Coffee Market Report March 15 2018

The latest report from the respected Rabobank and based on their lowering of their new crop forecast for Brazil this year, have reduced their forecast for global coffee supply for the forthcoming October 2018 to September 2019 coffee year to more modest 3.2 million bags.   This they say shall follow a 2.6 million bags deficit coffee supply, for the present October 2017 to September 2018 coffee year. 

This report while possibly seen to be near to neutral for coffee market sentiment is though somewhat conservative in comparison to many other forecasts within the market, with the speculative sectors within the terminal markets continuing to foresee more than sufficient coffee supply for the medium to longer term.   As is reflected by their short selling activity and the prevailing soft nature of both the New York and London markets, which continue to take a soft sideways track.   

The new Indian coffee crop is coming to the market but reports are that there is internal market price resistance, which is resulting in a lack of selling aggression on the part of Indian coffee exporters.  There are in the meantime reports from Indian coffee farmers that their new crop harvest has been below expectations and this is the reason for the slower internal market sales, but it is difficult to adjudge if this is truly the reason and is it not more so a reaction to the soft prices on offer, which is slowing sales. 

One might once again speculate that should there be no recovery for the reference prices of the coffee terminal markets by the second half of the year that for the same reasons and despite Brazil having a significantly larger new crop to sell, that there shall be price resistance on the part of many of the farmers.   Therefore, to dull the internal market selling activity, as farmers strive to force the short-sold exporters to pay up to cover their forward contract commitments.   A factor that might well result in a lack of selling aggression and some degree of firming up of the asking export differentials for new business out of Brazil, during the second half of the year.  

Should this prove to be the case, it would both assist the Brazilian farmers to rebuild their presently much depleted coffee stocks for the probability of a biennially bearing more modest 2019 coffee crop, while in terms of its influence upon the terminal markets the combination of the smaller 2019 crop and a related view of tighter global coffee supply to come, might contribute to some degree speculative short covering and a resulting late in the year buoyancy for the New York market.   With the London market following suit and reacting similarly, but perhaps in a more modest manner. 

The May 2018 to May 2018 contracts arbitrage between the London and New York markets remained unchanged yesterday, to register this at 41.58 usc/Lb., while this equates to 34.35% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 5,419 bags yesterday; to register these stocks at 1,924,306 bags.  There was meanwhile a larger in number 6,529 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 29,987 bags. 

The commodity markets were mixed in trade yesterday, to see the overall macro commodity index taking mostly a sideways track for the day.   The Oil, Sugar, Cocoa, Copper, Orange Juice and Wheat markets had a day of buoyancy, while the Natural Gas, Coffee, Cotton, Corn, 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 0.02% higher; to see this index registered at 430.29.  The day starts with the U.S. Dollar near to steady and trading at 1.397 to Sterling, at 1.237 to the Euro and with the dollar buying 3.260 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 63.90 per barrel. 

The London and New York markets started the day yesterday on the positive side of par and with the London market remaining very much on par and the New York market to the positive side of par, into the early afternoon trade.   As the afternoon progressed both markets started to come under pressure and despite a brief recovery for the London market, the markets took mostly a negative track for the rest of the day’s trade. 

The London market ended the day on a very negative note and with 91.7% of the earlier losses of the day intact, while the New York market ended the day on a negative note, with 55.6% of the earlier losses of the day intact.   This close does very little to inspire, but one might think that once again there shall be a cautious and hesitant steady start for the markets in early trade today, against the prices set yesterday, as follows: 

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

MAR   1804 – 11                                              MAR   119.95 – 0.50

MAY   1752 – 11                                              MAY    121.05 – 0.50

JUL    1778 – 8                                                 JUL    123.20 – 0.60 

SEP    1779 – 8                                                SEP    125.35 – 0.60

NOV   1781 – 8                                                DEC    128.70 – 0.60

JAN    1784 – 8                                                MAR   132.20 – 0.60

MAR   1793 – 8                                                 MAY   134.50 – 0.55

MAY   1806 – 7                                                 JUL    136.50 – 0.50

JUL    1821 – 7                                                 SEP    138.40 – 0.30

SEP    1838 – 7                                                 DEC   141.00 – 0.25