Coffee Market Report December 14 2017

In line with many other earlier forecasts, the respected bankers Rabobank have likewise come to the fore, with their forecast for the potential for a 4.1 million bags surplus coffee production for the next October 2018 to September 2019 coffee year.   This forecast related to their view that Brazil has the potential to produce a new coffee crop next year, which shall be close to 59 million bags. 

The report adding to the flood of news that is coming to add to the prevailing bearish sentiment for the volatile and short sold New York market, but the question remains with the medium-term prospects for rainfall within Brazil.   Thus, one can expect that there shall be a very close eye upon the weather reports out of South Eastern Brazil throughout the first quarter of 2018, which shall be a critical period for the development of the new Brazil crop. 

Forecasts for the prospects of coffee supply for the next coffee year aside, there is really very little in the way of news coming to the markets for the present.   The markets having accepted the fact that following this years smaller Brazil crop, that global coffee supply through to the middle of next year shall be close to perhaps marginally below demand, but with relatively high levels of consumer market stocks, no threat to short to medium terms coffee supply. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 42.40 usc/Lb., while this equates to 35.30% 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 4,750 bags yesterday; to register these stocks at 1,948,467 bags.  There were meanwhile a larger in number 4,329 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 25,726 bags. 

The commodity markets were mostly showing a degree of buoyancy in trade yesterday, but with the Oil markets coming off the boil, to limit the upside potential for the overall macro commodity index.   The Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Wheat, Corn, Soybean, Gold and Silver markets had a day of buoyancy, while the Oil and Orange Juice markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.38% higher; to register this index at 403.92.   The day starts with the U.S. Dollar tending softer and trading at 1.343 to Sterling and at 1.182 to the Euro, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 63.55 per barrel. 

The London market and New York markets started the day yesterday with early buoyancy and with both markets maintaining this positive stance, into the early afternoon trade.   As the afternoon progressed and with the New York market attracting support from both speculative and fund consolidation post the past few days of selling pressure and the influence of the positive nature of the overall macro commodity index, both markets continued to maintain something of a sideways positive track and taking the markets through to settle at positive value for the day. 

The London market ended the day on a positive note and with 71.7% of the earlier gains of the day intact, while the New York market likewise ended the day on a positive note and with 73.3% of the earlier gains of the day intact.   This close and with the U.S. dollar tending marginally weaker might assist to bring to the fore a degree of modest confidence and one might expect to see the markets register 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. 

JAN    1712 + 24                                            DEC   118.95 + 1.90

MAR   1713 + 33                                            MAR   120.10 + 1.65

MAY   1723 + 33                                            MAY   122.25 + 1.60

JUL    1767 + 30                                            JUL     124.45 + 1.50 

SEP    1777 + 31                                            SEP    126.80 + 1.50

NOV   1785 + 31                                            DEC    130.35 + 1.50

JAN    1794 + 30                                            MAR   133.70 + 1.50

MAR   1804 + 30                                            MAY   135.80 + 1.45

MAY   1829 + 30                                            JUL    137.85 + 1.40

JUL    1861 + 30                                            SEP    139.80 + 1.30