Coffee Market Report December 20 2017
The Cepea research department of the University of São Paulo’s agricultural college have come to the fore with a report that foresees that the good rains experienced over the main coffee districts in Brazil over the past few weeks, shall be favourable for the development of the next 2018 Brazil crop. But surprisingly the report forecasts that despite this, they do not foresee that the next 2018 crop shall be any larger than this year’s relatively modest crop.
This report is however countered by many other reports and coming from respected sources, which forecast a significantly larger new Brazil crop for the coming year and thus one would speculate, that the report shall have little influence upon the prevailing bearish market sentiment. Albeit that it is early day’s and Brazil still has to experience follow on good rains for the first quarter of the coming year, if these positive crop forecasts for 2018 are to become reality.
The Tanzania Coffee Board have voiced concern that following the present crop of approximately 833,340 bags that partial drought conditions experienced within many of the main producing districts, that the next coffee crop might be as much as 117,000 bags or approximately 14% lower, to total only 717,000 bags. It is of course a matter of concern for the approximately 450,000 small scale farmers who rely on coffee for their income, but in terms of global coffee supply and with increased volumes due in the coming year from the majority of producers, is unlikely to have any impact upon coffee market sentiment.
The main coffee consumer markets are now heading into the coming long weekend Christmas holiday season and likewise, most of coffee producer countries and one can expect little change to the prevailing lacklustre nature of the physical coffee market. While with next week due to be a short three-day week and with many players perhaps taking holidays over the week and through to post the New Year, one might expect to see the physical coffee market remain lacklustre through to at least the second week of January. However, it might not be the case in terms of the fund and speculative sectors of the markets, with speculation that the Funds might be due to invest into commodities and including coffee, in the New Year.
The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 43.61 usc/Lb., while this equates to 35.78% 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 4,628 bags yesterday; to register these stocks at 1,956,181 bags. There were meanwhile a larger in number 6,893 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 22,647 bags.
The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 37,000 bags or 1.74% over the week of trade leading up to Monday 18th. December, to register these stocks at 2,085,000 bags, on the day.
The commodity markets were mixed in trade yesterday and mostly lacking any excitement and despite a modest weakening of the U.S. Dollar, to see the overall macro commodity index taking a mostly sideways track for the day. The Oil, Sugar, Cotton, Copper and Corn markets had a day of buoyancy and the New York coffee market was near to steady for the day, while the Natural Gas, Cocoa, London robusta Coffee, Orange Juice, Wheat, Soybean, 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 0.03% higher; to register this index at 407.91. The day starts with the U.S. Dollar steady and trading at 1.339 to Sterling, at 1.184 to the Euro and 3.301 to the Brazilian Real, 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 close to par and taking a marginally south of par track, into the early afternoon trade. As the afternoon progressed both markets came under pressure and lost some more weight but with the New York market bouncing off the lows and briefly heading back into positive territory, prior to falling back to below par and towards a softer close for the day.
The London market ended the day on a negative note and with 50% of the earlier losses of the day intact, while the New York market ended the day on a modestly negative note and having recovered 83.3% of the earlier losses of the day, by the close. This close does little to inspire and one might expect to see little better than a steady start due for early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
JAN 1716 – 10
MAR 1713 – 13 MAR 121.75 – 0.15
MAY 1722 – 11 MAY 124.00 – 0.15
JUL 1762 – 10 JUL 126.40 – 0.10
SEP 1771 – 8 SEP 128.75 – 0.10
NOV 1780 – 8 DEC 132.25 – 0.10
JAN 1789 – 8 MAR 135.60 – 0.10
MAR 1799 – 8 MAY 137.70 – 0.10
MAY 1824 – 8 JUL 139.70 – 0.10
JUL 1856 – 8 SEP 141.55 – 0.15