Coffee Market Report January 17 2018

The Brazil Exporters Association Cecafé have reported that the countries green coffee exports for the month of December were 11.5% lower than the same month in the previous year, which has contributed to the countries green coffee exports for the year 2017 to have been 10% lower than the previous year, at a total of 27.31 million bags.   This dip in exports for the year Cecafé say, has come with the smaller crop last year and the resulting lower volumes exported over the recent months and are expected to continue for the next five to six months, but the association does indicate their belief in a significantly larger new coffee crop for this year and their expectations for rising export volumes of Brazil coffee due to come into play, for the second half of this year. 

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 105,985 bags or 1.57% during the month of December, to register these stocks at 6,631,501 bags at the end of the month.   It must be noted though that this is only the fifth month during last year that these stocks have fallen and despite this further dip in stocks for the month of December, they remain relatively substantial. 

These stocks do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 570,000 bags per week, would conservatively have been at least 1.1 million bags. If one is to consider the additional unreported stocks the end month stocks, this would equate to more than 13 weeks of roasting activity, which most would consider to be more than a safe reserve. 

The European Coffee Federation ECF have reported that the port warehouse stocks held within warehouses in the ports of Antwerp, Hamburg, Genoa, Le Havre and Trieste fell by 580,533 bags or 5.32% during the month of November, to register these stocks at the end of the month at 10,326,683 bags.   These stocks do not however include the unreported stocks from the warehouses in the port of Bremen, who no longer contribute to the end month stock figures.   Nor does this report consider the industry on site inventory stocks, the transit bulk container stocks and stocks being held within non-reporting private warehouses throughout Western and Eastern Europe. 

This said and with the combination of West and East Europe consuming approximately 1.05 million bags of coffee a week, one might guess that the additional stocks that were not included in the report, might contribute to as much as 2.5 million bags to the reported stocks.   Thus, indicating that as at the end of November, the European coffee stocks might have been close to the equivalent of close to a relatively safe, twelve and quarter weeks of Western and Eastern European roasting demand. 

The dip in stocks within these main consumer markets that is related to late last year, is however ahead of the pending delivery of the larger new Vietnam, Mexico and Central American crops and with these coffees now starting to come to the markets, there really is little reason for concern on the part of the consumer market industries.    This being a factor and along with the reasonable rains in Brazil which inspire many to forecast a larger new crop for this leading producer this year, that has supported the prevailing bearish sentiment on the part of the speculative and managed fund sectors of the terminal markets. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 42.09 usc/Lb., while this equates to 34.94% 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 1,377 bags yesterday; to register these stocks at 2,006,697 bags.  There was meanwhile a similar in number 1,345 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 56,503 bags.  

The Certified Robusta coffee stocks held against the London Exchange were seen to decrease by 53,167 bags or 2.67% over the week of trade leading up to Monday 15th. January, to register these stocks at 1,934,833 bags, on the day. 

The commodity markets were mixed in trade yesterday but with many markets unsettled by the erratic nature of the U.S. dollar, to see the overall macro commodity tending softer for most of the day.   The Cocoa, Orange Juice, Corn, Soybean, Gold and Silver markets had a day of buoyancy and the London robusta Coffee market was steady for the day, while the Oil, Natural Gas, Sugar, New York arabica Coffee, Cotton, Copper and Wheat markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.01% firmer; to register this index at 424.06.   The day starts with the U.S. Dollar steady and trading at 1.377 to Sterling, at 1.225 to the Euro and 3.224 to the Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 69.10 per barrel. 

The London market started the day yesterday trading marginally south of par and followed by a post long weekend New York market, that started the day on a softer note and while the London market soon recovered to trade around par, the New York market remained on its softer track into the early afternoon trade.   As the afternoon progressed the London market initially moved up into positive territory and while the New York market extended its losses and finally followed by the London market dipping back into negative territory, but with both market bouncing back from the lows late in the day’s trade. 

The London market ended the day on a near to steady note and having recovered 66.7% of the earlier modest losses of the day, while the New York market ended the day on a soft note and with 75% of the earlier losses of the day intact.   This close one would think shall provide for a somewhat neutral technical picture for the London market and a negative technical picture for the New York market, but one would think that with the New York market back within the lower end of the recent trading range that there might be some degree of hesitancy and caution coming into play.  This to perhaps set the markets for an uncertain steady start for early trade today, against the prices set yesterday, as follows: 

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

JAN    1743 – 4  

MAR   1727 – 2                                              MAR   120.45 – 1.80

MAY   1723 – 2                                              MAY   122.95 – 1.75

JUL    1753 – 2                                               JUL   125.35 – 1.70 

SEP    1756 – 3                                              SEP    127.75 – 1.65

NOV   1761 – 3                                              DEC    131.15 – 1.70

JAN    1768 – 2                                              MAR   134.45 – 1.70

MAR   1783 – 3                                              MAY   136.45 – 1.85

MAY   1800 – 4                                               JUL   138.25 – 1.95

JUL    1830 – 4                                               SEP   139.95 – 2.00