Coffee Market Report February 09 2018

The latest weather reports out of Brazil confirm reasonable to good rains for the main coffee districts in South East Brazil, which are assisting in the development of both the new conilon robusta and arabica coffee crops, with follow rains forecast to come with a new weather front next week and with the prospects for increasing ground water retention levels for the farms.   This news dampening speculative spirits within the coffee markets, as it underpins the many forecasts for the prospects of significantly increased conilon robusta and arabica coffee crops for this year. 

In the meantime the U.S. Governments National Weather Services Climate Prediction Centre have forecast that it is likely that the waning modest La Niña phenomenon within the Pacific Ocean is likely to be over by the coming month, which would indicate no short to medium term threatening weather for the Pacific rim coffee producing countries and as these relatively frequent La Niña and El Niño phenomenon’s within the Pacific Ocean do have a broader influence, limited weather threat for most global producers.   Adding along with the forecasts for rising coffee supply for the second half of the year, to the prevailing complacency on the part of the consumer market industries. 

Reuters report that traders in Ho Chi Minh City have estimated that following the impressive coffee exports of 3,345,750 bags in January, that they foresee that the country’s exports of mostly robusta coffee for the month of February shall most likely be more modest 2 million to 2.17 million bags.   This forecast more than likely to be proved a reality, in terms of the pending interruption of the week-long Tet holiday and this, within what is already a short month. 

Next week in terms of physical trade is likely to be a relatively quiet week, with the world’s two largest coffee producers who account for approximately 52% of global coffee production, taking holidays.   Starting with the Brazilians off the field of play from Monday through to Wednesday to celebrate the annual Carnival, while the Vietnamese shall be off the field of play from Thursday next week for the start of the Tet New Year celebrations to bring in the Year of the Dog, to only return to the market on Wednesday 21st. February.   

The May 2018 to May 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 44.70 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 4,745 bags yesterday; to register these stocks at 1,919,136 bags.  There was meanwhile a larger in number 10,510 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 23,345 bags.  

The commodity markets were mixed in trade yesterday, with the overall macro commodity index taking a softer track for the day.  The Natural Gas, Cocoa, London robusta Coffee, Cotton, Orange Juice, Corn, Soybean, Gold and Silver markets had a day of buoyancy, while the Oil, Sugar, New York arabica Coffee, Copper and Wheat markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.14% lower; to register this index at 420.86.   The day starts with the U.S. Dollar steady and trading at 1.394 to Sterling, at 1.225 to the Euro and the dollar is buying 3.286 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 63.95 per barrel. 

The London market started the day yesterday on a steady note, while the New York market started the day south of par and soon joined by the London market to see both markets within modest negative territory in early afternoon trade.   As the afternoon progressed the markets rallied into positive territory, but while the London market maintained its positive stance for most of the day’s trade, the New York market slipped back south and towards a soft close for the day. 

The London market ended the day on a positive note and with 58.3% of the earlier gains of the day intact, while the New York market ended the day on a negative note and with 36.7% of the earlier losses of the day intact.  This mixed close follows somewhat erratic and relatively good volume trade for both markets and does not really provide much in the way of direction, to make one think that there shall be some degree of caution coming into play, to set the markets for a hesitant steady start for early trade today, against the prices set yesterday, as follows: 

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

MAR   1793 + 7                                              MAR   122.85 – 0.45

MAY   1768 + 7                                              MAY   124.90 – 0.55

JUL    1791 + 4                                               JUL    127.15 – 0.55 

SEP    1790 + 1                                              SEP    129.45 – 0.60

NOV   1790 + 1                                              DEC    132.95 – 0.60

JAN    1793 + 1                                              MAR   136.25 – 0.55

MAR   1804 unch                                           MAY   138.25 – 0.55

MAY   1818 + 1                                                JUL   140.00 – 0.60

JUL    1847 unch                                            SEP   141.65 – 0.60

SEP    1850 unch                                            DEC   144.25 – 0.65