Coffee Market Report October 13 2017

The El Salvador Coffee Council have reported that the countries coffee exports for the just completed October 2016 to September 2017 coffee year were 28,144 bags or 5.82% higher than the previous coffee year, at a total of 511,724 bags.  This being a modest increase in terms of the overall performance of the production and exports from the producer bloc made up from Mexico and the Central American countries for this past coffee year, where exports have overall been even more impressive and especially so, from Honduras. 

In terms of the new crop from this producer bloc the forecasts are for an even more impressive harvest to come to the fore over the October to March harvest and with the lower grown districts already starting to be harvested within many of the countries, with a new crop from this bloc foreseen to be around 20.5 million bags.  A crop of mostly fine washed arabica coffees, which shall be joined by a larger new main crop and followed in the middle of next year by a larger new Mitaca crop from Colombia, where coffee supply for the October 2017 to September 2018 coffee year shall most likely exceed 15 million bags. 

The Climate Prediction Centre department of the National Weather Service in the U.S.A. have reported that they foresee a 55% chance for a new La Niña phenomenon to develop within the Pacific Ocean in the coming months, but by nature of the relatively modest chance, it would seem, that this might not be an intense La Niña and so far, is not threatening for medium term global coffee production.   Thus, with forecasts for later in the month rains for Brazil, there are presently no weather-related issues that are threatening for the potential for rising coffee production for the Latin American countries for the coming year. 

The only question in terms of weather remains with when the rain season over Vietnam shall stop, so as to trigger the new main crop harvest to kick off in intensity and while for the present the rains continue, the forecasts are for a drier November and for the harvest of what is foreseen to be a much larger new crop to come into play.  Bringing with it as Indonesia is seen to be close to sold out, much needed new robusta coffee supply for the consumer markets. 

The January 2018 to December 2017 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 37.08 usc/Lb., while this equates to 29.35% 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 3,718 bags yesterday; to register these stocks at 1,849,223 bags.  There was meanwhile a smaller in number 535 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 61,349 bags. 

The commodity markets remained mixed yesterday, with the overall macro commodity index taking a sideways stance for the day.  The Natural Gas, Cocoa, London robusta Coffee, Copper, Corn, Soybean, Gold and Silver markets had a day of buoyancy, while the Oil, Sugar, New York arabica Coffee, Cotton, Orange Juice and Wheat markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.01% higher, to see this Index registered at 413.00.  The day starts with the U.S. Dollar near to steady and trading at 1.328 to Sterling and at 1.184 to the Euro, while North Sea Oil is steady and is selling at US$ 55.55 per barrel. 

The London market started the day yesterday showing early buoyancy, while the New York market started the day hesitantly to the north of par, but with the New York market soon slipping back south of par and with the markets taking a mixed stance into early afternoon trade.  As the afternoon progressed the New York market lost some more weight and headed towards a softer close, while the London market shrugged off negative pressure and headed towards a positive close for the day. 

The London market ended the day on a very positive note and with 95.5% of the earlier gains of the day intact, while the New York market ended the day on a negative note and with 32.1% of the earlier losses of the day intact.  This mixed close does little to indicate direction, but with little in the way of positive fundamental news coming to the coffee markets and the charts tending to look soft, one would expect to see little better than a near to steady start for early trade today, against the prices set yesterday, as follows: 

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

NOV   1997 + 22                                             DEC   126.35 – 0.45

JAN    1968 + 21                                            MAR   130.10 – 0.45

MAR   1951 + 20                                            MAY   132.50 – 0.40

MAY   1959 + 20                                            JUL    134.85 – 0.40 

JUL    1983 + 19                                            SEP    137.10 – 0.40

SEP    1991 + 20                                            DEC   140.50 – 0.35

NOV   1997 + 18                                            MAR   143.80 – 0.35

JAN    1996 + 15                                            MAY   145.80 – 0.35

MAR   1998 + 12                                            JUL    147.80 – 0.35

MAY   2003 + 12                                            SEP    149.70 – 0.35