Coffee Market Report October 19 2017

The coffee markets remained somewhat stalled in trade yesterday, with the physical trade in coffee seemingly drifting within the doldrums of inactivity, while the speculative trade and with the managed money funds already well sold short into the New York market now focused upon the forthcoming Brazil rainfall reports for the coming week.  So far, these forecasts tending to lean towards good rains and by nature of the recent good flowering reports and illustrated by the circulation of impressive photographs, are tending to support the prospects for a large new crop for the coming year and are tending to support the bears within the market. 

Adding to the Brazil weather related bearish nature of the New York market is the slow but nevertheless steady growth and this ahead of what is generally forecasted to be a larger overall new crop for Central America, of the New York certified washed arabica coffee stocks.  This growth being a day by day and very public figure, truly indicating that there is presently no tight supply of arabica coffee for the present. 

The London market and with the prospects for a larger new Vietnam robusta coffee crop on the horizon, is tending to follow the fortunes of the New York market, albeit in terms of the relatively narrow margin of the arbitrage between these markets, one would say that the London market is relatively firm for the present.   But this might well be short lived as once the prevailing rains end over Vietnam and the new crop harvest starts, there might be reason for the funds to also contribute to some negative pressure over the London market.  

Meanwhile the inverted nature of the London market and with the premium value being offered for the prompt positions that comes with the short-term tightness of physical coffee supply ahead of the new Vietnam crop, offers little support for the international coffee trade.   Where traders are finding it difficult to utilise the London terminal market to finance the carry of robusta coffee stocks, but one might expect that once this new crop starts to come into play this market might start to return towards a more normal structure. 

The January 2018 to December 2017 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 35.89 usc/Lb., while this equates to 28.87% 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 5,366 bags yesterday; to register these stocks at 1,863,756 bags.  There was meanwhile a smaller in number 1,537 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 66,536 bags. 

The commodity markets had another overall lacklustre day yesterday and with many markets drifting south, to see the overall macro commodity index taking a modestly softer track for the day.  The Oil, Sugar, Cocoa and Coffee markets had a day of buoyancy, while the Natural Gas, Cotton, Copper, Orange Juice, 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 0.31% lower, to see this Index registered at 411.19.  The day starts with the U.S. Dollar near to steady and trading at 1.321 to Sterling and at 1.179 to the Euro, while North Sea Oil is steady and is selling at US$ 58.40 per barrel. 

The London market started the day yesterday marginally south of par, while the New York market started the day with early buoyancy and followed by a recovery within the London market that move back into the positive side of par, but with both markets slipping back and entering the early afternoon trade to the south of par.   As the afternoon progressed, both markets extended their losses but to soon bounce back from the lows and to return to par and with the markets proceeding to end the day with hesitant buoyancy. 

The London market ended the day on a modestly positive note and with 55.6% of the earlier modest gains of the day intact, while the New York market ended the day on a steady note and with only 27.3% of the very modest gains of the day intact.   This close and especially against the relatively modest volumes that were traded within the New York market provides no indication for direction within the coffee markets, but one might expect that with the relatively steady nature of the close, that it shall assist to instil some degree of caution and result in a steady start for early trade today against the prices set yesterday, as follows: 

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

NOV   2000 + 19                                             DEC   124.30 + 0.15

JAN    1949 + 5                                              MAR   128.10 + 0.10

MAR   1929 + 7                                              MAY   130.55 + 0.10

MAY   1935 + 8                                              JUL    132.95 + 0.15 

JUL    1961 + 8                                              SEP    135.25 + 0.05

SEP    1969 + 7                                              DEC   138.70 + 0.05

NOV   1975 + 4                                              MAR   142.05 + 0.05

JAN    1973 + 4                                              MAY   144.10 + 0.05

MAR   1972 + 4                                              JUL    146.15 + 0.05

MAY   1977 + 4                                              SEP    148.05 + 0.05