Coffee Market Report February 07 2018

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 548,000 bags or 5.31% during the month of December, to register these stocks at the end of the month at 9,778,683 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 December, the European coffee stocks might have been close to the equivalent of close to a relatively safe, eleven and half 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. 

Reuters have reported that at a workshop within the Indonesian Embassy in Hanoi in company of officials of the Vietnam Coffee and Cocoa Association, twenty-five Vietnamese and Indonesian coffee companies and various diplomatic agencies from both countries, that it was agreed that the two countries shall instigate close cooperation in terms of developing the coffee farming sector of Indonesia. 

This cooperation in terms of the Vietnamese coffee farmers generally proving to be more than twice as efficient as the Indonesian coffee farmers in terms of farm husbandry and yields, might prove to be very beneficial on the longer term for the Indonesian coffee farming industry, which with good farm practices has the potential to significantly increase its coffee production.  While with steadily growing Asian coffee consumption and a growing regional coffee market, it should be further factor of encouragement for Indonesian coffee farmers to step up and increase their yields and income from coffee. 

The May 2018 to May 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 44.76 usc/Lb., while this equates to 35.79% 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 7,693 bags yesterday; to register these stocks at 1,935,716 bags.  There was meanwhile a smaller in number 4,263 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 23,633 bags.  

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 64,167 bags or 3.65% over the week of trade leading up to Monday 5th. February, to register these stocks at 1,692,333 bags, on the day. 

The commodity markets had an erratic and mixed day yesterday, with the dollar firming and  weakening throughout the day and with increased money coming to the fore post the negative correction within the equity markets, to see the overall macro commodity index having a likewise erratic but overall marginally softer day.   The Coffee, Orange Juice, Wheat, Corn and Soybean markets had a day of buoyancy, while the Oil, Natural Gas, Sugar, Cocoa, Cotton, Copper, 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 0.02% lower; to register this index at 424.80.   The day starts with the U.S. Dollar steady and trading at 1.396 to Sterling, at 1.239 to the Euro and the dollar is buying 3.235 Brazilian Real, while North Sea Oil is steady and selling at US$ 67.20 per barrel. 

The London and New York markets started the day yesterday with a degree of modest buoyancy and trading hesitantly either side of par into the early afternoon trade, but to see both markets soon starting to pick up support.   As the afternoon progressed the New York market attracted short covering support and with only thin volumes of producer selling over the market to trigger buy stops, to accentuate the gains, while the London market moved up into more modest positive territory, but with seemingly producer selling pressure activity coming to the fore to limit the gains.    Both markets continued to maintain their somewhat sideways positive track, with the New York market proving to be the best performing commodity market for the day. 

The London market ended the day on a positive note and with 90% of the earlier modest gains of the day intact, while the New York market ended the day on a very positive note and with 93.6% of the earlier gains of the day intact.   This close might be seen to be constructive for market sentiment, albeit that there are aside from the short-sold nature of the New York market, there is little in the way of supportive market fundamentals.  One might however, expect to see some follow through buoyancy for early trade today against the prices set yesterday, as follows: 

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

MAR   1804 + 24                                            MAR   122.85 + 3.05

MAY   1770 + 18                                            MAY   125.05 + 2.95

JUL    1795 + 12                                             JUL    127.40 + 2.95 

SEP    1796 + 10                                            SEP    129.75 + 2.95

NOV   1797 + 8                                              DEC    133.25 + 3.00

JAN    1801 + 6                                              MAR   136.55 + 3.00

MAR   1812 + 6                                              MAY   138.55 + 3.00

MAY   1823 + 6                                               JUL   140.30 + 3.00

JUL    1853 + 6                                               SEP   141.95 + 3.00

SEP    1856 + 6                                              DEC   144.60 + 2.90