Coffee Market Report December 06 2017

There are mixed rainfall forecasts for the main coffee districts in South East Brazil for this week, with good rains foreseen for the more northern of the coffee districts and including the main conilon robusta coffee districts within the state of Espirito Santo, while the more southern districts have expectations of more scattered and erratic rain showers.   There have however been fair overall rains for the main coffee districts over the past eight weeks and for the present, the forecasts for a large new Brazil coffee crop for 2018 remain a negative feature for coffee market sentiment. 

It is likewise the case that the advent of the larger new Vietnam robusta coffee crop that is now coming to the market, further contributes towards overall bearish sentiment within the international coffee markets.  Albeit that for the present, the downside potential for the related London coffee market is seemingly being countered by steady volumes of industry price fixation buying. 

These factors aside and with the new Colombian main crop, the new Central American and Mexican crop and the new Indian crop now coming into harvest, there are no scare stories coming to the fore for the coffee markets and with the volatile New York market in the lead, the markets remain within the lower side of the prevailing price trading range.    While the physical coffee market aside from some active industry buying of discounted aged consumer market arabica coffee stocks to supplement some of their Brazil arabica coffee requirements, remains lacklustre in nature. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 48.16 usc/Lb., while this equates to 37.80% 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 2,624 bags yesterday; to register these stocks at 1,929,973 bags.  There was meanwhile a larger in number 3,620 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 30,965 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 20,333 bags or 0.94% over the week of trade leading up to Monday 4th. December, to register these stocks at 2,134,500 bags, on the day. 

The commodity markets and with the U.S. dollar showing some renewed muscle were mostly on the back foot again yesterday, to see the overall macro commodity index taking a softer track for the day.  The Oil, London robusta Coffee, Cotton, Orange Juice and Soybean markets nevertheless had a day of buoyancy, while the Natural Gas, Sugar, Cocoa, New York arabica Coffee, Copper, 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 0.92% lower; to register this index at 415.33.   The day starts with the U.S. Dollar steady and trading at 1.342 to Sterling and at 1.184 to the Euro, while North Sea Oil is steady and is selling at US$ 63.40 per barrel. 

The London market started the day yesterday with some modest buoyancy, but this was short lived and the market returned to trade around par, while the New York market started the day on a modestly softer note and with both markets retaining this stance, into the early afternoon trade.   As the afternoon progressed the London market recovered to move back into positive territory and joined briefly by the New York market, but while the London market managed to hold onto its gains and to spend the rest of the day on a sideways positive track, the New York market very swiftly fell back into negative territory and to then take a sideways negative track through to the close. 

The London market ended the day on a positive note and with 75% of the earlier gains of the day intact, while the New York market ended the day on a negative note and with 73.3% of the earlier losses of the day intact.   This close does little to inspire and tends to start to paint something of a negative picture for the New York charts, but something a little more positive for the London market charts.   But one would expect to see continued uncertainty and perhaps only a cautious near to steady start for early trade today, against the prices set yesterday, as follows: 

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

JAN    1757 + 35                                            DEC   125.95 – 0.80

MAR   1747 + 27                                            MAR   127.40 – 1.10

MAY   1757 + 26                                            MAY   129.55 – 1.15

JUL    1790 + 26                                            JUL     131.80 – 1.15 

SEP    1799 + 26                                            SEP    134.05 – 1.10

NOV   1807 + 25                                            DEC    137.40 – 1.05

JAN    1815 + 23                                            MAR   140.65 – 1.05

MAR   1832 + 23                                            MAY   142.65 – 1.00

MAY   1859 + 23                                            JUL    144.55 – 1.00

JUL    1891 + 23                                            SEP    146.45 – 0.95