Coffee Market Report September 01 2017

Reports from Brazil indicate that following the rains a couple of weeks ago, that the southern arabica coffee districts have reported some good early flowerings, but with only scattered flowerings for the more northern arabica coffee districts.   While now with no rains being forecasted for the coming week for the southern arabica coffee districts, there will be concerns until more rains come to the fore to assist to fix the flowerings and to guarantee a good 2018 crop for these districts.  

There are however forecasts for coastal rains to move in to Brazil main conilon robusta coffee state of Espirito Santo and into the very northern arabica coffee districts in the south of Bahia state.   Thus, in terms of the former bringing with them some degree of relief for the prospects for next year’s conilon robusta coffee crop, which is expected to be on the road to a recovery post the last years and again this years, relatively modest crops. 

There are still problems as a result of the falling behind in dredging in Brazil’s main coffee port of Santos, with draft restrictions forcing shipping lines to often sail with restricted numbers of containers.   This is causing many delays in forward contract shipments of new crop Brazil coffees and it might still take a few weeks, for exporters to catch up with their export commitments. 

Coffee export activity out of Vietnam and with stocks much depleted remain slow and likewise from Indonesia, there is little in the way of selling aggression.  The latter Indonesia likewise off the field of play for a few days now, as the country takes a long weekend to celebrate Eid al-Adha.   Meanwhile Vietnam has had good rains over the past few months and with positive forecasts for the next Vietnam robusta coffee crop, which can be expected to start to impact upon global coffee supply from late in November.   

The International Coffee Organisation have reported that the global coffee exports for the month of July were 11% higher than the same month last year, at a total of 9.38 million bags.    This they say has contributed to the cumulative global coffee exports for the first ten months of the present October 2016 to September 2017 coffee year to be 5.9% higher than the same period in the previous coffee year, at a total of 101.93 million bags.   

These ten months of global exports the ICO have recorded to be related to an 8.7% increase in the exports of arabica coffees, which they have registered at 64.22 million bags.   As against a more modest 1.5% increase in the exports of robusta coffees, which they have recorded at 37.71 million bags.  With these figures in hand and in terms of the declining volumes of Asian robusta coffee exports, one might suggest that it shall extrapolate over the months of August and September to global robusta coffee exports for this coffee year struggling to match the volumes of the previous year. 

The November to December contracts arbitrage between the London and New York markets broadened yesterday, to register this at 35.50 usc/Lb., while this equates to 27.44% 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 15,128 bags yesterday; to register these stocks at 1,707,898 bags.  There was meanwhile a smaller in number 10,210 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 82,765 bags. 

The commodity markets experienced a generally positive day yesterday for the last day of the month and ahead of the Monday Labour Day holiday, which will bring with it a long weekend for the important U.S.A. based markets, to see the overall macro commodity index taking an upside track for the day.   The Oil, Natural Gas, Sugar, New York arabica Coffee, Copper, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets had a day of buoyancy, while the Cocoa, London robusta Coffee and Cotton markets were near to steady for the day.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 2.19% higher, to see this Index registered at 405.42.  The day starts with the U.S. Dollar tending a little softer and trading at 1.292 to Sterling and at 1.190 to the Euro, while North Sea Oil is showing a degree of buoyancy and is selling at $ 53.40 per barrel. 

The London and New York markets started the day yesterday trading marginally to the positive side of par, but with both markets struggling to add value for early trade and taking only a steady track into the early afternoon.  However, as the afternoon progressed and while the London market struggled to maintain value and often slipping below par, the New York market and with perhaps the positive influences of the overall macro commodity index assisting to buoy sentiment, moved up into positive territory.  

The London market ended the day on a near to steady note and with 46.2% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 69.7% of the earlier gains of the day intact.  The positive nature of the New York market later in the day and along with the marginally softer U.S. dollar might well prove to be supportive for sentiment and one would think that the markets might be due for a steady to perhaps buoyant start for early trade today, against the prices set yesterday, as follows: 

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

SEP    2076 – 29                                             SEP    128.15 + 1.20

NOV   2069 – 6                                                DEC   129.35 + 1.15

JAN    2044 unch                                           MAR   132.85 + 1.15

MAR   2034 + 4                                               MAY   135.20 + 1.20

MAY   2040 + 6                                               JUL    137.55 + 1.30

JUL    2058 + 6                                               SEP    139.85 + 1.35

SEP    2062 + 6                                               DEC   143.10 + 1.30

NOV   2066 + 6                                               MAR   146.25 + 1.25

JAN    2072 + 6                                               MAY   148.20 + 1.20

MAR   2077 + 6                                               JUL    150.15 + 1.15