Coffee Market Report November 09 2017

The Customs Authorities in Vietnam have reported that the countries coffee exports for the month of October were marginally below even their relatively conservative forecast, at a total of 1.317 million bags.   This is however with the combination of most of the past crop stocks having been liquidated and the delay in the new crop harvest that has caused short sold exporters to carry additional stocks, is not a surprise.  

However, with Typhoon Damrey reported to have not been damaging for the coffee farms and with drier weather now coming into play, the new crop harvest in the main Central Highlands robusta coffee districts of Vietnam is starting.   Thus, one might expect to see exports starting to pick up in volume by late this month and most certainly, so long as there are no further weather issues to the fore, to start to significantly increase in volume during December. 

Meanwhile the report on Tuesday from the International Coffee Organisation ICO that had increased their assessment of the global coffee production for the just completed October 2016 to September 2017 coffee year to 157.44 million bags and its indication for surplus rather than deficit supply, continued to overshadow sentiment yesterday.  This negative news coming to the fore, in addition to the widely accepted prospects for large new crops from Colombia, Central America and Vietnam due to impact by the end of the year. 

However, with the speculative and managed money fund sectors of the market still holding extensive short sold positions within the New York market, it is difficult to imagine too much more downside potential for this market.  Albeit that these sectors of the market can be unpredictable and so long as the Brazil weather reports remain favourable for the next 2018 crop, it remains difficult to predict what direction the volatile New York market might take in the coming weeks. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 48.01 usc/Lb., while this equates to 37.15% 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 5,148 bags yesterday; to register these stocks at 1,910,404 bags.  There was meanwhile a larger in number 8,878 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 32,442 bags. 

The producer bloc of Mexico and Central America presently contribute 60.88% of these stocks and followed by Peru, who contribute 12.17% of these stocks, with Colombia close behind with an 11.81% contribution to the stocks.   This dominance by the traditional Central and South American producers in terms of the stocks, is joined by a 3.57% contribution on the part Brazil, to see the Latin American countries making up 88.43% of the New York certified stocks.    Followed by the African countries, Burundi, Rwanda, Tanzania and Uganda who jointly contribute 9.33% of the stocks, India with a 1.83% contribution and Papua New Guinea, with a 0.41% contribution. 

The European ware houses of this exchange presently carry 73.85% of the stocks held against this exchange, but with a more modest 50.52% of the coffees pending grading for the exchange.   

The commodity markets were mixed in trade yesterday, to see the overall macro commodity index taking something of a steady sideways track for the day.  The Natural Gas, Sugar, Cocoa, New York arabica Coffee, Cotton, Copper, Orange Juice, Corn, Soybean, Gold and Silver markets had a day of buoyancy, while the Oil, London robusta Coffee and Wheat markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.36% higher, to see this Index registered at 423.67.  The day starts with the U.S. Dollar near to steady and trading at 1.312 to Sterling and at 1.160 to the Euro, while North Sea Oil is steady and is selling at US$ 63.90 per barrel. 

The London market started the day yesterday on a steady note, while the New York market started the day with a degree of buoyancy, to see the London market trading around par and the New York market taking a positive stance, into the early afternoon trade.   As the afternoon progressed the London market started to come under pressure and slipped back into negative territory while the New York market settled back to par, but while the London market continued to end the day on a soft note, the New York market recovered back into positive territory. 

The London market ended the day on a negative note and with 56% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 83.3% of the earlier gains of the day intact.  This mixed close provides little in the way of direction and one might expect to see another cautious steady start for early trade today, against the prices set yesterday, as follows: 

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

NOV   1858 – 13                                             DEC   125.75 + 1.05

JAN    1810 – 14                                            MAR   129.20 + 1.00

MAR   1790 – 14                                            MAY   131.50 + 1.00

MAY   1795 – 18                                            JUL    133.80 + 1.00 

JUL    1819 – 19                                            SEP    136.10 + 1.05

SEP    1822 – 21                                            DEC   139.45 + 1.05

NOV   1824 – 21                                            MAR   142.60 + 1.00

JAN    1828 – 21                                            MAY   144.60 + 1.05

MAR   1827 – 21                                            JUL    146.40 + 0.85

MAY   1832 – 21                                            SEP    148.25 + 0.80