Coffee Market Report September 08 2017

Brazil weather reports indicate that most of the main coffee districts have had a dry week and it is likely to remain the same for the coming week, with the exception of the possibility of some light rains due for the most southern coffee state of Parana.   This is likely to bring forth some degree of speculation over the threat to the sustainability of the early flowering that came with the early rains during last month, over most of the main arabica coffee districts.   With many already speculating that this might lessen the chances that Brazil shall be able to achieve a new crop in 2018 that might be as large as 60 million bags, but it is early days and the focus remains upon the prospects for the rains late this month and during October. 

Meanwhile with most of the main players within Brazil taking a long weekend ahead of yesterdays Dia da Independência holiday, there is little in the way of internal market activity expected today.   Especially so as with the Brazil Real trading at 3.098 to the U.S. dollar and with the reference prices of the international terminal markets relatively low, there is no encouragement to be aggressive in terms of selling of new crop coffees. 

In terms of this new crop and particularly for the all-important and dominant natural process arabica coffees, which have a dedicated share of consumer market blends within the southern Mediterranean countries, there are many concerns over not only the more modest new crop this year, but also the evidence of a lower percentage of bolder screen 17 plus beans.   This with only a modest carryover stock of coffee into the new crop, is creating fears of a tightness of supply of the bolder beans for the first half of the coming year and is assisting to buoy prices for these grades of Brazil coffees within the internal market and on the part of the exporters. 

Brazil aside there is nothing in the way of fundamental supportive news coming to the markets, as global coffee weather remains near to perfect for the present and the speculative sector of the markets remain relatively bearish in nature.   Likewise, the consumer industry players within the main northern hemisphere consumer markets are entering the higher volume winter season with no lack of available supply, to see a degree of complacency for physical trade at present. 

The November to December contracts arbitrage between the London and New York markets broadened yesterday, to register this at 40.70 usc/Lb., while this equates to 31.51% 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 16,264 bags yesterday; to register these stocks at 1,748,725 bags.  There was meanwhile a smaller in number 3,319 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 60,733 bags. 

The commodity markets came off the boil yesterday and despite some weakening of the U.S. dollar, which saw the overall macro commodity index tending marginally softer for the day.  The Coffee, Orange Juice, Soybean, Gold and Silver markets had a day of buoyancy and the Oil markets were steady for the day, while the Natural Gas, Sugar, Cocoa, Cotton, Copper, Wheat and Corn markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.01% lower, to see this Index registered at 411.37.  The day starts with the U.S. Dollar tending softer and trading at 1.314 to Sterling and at 1.208 to the Euro, while North Sea Oil is steady and is selling at $ 54.75 per barrel. 

The London market started the day yesterday marginally south of par and the New York market started the day trading around par and to see the markets maintaining this stance, into the early afternoon trade.  As the afternoon progressed the New York market started to pick up some support and to move into positive territory and with the London market following suit, to recover into more modest positive territory and to see both markets end the day on a positive note. 

The London market ended the day on a modestly positive note and with 38.5% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 62.5% of the earlier gains of the day intact.  This ability of the coffee markets to show a degree of buoyancy for the end to the day and along with the weaker U.S. dollar might be seen to be somewhat supportive for sentiment and one might expect to see some degree of follow through buoyancy for early trade today against the prices set yesterday, as follows: 

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

SEP    1973 + 8                                               SEP    127.90 + 1.30

NOV   1950 + 5                                                DEC   129.15 + 1.25

JAN    1939 + 9                                               MAR   132.65 + 1.20

MAR   1936 + 12                                             MAY   134.95 + 1.20

MAY   1945 + 12                                              JUL   137.30 + 1.20

JUL    1974 + 17                                             SEP    139.55 + 1.15

SEP    1983 + 17                                             DEC   142.85 + 1.10

NOV   1991 + 17                                             MAR   146.05 + 1.10

JAN    2001 + 17                                             MAY   148.05 + 1.10

MAR   2006 + 17                                             JUL    150.00 + 1.10