Coffee Market Report November 01 2017

The Indonesian government trade data from Sumatra which is the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month of October were 445,589 bags or 71% lower than the same month last year, at a total of 182,023 bags. 

This relatively modest performance which follows a 28.38% lower performance during the previous month of September, reflects the drying up of offers from within the internal market post the end of this year’s harvest, which one would appropriate to not only diminishing stocks, but also to internal market price resistance towards exporters, whose price offers are dictated by the reference prices of the softer London market.  Considering that the Indonesian exporters in terms of price, must compete with a growing domestic market and with new crop stocks only due from April 2018 onwards, many would be looking to the domestic market roasters to add value to unsold 2017 crop stocks. 

The drying up of Indonesian robusta coffee supply is however not foreseen to be an issue on the part of the consumer market industries, as with the prospects for a new and larger Vietnam robusta coffee crop foreseen to start coming into play over the next three to four weeks, focus is now upon a good and steady supply of Vietnam robusta coffees for the rest of the year and the first half of next year. 

The International Coffee Organisation ICO have reported that the global coffee exports for the month of September were 14.8% lower than the same month last year, at a total of 8.34 million bags.   This dip in exports they however comment, does not detract from the fact that global coffee exports for the October 2016 to September 2017 coffee year were 4.8% higher than the previous coffee year, at a total of 122.45 million bags. 

The high volume of global coffee exports over the just completed coffee year and completely related to the arabica coffees which rose 7.9% in volume as against a 0.2% dip in robusta coffee exports for the coffee year, they further comment, contributing to the rising levels of consumer market stocks over the year.   This being a factor that has proved to be negative for sentiment over the recent months, for the New York arabica coffee market. 

Tomorrow shall be a public holiday for Brazil as the country celebrates Dia de Finados or All Souls Day, with many commercial houses due to take advantage of this holiday, to take a bridge day on Friday and to extend it into a long weekend.    Thus, one might expect to see some degree of selling activity out of Brazil in trade today, ahead of the break but perhaps muted, as despite the weaker Brazil Real that is presently trading at 3.27 to the dollar, by the prevailing soft reference prices of the New York market. 

The January 2018 to December 2017 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 39.92 usc/Lb., while this equates to 31.91% 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 316 bags yesterday; to register these stocks at 1,911,740 bags.  There was meanwhile a larger in number 5,664 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 46,425 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 14,167 bags or 0.65% over the week of trade leading up to Monday 30th. October, to see these stocks registered at 2,152,333 bags, on the day. 

The commodity markets were mixed in trade yesterday but with many markets falling south of par, to see the overall macro commodity index taking a mostly softer to sideways track for the day.   The Oil, Sugar and Soybean markets had a day of buoyancy, while the Natural Gas, Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, 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 0.22% lower, to see this Index registered at 415.31.  The day starts with the U.S. Dollar steady and trading at 1.327 to Sterling and at 1.163 to the Euro, while North Sea Oil is near to steady and is selling at US$ 61.95 per barrel. 

The London and New York markets started the day yesterday on a modestly negative note and maintaining this softer stance, into the early afternoon trade.  As the afternoon progressed the London market came under increased pressure and extending its losses and holding onto most of these through to the close, while the New York market having likewise added to its losses, did manage to bounce back from the lows of the day. 

The London market ended the day on a very negative note and with 86.5% of the earlier losses of the day intact, while the New York market ended the day on a negative note and with 45.7% of the earlier losses of the day intact.   This follow through soft close does little to inspire confidence and 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   1902 – 43                                             DEC   125.10 – 0.80

JAN    1878 – 32                                            MAR   128.60 – 0.85

MAR   1860 – 30                                            MAY   130.95 – 0.90

MAY   1867 – 30                                            JUL    133.35 – 0.85 

JUL    1892 – 27                                            SEP    135.60 – 0.90

SEP    1899 – 28                                            DEC   139.00 – 0.85

NOV   1908 – 26                                            MAR   142.25 – 0.95

JAN    1917 – 20                                            MAY   144.25 – 1.00

MAR   1916 – 20                                            JUL    146.20 – 1.05

MAY   1921 – 20                                            SEP    148.10 – 1.10