Coffee Market Report February 02 2018

The Indonesian government trade data from Sumatra which is the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month of January were 136,119 bags or 70.96% lower than the same month last year, at a total of 55,713 bags.   This number and following a similarly modest export performance for the previous months has contributed to the cumulative coffee exports for the first four months of the present October 2017 to September 2018 coffee year to be 1,230,646 bags or 67.07% lower than the same period in the previous coffee year, at a total of 604,348 bags. 

In the meantime, and ahead of the new crop that is mostly due to start in April, the Association of Coffee Exporters in Indonesia have forecast that the countries coffee production for 2018 shall be approximately 1,916,667 bags or 18.7% lower than the production in 2017, at a total of only 8.33 million bags.  But this is a questionable number and many might in terms of the prevailing soft international terminal market prices, be seen to be a somewhat market manipulative statement.   Albeit that in terms of the Sumatran arabica coffee crop and while it is a small percentage of overall coffee production in terms of the country’s dominant robusta coffees that account for approximately 83% of overall coffee production, the developing cherry counts do seemingly indicate a modest crop this year. 

The National Coffee Institute of Honduras have reported that coffee exports for he month of January were approximately 248,000 bags or 32.12% higher than the same month last year, at a total of 1.02 million bags.   These exports the report states have contributed to the countries cumulative exports for the first four months of the present October 2017 to September 2018 coffee year to be approximately 22% higher than the same period in the previous coffee year, at a total of 1.66 million bags.   

The Ministry of Trade in Brazil have reported that the countries coffee exports for the month of January were 157,185 bags or 6.39% higher than the same month last year, at a total of 2,618,395 bags.   This rise in exports for the month is however something of a catch-up matter, as it follows many months of relatively modes export volumes that followed the smaller 2017 crop and accompanied by problems within the port of Santos that disrupted overall export volumes from the country. 

Meanwhile the weather reports and forecasts from Brazil remain positive for the prospects of a significantly larger new crop to come to the fore from April in terms of the conilon robusta coffees and from June for the arabica coffees this year.   This information remaining a major factor, in terms of the prevailing bearish sentiment within the coffee markets. 

The May 2018 to May 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 44.28 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 decrease by 5,572 bags yesterday; to register these stocks at 1,964,470 bags.  There was meanwhile a smaller in number 3,989 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 14,611 bags.  

The commodity markets were mixed yesterday, but with many markets showing a degree of buoyancy, which contributed towards the overall macro commodity index taking a positive track for the day.   The Oil, Sugar, Cocoa, London robusta Coffee, Cotton, Copper, Orange Juice and Gold markets had a day of buoyancy, while the Natural Gas, New York arabica Coffee, Wheat, Corn, 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 0.30% higher; to register this index at 430.39.   The day starts with the U.S. Dollar near to steady and trading at 1.426 to Sterling, at 1.249 to the Euro and the dollar is buying 3.167 Brazilian Real, while North Sea Oil is steady and is selling at US$ 69.50 per barrel.

The London and New York markets started the day yesterday on a steady note and trading either side of par, into the early afternoon trade.   As the afternoon progressed the markets dipped south into modest negative territory and with the New York market suffering from more significant losses, but while the London market soon recovered to take a positive track for the rest of the day, the New York market struggled to move all the way back to par and following a partial recovery, took a sideways negative track through to the close. 

The London market ended the day on a positive note and with 70% of the earlier gains of the day intact, while the New York market ended the day on a negative note, but having recovered 70% of the earlier losses of the day.   This close paints an indecisive picture for the markets, but one might think that the thoughts might be that the New York market is becoming somewhat oversold and that this might assist to inspire some degree of caution, which could trigger a steady start for early trade today against the prices set yesterday, as follows: 

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

MAR   1769 + 7                                              MAR   121.40 – 0.45

MAY   1752 + 5                                              MAY   123.75 – 0.45

JUL    1786 + 3                                               JUL   126.15 – 0.40 

SEP    1789 + 2                                              SEP    128.50 – 0.45

NOV   1793 + 1                                              DEC    131.90 – 0.45

JAN    1799 + 1                                              MAR   135.20 – 0.45

MAR   1811 unch                                           MAY   137.20 – 0.45

MAY   1825 unch                                            JUL   139.00 – 0.45

JUL    1855 unch                                            SEP   140.70 – 0.45