Coffee Market Report August 25 2017

The coffee association in Peru have estimated that the country with the new crop harvest near to completion, shall harvest approximately 575,000 bags or 13% more coffee during this year’s harvest, at a total of 5 million bags.   This is a rather large number in terms of the many private trade and industry forecasts, which had been talking a number of close to 4.5 million bags.  But nevertheless, a larger new crop had been forecasted and added to the increased washed arabica coffee supply from Mexico and Central America that is foreseen to be soon forthcoming and good levels of washed arabica coffee due to continue to come from Colombia, is a negative factor for sentiment within the related New York market. 

Following the rains last week over the main arabica coffee districts in Brazil it has been mostly dry over these districts this week, but with some rains reported for the arabica coffee districts in Bahia and the conilon robusta coffee districts in northern Espirito Santo.   These rains have brought with them some early flowering for the next 2018 Brazil crop and now there shall be a close eye upon the rain reports for the coming three to four weeks, as more rains shall be needed if the trees are to hold on to the development from these flowerings.  Especially so, as there are no forecasts for nearby rains. 

Meanwhile the Brazil analyst Safras & Mercado and with a new crop forecast of a marginal deficit crop of 51.1 million bags has reported that the new conilon robusta coffee harvest has been completed, while 93% of the new arabica coffee crop has been harvested.  However, with the prevailing soft nature of the reference prices of the international coffee market and the Brazil Real relatively steady against the U.S. dollar, reports indicate that internal market selling activity of new crop coffees is somewhat muted this week.   Suggesting that if selling activity had been more active this week and with the related price fixation hedge selling activity, that the New York market might have been under even more negative pressure. 

Reports out of Asia indicate that the internal markets for robusta coffees within both Vietnam and Indonesia have been very quiet this week, with stocks low and most exporters within these important robusta coffee producers now looking towards the prospects for the new Vietnam crop that is due to started being harvested in less than two months’ time.   This new Vietnam crop largely being forecasted to be a 10% larger new crop, of something in the order of close to 28.5 million bags and of which in excess of 26 million bags would be robusta coffees.   

The holiday season within the main consumer markets in the northern hemisphere is coming to a close and shall definitely be over post the Monday 4th. September Labour Day holiday within the U.S.A., but so far there has been little excitement within the presently lacklustre physical coffee trade.   Rather industry buyers are watching the declining fortunes of the reference prices of the coffee terminal markets, taking advantage of the good levels of consumer market coffee stocks and looking to the fore, towards the larger new Mexican and Central American crop, the larger new Vietnam crop and the steady supply out of Colombia.  With the consumer stocks and the steady supply of Peru, Central American and Colombian arabica coffees, likely to do much to counter the tighter supply of Brazil natural arabica coffees that is expected for the next ten months.    With really only unforeseen weather issues for any of the main producer bloc’s, likely to bring any change the presently complacent nature of the consumer market coffee buyers. 

The November to December contracts arbitrage between the London and New York markets broadened yesterday, to register this at 34.14 usc/Lb., while this equates to 26.69% 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 5,632 bags yesterday; to register these stocks at 1,657,754 bags.  There was meanwhile a larger in number 6,182 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 123,281 bags. 

The commodity markets had another mixed day yesterday, but with the overall macro commodity index managing to retain some degree of buoyancy through the day.   The Natural Gas, Sugar, Cocoa, Cotton, Copper, Orange Juice, Wheat, Corn and Soybean markets had a day of buoyancy, while the Oil, Coffee, 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% higher, to see this Index registered at 397.74.  The day starts with the U.S. Dollar steady and trading at 1.281 to Sterling and at 1.179 to the Euro, while North Sea Oil is steady and is selling at $ 52.00 per barrel. 

The London market started the day yesterday with a degree of buoyancy, while the New York market traded close to par and with the markets maintaining this stance, into the early afternoon trade.   As the afternoon progressed the London market started to falter and dip back into negative territory and accompanied by technical and fund selling that took the New York market into likewise negative territory.   This set the tone for the rest of the day and with both markets extending their losses, towards another soft close.  

The London market ended the day on a very negative note and with 94.3% of the earlier losses of the day intact, while the New York market ended the day on a negative note and with 51.6% of the earlier losses of the day intact.   This soft close tends to paint a negative picture for the charts and with nothing in the way of supportive fundamental news, one might not expect little better than a hesitantly steady start for early trade today, against the soft prices set yesterday, as follows: 

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

SEP    2111 – 27                                             SEP    126.70 + 0.45

NOV   2067 – 35                                              DEC   127.90 – 0.80

JAN    2034 – 26                                             MAR   131.45 – 0.85

MAR   2020 – 23                                             MAY   133.75 – 0.90

MAY   2025 – 23                                             JUL    136.05 – 0.90

JUL    2041 – 23                                             SEP    138.30 – 0.95

SEP    2044 – 25                                             DEC   141.65 – 0.95

NOV   2054 – 25                                             MAR   144.90 – 0.90

JAN    2060 – 25                                             MAY   146.95 – 0.90

MAR   2065 – 25                                             JUL    148.95 – 0.95