Coffee Market Report November 08 2017

The International Coffee Organisation ICO have reported that they have increased their assessment of the global coffee production for the just completed October 2016 to September 2017 coffee year by 3.54 million bags or 2.3%, to now assess coffee production for the coffee year at 157.4 million bags.  This increase they appropriate mostly to their increasing Mexican and Central American production by 2.3 million bags, while they have now pegged production for the 2016/2017 coffee year to have been made up from 101.55million bags of arabica coffees and 55.89 million bags of robusta coffees.   Or a 64.5 to 35.5 ratio, for arabica and robusta coffees. 

The interesting fact in terms of this latest ICO report and with their having assessed global coffee consumption to presently be approximately 155.1 million bags, is that they now see this just completed coffee year to have been a modest surplus supply coffee year.   Their figures indicating the surplus as having been approximately 2.34 million bags, which shall assist to counter the relatively modest tightening of coffee supply that would have come with the smaller Brazil crop this year.  

The European Coffee Federation ECF have reported that the port warehouse stocks held within warehouses in the ports of Antwerp, Hamburg, Genoa, Le Havre and Trieste fell by 384,583 bags or 3.3% during the month of September, to register these stocks at the end of the month at 11,269,567 bags.   These stocks do not however include the unreported stocks from the warehouses in the port of Bremen, who no longer contribute to the end month stock figures.   Nor does this report consider the industry on site inventory stocks, the transit bulk container stocks and stocks being held within non-reporting private warehouses throughout Western and Eastern Europe. 

This said and with the combination of West and East Europe consuming approximately 1.05 million bags of coffee a week, one might guess that the additional stocks that were not included in the report, might contribute to as much as 2.5 million bags to the reported stocks.   Thus, indicating that as at the end of July, the European coffee stocks might have been close to the equivalent of close to a very safe, 13 weeks of Western and Eastern European roasting demand. 

However, with slow start to Brazil exports of new crop coffees this year and declining volumes of Vietnam exports over the past couple of months, it is possible that that these overall reported and unreported stocks might well by now, be as much as half a million bags lower.   But nevertheless, still at a relatively safe level, ahead of the delivery of the new Colombian, Central American and Vietnam crops.    

The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 46.37 usc/Lb., while this equates to 36.17% price discount for the London Robusta coffee market.  

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 19,703 bags yesterday; to register these stocks at 1,905,256 bags.  There was meanwhile a smaller in number 3,902 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 41,320 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 10,167 bags or 0.47% over the week of trade leading up to Monday 6th. November, to see these stocks registered at 2,142,167 bags, on the day. 

The commodity markets and with the U.S. dollar showing a degree of renewed muscle for the day were mixed in trade but with many markets tending softer, to see the overall macro commodity index taking a softer track for the day.   The Natural Gas, Sugar, Cocoa and Soybean markets had a day of buoyancy, while the Oil, 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 0.42% lower, to see this Index registered at 422.18.  The day starts with the U.S. Dollar tending softer and trading at 1.317 to Sterling and at 1.160 to the Euro, while North Sea Oil is steady and is selling at US$ 64.10 per barrel. 

The London and New York markets started the day yesterday on a near to steady note and trading modestly south of par, but with the London market soon slipping lower, to see the markets taking this mixed stance into the early afternoon trade.   As the afternoon progressed the London market started to lose some more weight and with the New York market following suit and with sell stops coming into play to accentuate the losses for both markets, prior to a bounce back from the lows in the London market on the back of some industry buying activity and followed by seemingly a combination of some industry buying and speculative profit taking recovery within the New York market.   

The London market ended the day on a negative note and with 56.4% of the earlier losses of the day intact, while the New York market ended the day on a negative note, but having recovered 65.3% of the earlier losses of the day by the close.   The ability of both markets to bounce back from the lows might assist to bring to the fore a degree of caution and one might expect to see a hesitant steady start due for early trade today, against the prices set yesterday, as follows: 

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

NOV   1871 – 32                                             DEC   124.70 – 0.85

JAN    1824 – 31                                            MAR   128.20 – 0.85

MAR   1804 – 28                                            MAY   130.50 – 0.85

MAY   1813 – 25                                            JUL    132.80 – 0.85 

JUL    1838 – 23                                            SEP    135.05 – 0.90

SEP    1843 – 24                                            DEC   138.40 – 0.85

NOV   1845 – 25                                            MAR   141.60 – 0.85

JAN    1849 – 22                                            MAY   143.55 – 0.85

MAR   1848 – 22                                            JUL    145.55 – 0.80

MAY   1853 – 22                                            SEP    147.45 – 0.80