Coffee Market Report December 29 2017

The General Statistics Office in Vietnam have with the month of December nearly complete, estimated that coffee exports for the month shall total approximately 2.33 million bags.   This they report shall contribute towards the coffee exports for 2017 to be 20.1% lower than the previous year, at a total of approximately 23.3 million bags. 

The fall in coffee exports from Vietnam this year and of mostly robusta coffees, has not actually put too much pressure on robusta coffee supply through the year, as the consumer markets while experiencing tighter supply and price buoyancy through most of the year, have nevertheless been in receipt of sufficient hand to mouth robusta coffee supply.   While with the forecast for a significantly larger new Vietnam coffee crop that is nearing completion of its harvest at present, there are no concerns over medium to longer term robusta coffee supply.  A factor that is reflected within the prevailing softer price trading range for the London market. 

Meanwhile the weather forecasts from South East Brazil indicate fair rains for the coming month of January for the main coffee districts within the country, which is a factor that continues to support the forecasts for a significantly larger new coffee crop for Brazil, in the coming year.   This perspective and with the certified coffee stocks of the market steadily increasing, proving to be a negative factor for speculative and fund sentiment within the New York market and likewise, for the London market.  With this latter London market that is already under pressure from the larger new Vietnam robusta coffee crop, presently anticipating a larger new Brazil conilon robusta coffee crop due to come to the fore by May 2018 and accompanied by the new Indonesian robusta coffee crop. 

However, with the evidence of the extensive net short position of the speculative and managed money fund sectors of the New York market, one would think that the downside potential for this market is somewhat limited for the present.   Which is a factor that one might guess, shall bring to the fore some short-term stability for the New York market and to a lesser extent, for the London market.  Thinking that caution shall come with the fact that the New York market and presently already being so short sold, is vulnerable to an aggressive short covering rally against any extended spell of dry weather in Brazil, during the first quarter of the coming year.  

The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 47.01 usc/Lb., while this equates to 37.67% 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 4,346 bags yesterday; to register these stocks at 1,972,330 bags.  There was meanwhile a smaller in number 180 bags increase to the number bags pending grading for this exchange; to register these pending grading stocks at 56,75 bags.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.72% higher; to register this index at 418.68.   The day starts with the U.S. Dollar steady and trading at 1.346 to Sterling, at 1.194 to the Euro and 3.312 to the Brazilian Real, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 67.70 per barrel. 

The London market started the day yesterday on the positive side of par, while the New York market started the day to the negative side of par, but with the London market soon falling back to par and the New York market losing a little bit of weight into the early afternoon trade.   As the afternoon progressed the London market remained close to par and the New York market taking a negative stance, but with both markets recovering in late trade and moving back up into positive territory. 

The London market ended the day on a modestly positive note and with 28.6% of the earlier gains of the day intact and likewise, the New York market ended the day on a modestly positive note and with 75% of the earlier modest gains of the day intact.  This close and with the charts tending to paint a modestly positive picture ahead of Monday’s New Year holiday for both markets, is likely to inspire some degree of confidence and assist the markets to post a steady start for early trade today, against the prices set yesterday, as follows: 

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

JAN    1709 + 3

MAR   1715 + 4                                              MAR   124.80 + 0.30

MAY   1724 + 3                                              MAY   127.15 + 0.30

JUL    1760 + 2                                              JUL     129.50 + 0.30 

SEP    1768 + 2                                              SEP    131.90 + 0.35

NOV   1777 + 2                                              DEC    135.35 + 0.35

JAN    1786 + 2                                              MAR   138.65 + 0.30

MAR   1798 + 2                                              MAY   140.65 + 0.25

MAY   1823 + 2                                              JUL    142.60 + 0.25

JUL    1855 + 2                                              SEP    144.50 + 0.25