Coffee Market Report October 18 2017

The physical coffee trade is for the present very quiet and lacklustre in nature, with the main consumer market industries mostly on the backfoot and relatively inactive in terms of their buying activity, which is unlike the usual activity at the start of the winter roasting season for the main northern hemisphere consumer markets.   While on the producer side and with the reference prices of the terminal markets at to low side of the years price trading range, there are many showing some degree of price resistance for new business.  

Most players and including the speculative and fund sectors of the market who direct the fortunes of the terminal market are focused upon the Brazil weather reports and while for the present the prospects for rains for the coming week are proving to be negative for the fortunes of the volatile New York market, there are some questions being asked. 

This related to the medium-term weather forecasts that are presently indicating that fair rains shall be forthcoming for the end of this month and thereon for the month of November, to assist to set the good flowerings that came with the recent rains.  There are however some that indicate that these nearby month end rains might prove to be relatively modest for the northern arabica coffee districts in central Minas Gerais and Bahia and likewise, for the main conilon robusta stare of Espirito Santo.  These latter forecasts, likely to inspire a degree of caution, on the part of the speculative bears within the market. 

Meanwhile the rains keep coming to Vietnam and with further typhoon related flood reports for the coastal areas in north and central Vietnam, but while there are rains within the main central highlands coffee districts of the country, they are so far not seen to be damaging for the maturing new crop cherries.  Thus, for the present the rains have not caused any fears for the prospects of the what is generally forecasted to be a larger new crop, but they are delaying the start of the new crop in any significant volume and leaving the countries exporters to have to rely upon the much-diminished past crop stocks to fulfil their short-term forward contract export commitments.    

The January 2018 to December 2017 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 35.97 usc/Lb., while this equates to 28.97% 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 1,925 bags yesterday; to register these stocks at 1,858,390 bags.  There was meanwhile a larger in number 4,083 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 64,999 bags. 

These washed arabica certified stocks remain dominated by the producer bloc of Mexico and Central America and mostly so by Honduras, who contribute 58.62% of the stocks and followed by Peru who account for 12.94% of the stocks and Colombia, who account for 12.18% of the stocks.   The African producers Burundi, Rwanda, Tanzania and Uganda contribute 10.3% of the stocks and followed by modest contributions from Brazil who account for 3.67% of the stocks, India with a 1.89% contribution and Papua New Guinea, with a 0.4% contribution.   While the European based warehouses of the exchange are presently holding 74.96% of the certified stocks along with, 55.18% of the coffees pending grading for the exchange.  

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 55,333 bags or 2.41% over the week of trade leading up to Monday 16th. October, to see these stocks registered at 2,243,333 bags, on the day. 

The commodity markets had an overall lacklustre day yesterday and with many markets drifting south, to see the overall macro commodity index taking a softer track for the day.  The Natural Gas, Cocoa, New York arabica Coffee, Cotton and Orange Juice markets had a day of buoyancy, while the Oil, Sugar, London robusta Coffee, Copper, Wheat, Corn, Soybean, Gold and Silver markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.44% lower, to see this Index registered at 412.46.  The day starts with the U.S. Dollar steady and trading at 1.318 to Sterling and at 1.176 to the Euro, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 58.10 per barrel. 

The London and New York markets started the day yesterday trading around par and attracting modest support within and environment of thin trade, maintain a degree of buoyancy into the early afternoon trade.  As the afternoon progressed the markets continued to take an erratic sideways track and with the New York market mostly to the positive side of par, while the London market remained mostly south of par and with the markets continuing in this manner, towards a mixed close for the day. 

The London market ended the day on a negative note and with 90.9% of the earlier losses of the day intact, while the New York market ended the day on a modestly positive note and with 30.8% of the earlier gains of the day intact.  This close does very little to inspire and one might expect to see little better than a steady start for early trade today, against the prices set yesterday, as follows: 

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

NOV   1981 – 7                                               DEC   124.15 + 0.40

JAN    1944 – 10                                            MAR   128.00 + 0.40

MAR   1922 – 10                                            MAY   130.45 + 0.40

MAY   1927 – 9                                              JUL    132.80 + 0.35 

JUL    1953 – 7                                              SEP    135.20 + 0.40

SEP    1962 – 4                                              DEC   138.65 + 0.45

NOV   1971 – 2                                              MAR   142.00 + 0.45

JAN    1969 – 2                                              MAY   144.05 + 0.50

MAR   1968 – 2                                              JUL    146.10 + 0.50

MAY   1973 – 2                                              SEP    148.00 + 0.50