Coffee Market Report February 08 2018

The Vietnam Customs Department have reported that the country’s coffee exports of mostly robusta for the month of January were 14.7% higher than their earlier estimate, to total 3,345,750 bags.   This impressive export volume of the month which was 26.8% higher than the previous month one would think is more related to catch up coffee supply to the consumer markets following the relatively modest volumes exported from September to November, rather than being an indication of selling aggression out of the rain delayed larger new crop. 

One might however expect with Vietnam now only a week away from the eve of the week-long Tet New Year holiday and with February already a short month, that the coffee export volumes from Vietnam for this month shall be more modest.   But with the evidence of the good volumes of robusta coffee exports over the past two months, one would imagine that there is now not much in the way of consumer market demand for significantly large volumes of follow on Vietnam robusta coffee exports for the present month. 

The International Coffee Organisation have revised their forecast of the global coffee supply for the present October 2017 to September 2018 coffee year marginally higher, to now peg this at 158.93 million bags.  While they have also revised higher their forecast for global coffee consumption for the same coffee year, to now anticipate a figure of 158.95 million bags. 

These figures that indicate a global coffee supply to match global coffee demand would not really indicate any reason for strong bearish sentiment within the coffee markets but are figures that come to the fore, even though they include last year’s relatively small Brazil crop.    But with the report indicating no reason to fear tightening coffee supply and with forecasts regularly coming to the fore that foresee this year’s new Brazil crop to be between 6 million to as much as 10 million bags higher than the previous crop, it does tend to be something of a bearish report. 

Especially so as it is geared to matching supply and demand for the coffee year that ends in just under eight months’ time whereas the reality is that the anticipated larger new Brazil conilon robusta coffees are now only three months from starting to come to the market and soon followed by the new Brazil arabica coffee crop that is only five months from starting to come to the market.   These new crop coffees not calculated into the International Coffee Organisations figures for the present 2017/2018 coffee year, but for the following coffee year, even though they shall be physically impacting upon global coffee supply for the last quarter of the coffee year. 

The May 2018 to May 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 45.57 usc/Lb., while this equates to 36.33% 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 11,835 bags yesterday; to register these stocks at 1,923,881 bags.  There was meanwhile a smaller in number 3,778 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 11,835 bags.  

The U.S. dollar regained a little of its muscle yesterday and it seemingly impacted within many of the commodity markets, to see the overall macro commodity index taking a softer track for the day.   The Sugar, New York arabica Coffee, Wheat and Corn markets nevertheless had a day of buoyancy, while the Oil, Natural Gas, Cocoa, London robusta Coffee, Cotton, Copper, Orange Juice, Soybean, 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 0.78% lower; to register this index at 421.46.   The day starts with the U.S. Dollar tending marginally softer and trading at 1.391 to Sterling, at 1.228 to the Euro and the dollar is buying 3.271 Brazilian Real, while North Sea Oil is near to steady and selling at US$ 65.20 per barrel. 

The London and New York markets started the day yesterday with some modest buoyancy, but soon faltered and took as marginally softer track into the early afternoon trade.   As the afternoon progressed and with the America’s coming to the fore to increase volumes and against lacklustre producer selling activity, the New York market started to attract support and moved up into erratic positive territory and through to the close, while the London market continued an erratic negative track for the rest of the day. 

The London market ended the day on a negative note and with 75% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 57.1% of the earlier gains of the day intact.   This mixed close that came with very high volumes of trade for both markets might be seen to be constructive for sentiment, but perhaps muted by the lack of supportive fundamental news.   While with weaker Brazil real and the usual perception that it shall increase Brazil price fixation selling activity within the New York market and along with the possibility for active price fixation selling from Vietnam ahead of the holidays for the London market, one would expect little better that a steady start for early trade today, against the prices set yesterday, as follows: 

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

MAR   1786 – 16                                            MAR   123.30 + 0.45

MAY   1761 – 9                                              MAY   125.45 + 0.40

JUL    1787 – 8                                               JUL    127.70 + 0.30 

SEP    1789 – 7                                              SEP    130.05 + 0.30

NOV   1789 – 8                                              DEC    133.55 + 0.30

JAN    1792 – 9                                              MAR   136.80 + 0.25

MAR   1804 – 8                                              MAY   138.80 + 0.25

MAY   1817 – 6                                               JUL   140.60 + 0.30

JUL    1847 – 6                                               SEP   142.25 + 0.30

SEP    1850 – 6                                              DEC   144.90 + 0.30