Coffee Market Report January 18 2018

The weather forecasts continue to indicate that the prevailing modes La Niña phenomenon within the Pacific Ocean is due to start to wane in a couple of months’ time, which removes for the present any fears of significant weather issues due for the Pacific Rim coffee producing countries.   Likewise, further afield for South East Brazil, which is usually affected to a lesser degree by the La Niña and El Niño phenomenon’s.  

The coffee markets remain devoid of any striking news for the present and with the perception that with more than adequate new crop coffee supply from Vietnam, Colombia, Mexico, Central America, India and Uganda tending to bring forth a degree of complacency on the part of the consumer market industries, while the perception of a potentially much larger new Brazil crop due to come into play for the second half of the year, continues to fuel bearish sentiment on the part of the speculative and managed money fund sectors of the market. 

However, with only four weeks of trade to the fore ahead of the week-long Tet New Year holiday in Vietnam that shall trigger the start of the Year of the Dog, there is seemingly some increase in consumer market industry interest in taking on some additional pre-holiday cover, which is assisting to buoy the prices in the related London market.  Albeit that with many on the internal market trade remaining unfixed for new crop supply, there is the threat of more price fixation selling to come to the fore and to cap any significant price rally for this market. 

Meanwhile with the New York market having this week dipped back since the New Year and on the back of mostly speculative and managed money fund sector short selling activity, there is a perception that there might not be much more in the way of short selling capacity left.  This has assisted yesterday, in some degree of short covering buying activity coming to the fore and to buoy the market.   Albeit that with the bearish fundamentals that remain within the market and the potential for large volumes of new crop price fixation hedge selling due to come from Mexico, Central America and Colombia, the corrective upside for this market is possibly limited for the present. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 42.86 usc/Lb., while this equates to 34.82% 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 148 bags yesterday; to register these stocks at 2,006,845 bags.  There was meanwhile a larger in number 9,508 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 46,995 bags.  

The commodity markets were mixed but with many markets on the upside yesterday, to see the overall macro commodity index taking an upside track for the day.   The Oil, Natural Gas, Cocoa, Coffee, Cotton, Wheat, Corn and Gold markets had a day of buoyancy, while the Sugar, Copper, Orange Juice, Soybean and Silver markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.57% firmer; to register this index at 426.48.   The day starts with the U.S. Dollar steady and trading at 1.381 to Sterling, at 1.217 to the Euro and 3.224 to the Brazilian Real, while North Sea Oil is steady and is selling at US$ 69.65 per barrel. 

The London market started the day yesterday on a steady note and trading around par, while the New York market started the day with modest buoyancy and to see both markets taking a steady to buoyant track into the early afternoon trade.  As the afternoon progressed and with the markets attracting additional short covering and industry price fixation support, both markets started upon a steady upside track for the day and through to the close. 

The London market ended the day on a very positive note and with 95.5% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 79.1% of the earlier gains of the day intact.  This close is somewhat supportive for sentiment and may well inspire some follow through support for early trade today, to fuel some degree of hesitant buoyancy for early trade today against the prices set yesterday, as follows: 

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

JAN    1789 + 46  

MAR   1769 + 42                                            MAR   123.10 + 2.65

MAY   1754 + 31                                            MAY   125.55 + 2.60

JUL    1783 + 30                                             JUL   127.95 + 2.60 

SEP    1787 + 31                                            SEP    130.30 + 2.55

NOV   1792 + 31                                            DEC    133.70 + 2.55

JAN    1799 + 31                                            MAR   136.95 + 2.50

MAR   1815 + 32                                            MAY   138.85 + 2.40

MAY   1833 + 33                                             JUL   140.55 + 2.30

JUL    1863 + 33                                             SEP   142.20 + 2.25