Coffee Market Report September 07 2017

It is early day’s in terms of the forthcoming new October to April spring and summer rain season in Brazil, which usually only becomes an issue if there is dry weather over the main coffee districts in the country by the middle of October, but the country’s leading coffee cooperative Cooxupé came forth yesterday with a voice of concern over the prospects for the start of the rain season.   In this respect to state that there had been no rains since the 21st. August and thus two and half weeks, while they say that the weather forecasts are pointing to an extended dry period due for October. 

This the report states, might be damaging to the potential of the flowering towards the coming years forecasted, biennially bearing larger crop.   But with quite some weeks to go before the rain season is due to come to the fore with any intensity, it is difficult to really start talking about significant damage to the potential for this next crop, which many are already forecasting to be a 18% larger new surplus crop of approximately 60 million bags. 

But there is no doubt that following some early flowerings that came with the spell of rains last month, that there shall be many keeping a close eye upon the Brazil weather reports as while there are large new crops soon to start in Colombia, Mexico, Central America and Vietnam, they do not detract from the perception that based on this year’s relatively modest Brazil crop of approximately 51 million bags that global coffee supply for the coming October 2017 to September 2018 is in deficit supply of approximately 2 to 3 million bags.  Thus, without a large new crop for Brazil to come to the fore next year and despite the presently high consumer market coffee stocks, it would be a potential longer-term problem for the follow on 2018 to 2019 coffee year. 

The Brazil Real has firmed further and is presently trading at 3.099 to the dollar, which with the soft nature of the reference prices of the New York market, does little to encourage any internal market selling aggression.  However, with Brazil celebrating Dia da Independência today and with many extending this into a long weekend, one expects to see little in the way of negative price fixation hedge selling due from this leading player for the next few days of trade.   Which might assist with the managed money funds and speculative sector of the New York market already well sold short, so some degree of stability for the New York market. 

Meanwhile and post the flooding in Texas that came with hurricane Harvey, the registered warehouses of the New York exchange in Houston and Galveston have reported that they have not encountered any damage and the that they are all once again, open and fully operational.    The question now being what track that the new hurricane Irma might take but so far and while it has been severely damaging for many Caribbean islands, the indications are that it is heading north within the Gulf of Mexico and is unlikely to be causing any problems for the southern Mexican and Central American coffee producers, where ripening new crop coffee cherries would be vulnerable to cherry drop from heavy rains and winds. 

The November to December contracts arbitrage between the London and New York markets broadened yesterday, to register this at 39.68 usc/Lb., while this equates to 31.02% 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 8,258 bags yesterday; to register these stocks at 1,732,461 bags.  There was meanwhile a smaller in number 4,527 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 64,052 bags. 

The commodity markets were mixed in trade yesterday, but with many markets keeping to the positive side of par for the day, the overall macro commodity index took a modest positive track for the day.  The Oil, Natural Gas, Sugar, Copper, Orange Juice, Whet, Corn and Soybean markets had a day of buoyancy and the New York arabica Coffee market was steady, while the Cocoa, London Robusta Coffee, Gold and Silver markets has a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.09% higher, to see this Index registered at 411.42.  The day starts with the U.S. Dollar steady and trading at 1.304 to Sterling and at 1.192 to the Euro, while North Sea Oil is near to steady and is selling at $ 54.35 per barrel. 

The London market started the day yesterday marginally south of par and the New York market started the day marginally to the north of par and with the markets maintaining this stance, into the early afternoon trade.  As the afternoon progressed the London market once again came under selling pressure and with the losses being extended and followed by the New York market moving back into more modest negative territory, but both markets bounced off the lows and while the London market only made a partial recovery, the New York market moved back into modest positive territory. 

The London market ended the day on a soft note but having recovered 56.4% of the earlier losses of the day, while the New York market ended the day on a steady note, but with 5% of the earlier gains of the day intact.   This close and with the ability of the London market to halt the slide and to post a reasonable recovery, while the New York market ended on a steady note might assist towards some degree of cautious confidence that the lows have been hit and could well assist towards a steady start for early trade today, against the prices set yesterday, as follows: 

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

SEP    1965 – 18                                             SEP    126.60 + 0.10

NOV   1945 – 24                                              DEC   127.90 + 0.05

JAN    1930 – 22                                             MAR   131.45 + 0.10

MAR   1924 – 20                                             MAY   133.75 + 0.05

MAY   1933 – 20                                              JUL   136.10 + 0.10

JUL    1957 – 19                                             SEP    138.40 + 0.10

SEP    1966 – 17                                             DEC   141.75 + 0.15

NOV   1974 – 13                                             MAR   144.95 + 0.20

JAN    1984 – 9                                               MAY   146.95 + 0.20

MAR   1989 – 9                                               JUL    148.90 + 0.20