Coffee Market Report October 25 2017

The respected commodity bank Rabobank have amended their perspective of the global coffee supply for the just completed October 2016 to September 2017 coffee year from a marginal deficit of 200,000 bags, to a 1.1 million bags surplus for this past coffee year.   While they have reduced their forecasted deficit supply for this new October 2017 to September 2018 coffee year from an earlier forecast for a 6.1 million bags deficit supply, to a more modest 4.9 million bags deficit. 

This latest report and one that considers this year’s more modest Brazil coffee crop which is allocated to contribute towards global coffee supply for the present 2017/2018 coffee year, would indicate a potential draw down of global coffee stocks for the present coffee year, of 3.8 million bags.   However, with consumer market coffee stocks considered to be perhaps as much as 4 million bags more than safe requirements, the report would indicate little reason for concern over overall coffee supply for the present coffee year. 

While with the forthcoming new Brazil 2018 coffee crop already in terms of the conilon robusta coffees due to impact upon coffee supply only seven months into this new coffee year and likewise the new arabica coffee crop due to impact upon global coffee supply ten months into the new coffee year, it would further illustrate that there is presently no reason to be concerned over longer term global coffee supply.   This factor is however only if the next 2018 Brazil coffee crop turns out to be a much larger crop as has recently been forecasted, but it is early days into the Brazil spring and summer rain season and the prospects for a larger 2018 crop are still uncertain. 

Nevertheless, and while coffee market players are presently awaiting the next couple of weeks weather reports from Brazil, the sentiment is very much weighted towards those who foresee no medium-term weather problems for Brazil, which is fuelling bearish sentiment within the New York market.   While in terms of the fortunes for the London market, the general perspective is that the summer and autumn rain season shall soon end and that new crop robusta coffees are only approximately five to six weeks away from the market.  Further contributing towards the prevailing general lack of concern, over medium to longer term global coffee supply and is very much reflected, in the direction the New York and London markets took during yesterday’s trade. 

The January 2018 to December 2017 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 34.98 usc/Lb., while this equates to 28.39% 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 2,827 bags yesterday; to register these stocks at 1,893,444 bags.  There was meanwhile a smaller in number 561 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 54,907 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 76,833 bags or 3.42% over the week of trade leading up to Monday 23rd. October, to see these stocks registered at 2,166,500 bags, on the day. 

The commodity markets were mixed in trade yesterday, but with the Oil markets showing some renewed muscle and having an influence within the overall macro commodity index, which took a positive track for the day.   The Oil, Sugar and Copper markets had a day of buoyancy, while the Natural Gas, Cocoa, Coffee, Cotton, 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 0.21% higher, to see this Index registered at 414.76.  The day starts with the U.S. Dollar steady and trading at 1.313 to Sterling and at 1.176 to the Euro, while North Sea Oil is near to steady and is selling at US$ 58.45 per barrel. 

The London market started the day yesterday marginally south of par, while the New York market started the day on a steady note and with some modest buoyancy, to see the markets taking this mixed stance into the early afternoon trade.  As the afternoon progressed both markets came under renewed pressure and with a weaker Brazil Real in play and assisting towards easier selling activity on the part of new crop arabica coffees, the New York market slid back into negative territory and with the London market increasing its losses for the day.  The London market did however bounce back from the lows, to join the New York market on something of a negative sideways track for the rest of the day. 

The London market ended the day on a negative note and with 71.9% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 76.7% of the earlier losses of the day intact.   This soft close accompanies nothing in the way of fundamentally supportive news, other than the perspective that the New York market might be suffering from a degree of speculative and fund selling exhaustion and one would think that with the Brazil Real weaker and presently trading at around 3.24 to the dollar, that the markets are due for 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   1993 – 25                                             DEC   123.20 – 1.15

JAN    1945 – 23                                            MAR   126.95 – 1.15

MAR   1920 – 21                                            MAY   129.40 – 1.10

MAY   1926 – 21                                            JUL    131.75 – 1.10  

JUL    1951 – 22                                            SEP    134.05 – 1.15

SEP    1959 – 20                                            DEC   137.50 – 1.10

NOV   1963 – 17                                            MAR   140.85 – 1.10

JAN    1961 – 17                                            MAY   142.90 – 1.10

MAR   1960 – 17                                            JUL    144.90 – 1.10

MAY   1965 – 17                                            SEP    146.80 – 1.10