Coffee Market Report November 03 2017

The latest reports from Brazil indicate that most of the main coffee districts in the country experienced near normal rains for the month of October, with only the Zona da Mata, Bahia and Espirito Santo districts having below average rains for the month.   There are however rains now falling over Espirito Santo and Bahia, while more rains are forecast to move up from the southern coffee districts during the weekend and to impact over most of South East Brazil next week.  

In terms of commercial activity within Brazil and following yesterday’s Dia de Finados or All Souls Day public holiday, most of the commercial houses shall remain closed for business today and for a long weekend for the majority within the country.    Therefore, once again, there shall be little in the way of price fixation selling activity due from Brazil within the New York market today, which might assist to buoy the market ahead of the weekend.  

Meanwhile there are rains forecast for the main central highlands in Vietnam for the next few days, which shall continue to delay the start of the new crop harvest in any volume.   However so far the delayed start to end of the rain season is not seen to be damaging to the prospects of what is foreseen to be a larger new robusta coffee crop, but only a delay factor to this crop having an impact upon consumer market supply. 

The physical coffee trade remains lacklustre for the present, but perhaps with the markets having bounced back from the lows yesterday, there might be some industry players who shall think that the downside is limited and it is time to start to step in to buy.    Making one think that there might be more activity within this sector of the market within the coming weeks, as the industries take in some additional new crop Colombia, Central American and Vietnam cover.  

The consumer industries are however likely in terms of the good to perhaps still excessive consumer arabica coffee stocks, still likely to remain relatively complacent and while possibly due to become more active buyers, not really expected to bring much excitement to the terminal markets.   Leaving direction very much in the hands of the speculative and fund sectors of the volatile New York market, which is presently trading at what would be seen to be loss making price levels for many producer countries. 

The January 2018 to December 2017 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 41.58 usc/Lb., while this equates to 32.9% 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 4,613 bags yesterday; to register these stocks at 1,915,490 bags.  There was meanwhile a larger in number 5,820 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 43,305 bags. 

The commodity markets were mixed in trade yesterday, but to see the overall macro commodity index showing a degree of buoyancy for the day.   The Oil, Natural Gas, Coffee, Cotton, Orange Juice, Wheat, Corn and Soybean markets had a day of buoyancy and the Gold market was steady for the day, while the Sugar, Cocoa, Copper and Silver markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.13% higher, to see this Index registered at 417.93.  The day starts with the U.S. Dollar steady and trading at 1.307 to Sterling and at 1.166 to the Euro, while North Sea Oil is near to steady and is selling at US$ 61.15 per barrel. 

The London market started the day yesterday on a modestly firmer note, while the New York market started the day close to par and with the both markets maintaining this stance, into the early afternoon trade.  As the afternoon progressed the London market started to attract more support and with the New York market likewise moving back into positive territory and with the New York market soon triggering stop loss buy orders and accentuating its gains and to see both markets moving higher.  The markets did however soon reach a ceiling and settling back to what was nevertheless, a positive close for the day.   

The London market ended the day on a positive note and with 82.1% of the earlier gains of the day intact, while the New York market ended the day on a negative note and with 74.2% of the earlier gains of the day intact.   This close might well inspire a degree of confidence and with the combination of the delayed start to the new Vietnam robusta coffee crop, the potential lack of Brazil selling activity and the very active positive correction for the New York market yesterday, there is the potential for a positive to buoyant start for early trade today against the prices set yesterday, as follows: 

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

NOV   1916 + 29                                             DEC   126.40 + 3.45

JAN    1870 + 32                                            MAR   129.85 + 3.40

MAR   1850 + 36                                            MAY   132.15 + 3.30

MAY   1859 + 38                                            JUL    134.45 + 3.30 

JUL    1883 + 36                                            SEP    136.70 + 3.25

SEP    1890 + 35                                            DEC   140.00 + 3.15

NOV   1899 + 35                                            MAR   143.25 + 3.10

JAN    1902 + 29                                            MAY   145.30 + 3.15

MAR   1901 + 29                                            JUL    147.20 + 3.10

MAY   1906 + 29                                            SEP    149.10 + 3.10