Coffee Market Report October 27 2017

The weather forecasts from Brazil continue to dampen market spirits, with most pointing towards the potential for rains to continue over the main coffee districts of the country through to the second week of November.  These rains due to assist to set the flowerings for the forthcoming 2018 crop, which many have forecast to be a potentially large surplus supply crop. 

Meanwhile with the Brazil Real having weakened against the U.S. dollar and now trading at 3.29 to the dollar, there has been more active internal market selling of new crop coffee stocks, which being accompanied by exporter price fixation hedge selling into the New York market, has contributed towards the prevailing soft nature of this market. 

Looming over the New York market in the meantime, is the start of the new crop harvest in Mexico and Central America, which is already starting within the lower grown districts of this producer bloc.    With the prospects that by December and with the harvest picking up in volume, that there shall be increasing volumes of sales and price fixation hedge selling coming to the market.  

Thus, for the present and so long as there are not hiccups in terms of Brazil weather for the main coffee districts, the coffee markets a looking to remain within the present relatively low trading range for the New York market and in terms of the London market, to decline and broaden the arbitrage between the markets, once the new crop harvest starts to pick up in volume.   So far and in terms of the latter factor, the indications are that by the end of next month, there shall be significant volumes of new crop robusta coffees flowing into Ho Chi Minh City. 

The January 2018 to December 2017 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 36.14 usc/Lb., while this equates to 29.02% 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 4,610 bags yesterday; to register these stocks at 1,902,939 bags.  There was meanwhile a smaller in number 672 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 52,380 bags. 

The commodity markets were mixed in trade yesterday but with most markets relatively flat, to see the overall macro commodity index taking something of a sideways track for the day.   The Oil, Cocoa, New York arabica Coffee, Orange Juice and Corn markets had a day of buoyancy, while the Natural Gas, Sugar, London robusta Coffee, Cotton, Copper, Wheat, 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 0.03% higher, to see this Index registered at 414.32.  The day starts with the U.S. Dollar showing a degree of buoyancy and trading at 1.313 to Sterling and at 1.164 to the Euro, while North Sea Oil is steady and is selling at US$ 59.40 per barrel. 

The London and New York markets started the day yesterday with a degree of buoyancy, but while the New York market maintained this positive stance into the early afternoon trade, the London market slipped back to trade hesitantly either side of par.  As the afternoon progressed both markets drifted back into negative territory and while the London market continued to post a mostly negative stance, the New York market bounced back to end the day on the positive side of par. 

The London market ended the day on a negative note and with 63.2% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 56.2% of the earlier gains of the day intact.   This mixed close and with value for the New York market relatively close to par for the day, provides little in the way of direction and with the stronger U.S. dollar in play, one might 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   1995 – 15                                             DEC   124.55 + 0.45

JAN    1949 – 12                                            MAR   128.15 + 0.35

MAR   1925 – 9                                              MAY   130.55 + 0.25

MAY   1932 – 7                                              JUL    132.95 + 0.30 

JUL    1955 – 7                                              SEP    135.25 + 0.30

SEP    1961 – 8                                              DEC   138.65 + 0.25

NOV   1967 – 8                                              MAR   142.00 + 0.30

JAN    1970 – 8                                              MAY   144.05 + 0.30

MAR   1969 – 8                                              JUL    146.05 + 0.30

MAY   1974 – 8                                              SEP    147.95 + 0.30