Coffee Market Report November 24 2017

The weather reports from Brazil confirm good rains were experienced for most of the main coffee districts in south east Brazil, which is good for the development of the next 2018 crop.   So far this next year’s crop is forecast to be significantly larger than this year’s crop, to indicate surplus overall global coffee supply to start to come into play, for the second half of next year.  

It is early day’s yet in terms of the October to April summer rain season for Brazil and with the Australian Government Bureau of Meteorology now assessing a 70% chance for new La Niña phenomenon to develop within the Pacific Ocean, it brings with it some threat for dry weather for South East Brazil early in the new year.   However so far, the report notes, the climate models suggest that should the La Niña come to the fore, it would most likely be relatively weak and short lived.  Thus, for the present, it is not a factor that is proving to be threatening for the prospects for the 2018 Brazil coffee crop. 

Meanwhile the Exporters Association in Brazil Cecafé have been reported on Reuters that as at the end of October, that Brazil had only exported 24.75 million bags of coffee and this in terms of the combination of green coffee and value added processed coffees, which is 10.7% lower than the for the same period last year.   While based on this relatively low volume performance, they now foresee that the 2017 coffee exports shall be approximately 5% lower than their earlier expectations, at between 30 million to 31 million bags.  

One might however comment that so far, the more modest volume of coffee exports from Brazil this year, have not been disruptive to the consumer market industries.  With the now rising volumes of new crop coffees coming to the fore from Colombia, Vietnam and Central America and along with good consumer stock levels, that the lower export volumes from Brazil are unlikely to be much of a supportive factor for market sentiment. 

In terms of Vietnam and with the new crop in full harvest, the weather reports indicate mostly hot and dry weather and this is likely to remain the case for the coming week.   This being ideal conditions for new crop harvesting and with large volumes of new crop robusta coffees now flowing into the mills and export warehouses, in Ho Chi Minh City.  This and following he earlier in the week forecast by Rabobank for a new Vietnam crop of 28.7 million bags, is proving to be negative for sentiment within the speculative and fund sectors of the London market. 

It has been reported that in a bid to encourage coffee farming in Tanzania and to assist farmers to increase production, the Tanzanian government have decided to do away with the taxes and levy’s that are presently imposed upon the coffee industry.   This decision to assist to inspire farmers and to bring reality to the countries ten-year development plan, to increase coffee production towards the 2 million bags per annum target. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 47.94 usc/Lb., while this equates to 37.75% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange with the market closed yesterday for the Thanksgiving holiday remained unchanged yesterday; to register these stocks at 1,921,642 bags.  There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 23,346 bags. 

The commodity markets outside of North America where the country celebrated Thanksgiving Day yesterday, were mostly thin in trade for the day, as they also lacked the participation of the U.S.A. based investors.  The Oil and Copper markets had a day of buoyancy and the London robusta Coffee market was steady, while the Gold and Silver markets had a softer day’s trade.    Lacking the participation of many markets the Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets could not be a feature, following it being registered at 423.11 on Wednesday.  The day starts with the U.S. Dollar steady and trading at 1.329 to Sterling and at 1.185 to the Euro, while North Sea Oil is steady and is selling at US$ 63.25 per barrel. 

The London market trading solo for the day, started the day yesterday with some modest buoyancy an taking a modestly positive stance through into the afternoon trade and posting gains of $ 9.00 per metric ton, before falling back to and marginally below par in late in the afternoon trade.  Trade for the day was however thin and lacklustre in nature and the market with the market managing to remain close to par, towards the close. 

The London market ended the day on a steady note and with 25% of the earlier very modest losses of the day intact and setting no real indication for direction today, when the market shall be joined by the New York market for a normal day’s trade.   Thus one might not expect more than a hesitantly steady start for early trade today against the prices set in London yesterday and in New York on Wednesday, as follows: 

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

NOV   1784 – 1                                               DEC   124.55 + 0.70

JAN    1756 – 1                                              MAR   127.00 + 0.35

MAR   1743 – 1                                              MAY   129.25 + 0.35

MAY   1753 – 2                                               JUL   131.60 + 0.35 

JUL    1779 – 2                                              SEP    133.90 + 0.35

SEP    1787 – 2                                              DEC   137.25 + 0.30

NOV   1796 – 2                                              MAR   140.55 + 0.35

JAN    1806 – 2                                              MAY   142.55 + 0.35

MAR   1823 – 2                                              JUL    144.50 + 0.40

MAY   1853 – 2                                              SEP    146.35 + 0.35