Coffee Market Report February 14 2018

The coffee markets remain devoid of striking fundamental news for the present, with the speculative and fund sectors of the volatile New York market holding significantly sold short on the perception of increased arabica coffee supply due for the second half of the year, with the prospects for a larger new Brazil crop.   While the physical coffee trade remains lacklustre in nature, as consumer market industries continue to take advantage of good volumes of Mexican and Central American arabica coffees and Vietnam robusta coffees, along with the carry over good volumes of mainstream consumer market coffee stocks. 

These latter consumer market coffee stocks have been declining over the past few months and should by now be falling back to safe rather than surplus levels, which should soon see more aggressive buying coming to the fore, for the producers.   This one would think, shall bring more life to the physical coffee trade, which will be beneficial for the many price resistant producers, who have been reluctant to use the prevailing soft prices offered by the terminal markets as an alternative market. 

The big question is which direction shall the presently flat coffee terminal markets go in the coming weeks as with the New York market presently well sold the downside potential would seem to be limited, which might be encouraging for some to look to buy in and profit.   A factor that would be positive for the charts within the New York market and could trigger something of a rally, but with producer price fixation selling hanging over the market, likely to limit any short-term recovery within both markets. 

The May 2018 to May 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 44.40 usc/Lb., while this equates to 35.51% 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 4,365 bags yesterday; to register these stocks at 1,913,312 bags.  There was meanwhile a larger in number 6,660 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 16,810 bags. 

The Certified Robusta coffee stocks held against the London Exchange were seen to decrease by 116,167 bags or 6.86% over the week of trade leading up to Monday 12th. February, to see these stocks registered at 1,576,167 bags, on the day.  

The commodity markets were mixed yesterday but with many markets on the upside, to see the overall macro commodity index taking a positive track for the day.  The Oil, Natural Gas, Cocoa, Coffee, Copper, Corn, Soybean and Gold markets had a day of buoyancy, while the Sugar, Cotton, Orange Juice, Wheat and Silver markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.25% higher; to register this index at 420.03.   The day starts with the U.S. Dollar is steady and trading at 1.390 to Sterling, at 1.238 to the Euro and the dollar is buying 3.295 Brazilian Real, while North Sea Oil is steady and is selling at US$ 62.50 per barrel. 

The London and New York markets started trading around and either side of par yesterday, to see both markets taking an erratic sideways track close to par into the early afternoon trade.    As the afternoon progressed the New York market started to dip back into negative territory, while the London market remained close to par and with the New York market bouncing back from the lows in later trade, both markets took a positive track for late in the day trade. 

The London market ended the day on a positive note and with 75% of the earlier gains of the day intact, while the New York market ended the day on an even more positive note and with 86.1% of the earlier gains of the day intact.  This close and with the ability of both markets being able to show some buoyancy for late trade might be constructive for confidence and one might expect to see a follow through steady start for early trade today, against the prices set yesterday, as follows: 

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

MAR   1806 + 17                                             MAR   122.75 + 1.35

MAY   1778 + 9                                                MAY   125.05 + 1.55

JUL    1801 + 8                                                JUL    127.15 + 1.50 

SEP    1800 + 8                                                SEP    129.40 + 1.50

NOV   1801 + 7                                                DEC    132.90 + 1.50

JAN    1806 + 7                                                MAR   136.20 + 1.45

MAR   1817 + 7                                                MAY   138.20 + 1.45

MAY   1831 + 7                                                 JUL   139.95 + 1.45

JUL    1860 + 7                                                 SEP   141.50 + 1.45

SEP    1863 + 7                                                 DEC   143.95 + 1.45