Coffee Market Report November 10 2017

The rainfall reports from Brazil have indicated fair rains for most coffee districts this week and with forecasts for abundant rains for many districts, over the coming weekend.   Thus, so far, it is looking to be a positive weather for the forthcoming 2018 new Brazil crop, while the rains contribute towards complacency on the part of the consumer industries and negative sentiment for the speculative sectors of the coffee markets. 

There is meanwhile continued price resistance within the internal market in Brazil on the part of the arabica coffee farmers, for their new crop coffee stocks.  With farmers holding back to take advantage of short sold exporters, whose offer prices are linked to the fortunes of the relatively soft New York coffee market.   This scenario tending to indicate a potential tightening supply of Brazil arabica coffees in the coming months and ahead of the new crop in eight months’ time, but it might be more the prevailing tight prices than the potential medium term arabica coffee supply, albeit that the most certainly is going to be less arabica coffee supply following this year’s smaller crop.    

Brazil aside there are no striking fundamental reports coming to the fore and it would seem to be that with the new crops now coming into play from Mexico, Central America, Colombia, India and Vietnam, that it is very much business as usual, with a free flow of both fine washed arabica coffees and robusta coffee on the cards, for the coming months.   Thus, contributing towards the lacklustre nature of the physical coffee market, ahead of the forthcoming Christmas and New Year holiday season for the main consumer markets. 

The Bureau of Meteorology in Australia have forecast that there is only a 50% chance for a new La Niña phenomenon to develop within the Pacific Ocean at the end of the year, while noting that if it does develop it would likely to be a weak and short-lived occurrence.   Thus, for the for the present, the chances for damaging La Niña weather coming in to threaten the pacific rim coffee producing countries is unlikely. 

However, the Climate Prediction Centre of the National Weather Service in the U.S.A., have raised the forecast for a new La Niña phenomenon to develop with the Pacific Ocean, to a 65% to 75% chance.   This tending to present some reason for the well sold speculative bears in the New York market to show some degree of caution, over extending their short sales.  

The recent rally in the leading stock markets in the recent months, might be seen to be a positive factor for the commodity markets, as investors look to alternative investment mediums.   But of course, there also must be some degree of fundamental focus upon the individual commodity markets, to dictate which might benefit the most, from renewed interest in commodities.  It could though and especially in terms of the well sold New York coffee market, be a supportive factor within the prevailing soft price trading range. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 47.97 usc/Lb., while this equates to 36.96% 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 1,275 bags yesterday; to register these stocks at 1,911,679 bags.  There was meanwhile a similar in number 1,248 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 31,194 bags. 

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 Oil, Natural Gas, Sugar, Coffee, Wheat and Gold markets had a day of buoyancy, while the Cocoa, Cotton, Copper, Orange Juice, Corn, Soybean and Silver markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.07% lower, to see this Index registered at 423.38.  The day starts with the U.S. Dollar steady and trading at 1.314 to Sterling and at 1.164 to the Euro, while North Sea Oil is steady and is selling at US$ 64.20 per barrel. 

The London market and New York markets started the day yesterday trading on a steady note and close to par, with the London market tending to stay to the positive side of par and the New York market marginally south of par, through to early afternoon trade.   As the afternoon progressed both markets started to attract support and with only limited volumes of origin selling over the markets, the markets started to add value and with the London market showing some muscle, but both markets soon hit a ceiling and came off the boil in later trade to post more modest gains for the day. 

The London market ended the day on a positive note and with 58.3% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 38.7% of the earlier gains of the day intact.  This mixed close provides little in the way of direction but perhaps the positive nature of the close might assist to portray a feeling of the markets tending to bottom out, which could inspire a follow through steady start for early trade today, against the prices set yesterday, as follows: 

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

NOV   1873 + 15                                             DEC   126.40 + 0.65

JAN    1824 + 14                                            MAR   129.80 + 0.60

MAR   1804 + 14                                            MAY   132.00 + 0.50

MAY   1808 + 13                                            JUL    134.35 + 0.55 

JUL    1831 + 12                                            SEP    136.60 + 0.50

SEP    1834 + 12                                            DEC   139.95 + 0.50

NOV   1834 + 10                                            MAR   143.15 + 0.55

JAN    1838 + 10                                            MAY   145.10 + 0.50

MAR   1860 + 33                                            JUL    146.95 + 0.55

MAY   1865 + 33                                            SEP    148.80 + 0.55