Coffee Market Report October 05 2017

The coffee markets while many major industry players are distracted by the Swiss Coffee Dinner in Geneva this week, remain devoid of any striking fundamental news, while with the smaller Brazil crop this year being countered by the front loading of forecasted larger new Vietnam, Colombian and Central American crops that are now starting to be harvested. 

There are however still some questions being asked about the prospects for the next 2018 Brazil coffee crop, as it shall need to be a large surplus crop if it is to assist to both rebuild the much-depleted Brazil coffee stocks and to contribute towards a steady global coffee supply for the follow-on October 2018 to September 2019 coffee year.   As there are questions as to when shall the summer rain season end within Vietnam, so as to allow for the new crop harvest to start to impact upon the presently much depleted robusta coffee stocks. 

So far within Brazil there had been some early flowerings following the somewhat unseasonal spell of late August rains and some of which many speculate might have aborted, due to the follow-on month of dry weather.   While late September and early this month, more rains have been forthcoming to assist to build ground water retention levels and to trigger more flowering, but the question now is what shall be the intensity of the rains over the main coffee growing districts for the rest of this month.   Presently the weather forecasts indicate no reason to fear any damaging long dry spells, but there shall be no certainty over this matter until well into the coming month. 

Within the main central highlands robusta coffee districts in Vietnam the rain season continues and it would appear from the medium-term weather forecasts, that there shall be regular rains for the rest of the month.   This will delay the harvest in any volume into the month of November, which can be expected to likewise inspire internal market price resistance for the relatively small volumes of early harvest coffees that shall be available to the exporters and could be a factor that shall contribute towards some degree of short term buoyancy for the London market. 

The January 2018 to December 2017 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 35.47 usc/Lb., while this equates to 28.34% 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 9,137 bags yesterday; to register these stocks at 1,829,338 bags.  There was meanwhile a smaller in number 5,126 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 72,415 bags. 

The commodity markets had a mixed day yesterday, but with sufficient support within many market to contribute towards the overall macro commodity index taking a positive track for the day.   The Sugar, Cotton, Orange Juice and Gold markets had a day of buoyancy and the Oil, London robusta Coffee and Silver markets were near to steady for the day, while the Cocoa, New York arabica Coffee, Copper and Wheat markets had a softer day’s trade.    The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.28% higher, to see this Index registered at 407.88.  The day starts with the U.S. Dollar steady and trading at 1.324 to Sterling and at 1.175 to the Euro, while North Sea Oil is steady and is selling at US$ 55.75 per barrel. 

The London market started the day yesterday trading around par, while the New York market started the day with early buoyancy and with both markets trading to the positive side of par into the early afternoon trade.  As the afternoon progressed both market started to falter and moved back into negative territory, but only modestly so for the London market and with both markets showing the ability to soon bounce back from nearby lows and with both markets returning to only marginally south of par. 

The London market ended the day on a near to steady note and with 62.5% of its modest losses for the day intact, while the New York market ended the day on a marginally softer note and having recovered 71.4% of the earlier losses of the day.    This close does little to inspire, but perhaps with the ability of both markets to limit their losses in trade yesterday and the New York market projecting something of an over-sold picture, one might expect to see a steady start for early trade today against the prices set yesterday, as follows: 

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

NOV    2015 – 6                                              DEC   125.15 – 0.30

JAN    1977 – 5                                              MAR   128.70 – 0.30

MAR   1964 unch                                           MAY   131.10 – 0.10

MAY   1975 + 4                                              JUL    133.45 – 0.25 

JUL    2000 + 3                                              SEP    135.75 – 0.20

SEP    2006 + 2                                              DEC   139.15 – 0.20

NOV   2014 + 2                                              MAR   142.40 – 0.25

JAN    2023 + 2                                              MAY   144.45 – 0.20

MAR   2028 + 2                                              JUL    146.45 – 0.15

MAY   2033 + 2                                              SEP    148.35 – 0.15