Coffee Market Report February 15 2018

The Brazilian coffee trade house Terra Forte have come to the fore with their forecast that following what they saw to have been a 48.17 million bags coffee crop last year, that this year’s new crop shall be 10.98 million bags or 22.79% larger crop of 59.15 million bags.  In this respect they foresee that the new arabica coffee crop shall be 17.61% larger at 43.62 million bags and the new conilon robusta coffee crop shall be 40.16% larger, at a total of 15.53 million bags.    

This forecast follows so many other forecasts from both internal Brazilian coffee trade and industry players and international trade with connections within Brazil, which foresee that Brazil is due a significantly larger new crop for this year.  With what is seen to be a somewhat dramatic recovery for the countries conilon robusta coffee crop that is traditionally prominent within the countries large 21.5 million bags domestic roasting industry, expected to free more of the larger new arabica coffee crop for the export clients. 

Thus, with no weather fears out of Brazil so far and with ground water retention levels for most of the main coffee districts within the country good, the report adds fuel to the prevailing bearish sentiment within the coffee markets at present.   Albeit that with the speculative and fund sectors of the volatile New York market already almost excessively net short sold within this market, one might not expect to see much more in terms of downside movement for the market. 

Today is the eve of the Tet New Year in Vietnam and with the country taking a week long holiday to celebrate the start of the Year of the Dog, which is likely to slow trading activity within the London robusta coffee markets, while the New York arabica coffee market heading towards a long weekend that shall come with Monday’s President Day holiday and with the Brazilians returning in force to the field of play post their carnival holidays, one might expect to see this market to be quite active for today and tomorrows trade.   But perhaps Brazilian activity somewhat muted, with the recovery of the Brazil Real against the U.S. dollar, which could prove to be a modest supportive factor for the New York market. 

The May 2018 to May 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 44.27 usc/Lb., while this equates to 35.39% 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 10,191 bags yesterday; to register these stocks at 1,903,121 bags.  There was meanwhile a smaller in number 3,381 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 20,191 bags. 

The commodity markets were supported by the weaker U.S. dollar yesterday, to see the overall macro commodity index taking a positive track for the day.   The Oil, Natural Gas, Cocoa, London robusta Coffee, Copper, Orange Juice, Corn, Soybean, Gold and Silver markets had a day of buoyancy and the New York arabica Coffee market was steady for the day, while the Sugar, Cotton and Wheat markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.98% higher; to register this index at 424.13.   The day starts with the U.S. Dollar tending softer and trading at 1.401 to Sterling, at 1.246 to the Euro and the dollar is buying 3.217 Brazilian Real, while North Sea Oil is showing some early buoyancy and is selling at US$ 64.25 per barrel. 

The London and New York markets started trading with some degree of buoyancy yesterday but this was short lived for the New York market, which soon slipped back into modest negative territory and with the markets maintaining this mixed stance, into the early afternoon trade.   As the afternoon progressed the London market started to add value and the New York market that had dipped to a 2.00 usc/Lb. loss for the day, bounced off the lows and to start on an upside track towards par, but with the London market falling back to limit its gains for the day, as against the New York market managing to recover to end the day on par. 

The London market ended the day on a positive note and with 30.8% of the earlier gains of the day intact, while the New York market ended the day on a steady note and with 16.7% of the earlier modest gains of the day intact.   This close and with the ability of the New York market to recover, while producer selling is muted by the holidays in Vietnam for the London market and a weaker U.S. dollar for the New York market, are likely to be a supportive for the markets.   Thus, one might expect to see a steady start for early trade today, against the prices set yesterday, as follows: 

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

MAR   1811 + 5                                                MAR   122.80 + 0.05

MAY   1782 + 4                                                MAY   125.10 + 0.05

JUL    1806 + 5                                                JUL    127.20 + 0.05 

SEP    1805 + 5                                                SEP    129.45 + 0.05

NOV   1807 + 6                                                DEC    132.90 unch

JAN    1810 + 4                                                MAR   136.15 – 0.05

MAR   1820 + 3                                                MAY   138.15 – 0.05

MAY   1834 + 3                                                 JUL   139.90 – 0.05

JUL    1862 + 2                                                 SEP   141.50 unch

SEP    1865 + 2                                                 DEC   143.95 unch