Coffee Market Report September 20 2017

The coffee markets and with no fundamentally negative crop reports in play for the present, remain very much weather related for the present and mostly so, in terms of the Brazil forecasts.   Presently the short-term forecasts indicate a mostly dry end to the month, but it is not historically unusual to have a dry September over the main coffee districts in South East Brazil and with forecasts for rains due for early October, the markets came off the boil yesterday. 

The lack of concern over the short to medium term coffee supply that comes with the pending surge of new crop washed arabica coffees from Central America, Colombia and Vietnam and along with the evidence of above average consumer market coffee stocks, tends to weigh upon the markets for the present.   With the steadily rising certified stocks held against the New York market, likewise adding some negative influence.    

It remains though a question as to how good shall be the much-needed rains that come with the start of the spring and summer October to April rain season in Brazil and one can expect that the markets remain vulnerable to weather volatility for the next four to five weeks, as was experienced in yesterday’s sharp reversal in the fortunes of the New York market.  While these sharp moves do also contribute to painting directional pictures for the charts, which likewise contribute to speculative direction within the more volatile New York market and ultimately, its influence upon the direction within the London market. 

One might speculate though that with the markets having crumbled yesterday, that might be some reactive new weather scare reports coming to the fore from Brazil, but how effective these might be in terms of their influence upon market sentiment, is questionable.    Such reports and should they be forthcoming, do have the possibility of bringing some caution into play and a degree of short term stability for the coffee markets.   

The November to December contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 45.40 usc/Lb., while this equates to 33.54% 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 15,214 bags yesterday; to register these stocks at 1,808,421 bags.  There was meanwhile a larger in number 26,789 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 29,208 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 40,500 bags or 1.69% over the week of trade leading up to Monday 18th. September, to see these stocks registered at 2,435,500 bags, on the day. 

It was a mixed but mostly negative day for the commodity markets yesterday and with many players now focused upon this week’s meeting of the Federal Reserve Bank in the U.S.A. and its influence upon interest rates and dollar value, to see the overall macro commodity index taking a softer stance yesterday.   The Cotton, Orange Juice and Silver markets nevertheless had a day of buoyancy and the Copper market was near to steady, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Wheat, Corn, Soybean and Gold markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.55% lower, to see this Index registered at 408.77.  The day starts with the U.S. Dollar tending softer and trading at 1.352 to Sterling and at 1.201 to the Euro, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 56.60 per barrel. 

The London and New York markets started the day yesterday on a near to steady note and marginally below par, but to see both markets soon losing a little weight and taking a modest softer track into the early afternoon trade.  As the afternoon progressed the New York market attracted further selling pressure and with sell stops being triggered to accentuate the losses, to slip back into very soft territory and followed by a more modest sell off within the London market.   Both markets did however soon bounce back from the lows but while the New York market soon lost its way again and fell back into deep negative territory, the London market took a steadier sideways stance through to the close. 

The London market ended the day on a soft note and with 57.9% of the earlier losses of the day intact, while the New York market ended the day on a very soft note and with 84.7% of the earlier losses of the day intact.   This close tends to paint something of a negative picture for the charts, but perhaps with a softer dollar and some degree of caution coming into play, one might still see a hesitant near to steady start for early trade today against the prices set yesterday, as follows: 

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

SEP    2006 – 20                                            SEP    133.95 – 5.00

NOV   1983 – 22                                             DEC   135.35 – 5.00

JAN    1957 – 36                                            MAR   138.90 – 4.95

MAR   1950 – 41                                            MAY   141.20 – 4.95

MAY   1960 – 42                                            JUL    143.40 – 4.90 

JUL    1988 – 43                                            SEP    145.55 – 4.95

SEP    1997 – 43                                            DEC   148.75 – 5.00

NOV   2007 – 43                                            MAR   151.90 – 5.00

JAN    2016 – 45                                            MAY   153.85 – 5.00

MAR   2021 – 45                                            JUL    155.70 – 5.00