, Wheat, Corn and Soybean markets had a soft day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.27% lower, to see this Index registered at 403.87. The day starts with the U.S. Dollar steady and trading at 1.298 to Sterling and at 1.176 to the Euro, while North Sea Oil is tending softer and is selling at $ 51.55 per barrel.
The coffee markets started the day yesterday with both the London and New York markets opening close to par, but with both markets soon losing a little weight. The London market did however recover and while the New York market took a modestly softer track into the early afternoon trade, the London market remained close to par. As the afternoon progressed the New York market recovered to close to par for a short period, before both markets and with the negative influences of the overall macro commodity index in play, the markets slipped back into negative territory. This dip hit sell stops for the markets which accentuated the losses, to see both the London and New York markets move deeper into negative territory for late trade.
The London market ended the day on a soft note and with 87.5% of the earlier losses of the day intact, while the New York market ended the day on a likewise soft note and with 83.8% of the earlier losses of the day intact. This reversal of fortunes for both markets does not assist confidence and tends to paint something of a negative picture for the charts, but one might expect to see a degree of caution and perhaps a hesitant corrective steady start due for early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
SEP 2090 – 46 SEP 138.50 – 4.15
NOV 2089 – 42 DEC 142.00 – 4.15
JAN 2074 – 37 MAR 145.55 – 4.15
MAR 2067 – 36 MAY 147.80 – 4.15
MAY 2075 – 37 JUL 150.00 – 4.15
JUL 2094 – 37 SEP 152.05 – 4.15
SEP 2103 – 37 DEC 154.95 – 4.10
NOV 2111 – 37 MAR 157.85 – 4.05
JAN 2117 – 37 MAY 159.45 – 4.10
MAR 2122 – 37 JUL 161.00 – 4.15