Coffee Market Report January 31 2018

The coffee markets seemingly continue to focus on more than adequate front loaded Mexican, Central American and Vietnam short to medium term coffee supply, with the further focus on increasing coffee supply for the second half of the year, which would come with the prevailing forecasts for a significantly larger new Brazil crop.   Albeit early days yet in terms of Brazil weather, as the main coffee districts in south east Brazil still require three more months of normal rain conditions, if this larger new crop is to become reality. 

This perspective of good coffee supply coming with the fact that presently aside from some concerns being voiced about more modest coffee supply for the first half of the year from Colombia, there are absolutely no other scare stories coming to the fore from the other producers.   With the concerns voiced over Colombian coffee supply, being countered by the perspective of relatively good supply due from neighbouring Central America.  

Accompanying the negative fundamentals that prevail within the coffee markets, it the short selling activity on the part of the speculative and fund sectors of the markets.   This activity having kept the markets mostly within the lower end of the prevailing trading range, albeit that with relatively heavy short sold positions already in hand, one would question if there is much more downside potential for the coffee markets at present.   

Meanwhile the physical coffee trade remains somewhat lacklustre, with the consumer market industries tending to be complacent in nature, as they look to take advantage of the prospects for increased coffee supply of both arabica and robusta coffees from Mexico, Central America and Vietnam.  While in terms of the relatively modest volumes of new crop Brazil arabica coffees flowing into the market, some are taking advantage of the relatively inexpensive certified stocks held against the New York market. 

The March 2018 to March 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 43.92 usc/Lb., while this equates to 35.91% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,840 bags yesterday; to register these stocks at 1,965,325 bags.  There was meanwhile a larger in number 9,232 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 27,616 bags.  

The commodity markets were mixed but with many markets coming off the boil yesterday, to see the overall macro commodity index taking a softer track for the day.  The Natural Gas, Sugar, Cocoa, Wheat, Corn and Soybean markets had a day of buoyancy, while the Oil, Coffee, Cotton, Copper, Orange Juice, 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 0.583% lower; to register this index at 430.48.   The day starts with the U.S. Dollar tending softer and trading at 1.417 to Sterling, at 1.243 to the Euro and the dollar is buying 3.181 Brazilian Real, while North Sea Oil is steady and is selling at US$ 67.65 per barrel. 

The London started the day yesterday on a steady note and trading around par, while the New York market started the day marginally south of par and soon falling back into modest negative territory and with the markets mainlining this uncertain stance, into the early afternoon trade.  As the afternoon progressed the New York market started to attract increased selling activity and with sell stops coming into play, to accentuate the losses, with the London market following suit in a less aggressive manner.   The New York market did however bottom out and bounce off the lows before taking a negative sideways track for the rest of the day, while the London market took a sideways track at close to the lows of the day. 

The London market ended the day on a very soft note and with 93.5% of the earlier losses of the day intact, while the New York market ended the day on a negative note and with 77.9% of the earlier losses of the day intact.   This close does little to inspire confidence, but one might think that following the high volumes of trade experienced yesterday that there might be a degree of exhaustion and caution coming into play, to steady the markets and set them for a steady start for early trade today, against the prices set yesterday, as follows: 

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

JAN    1728 – 23     

MAR   1728 – 29                                            MAR   122.30 – 2.65

MAY   1717 – 23                                            MAY   124.65 – 2.55

JUL    1755 – 20                                             JUL   127.05 – 2.50 

SEP    1760 – 18                                            SEP    129.40 – 2.50

NOV   1764 – 19                                            DEC    132.85 – 2.45

JAN    1770 – 19                                            MAR   136.10 – 2.50

MAR   1783 – 19                                            MAY   138.10 – 2.45

MAY   1797 – 19                                             JUL   139.90 – 2.40

JUL    1827 – 19                                             SEP   141.60 – 2.35