Coffee Market Report March 21 2018

The Brazil real continues to soften against the U.S. dollar, which is a factor that is seen to be threatening for the coffee markets, as it indicates the probability of more active selling activity on the part of the farmers and with the related price fixation hedge selling on the part of the countries mills and exporters.   One might however suggest that while the international speculative trade might see this to be a bearish factor for the coffee markets, that there actually is not that much in the way of stocks and that the weaker Real might not actually bring much in the way of actual selling activity to the market in terms of short term business. 

There might however with many of Brazils exporters short sold for the new crop arabica coffees and looking to gain some cover for these commitments, be some volumes of internal market forward selling of the new crop, which may prove to be negative for the New York market.   But the question might be with the New York market presently trading in a narrow soft price range, if even some relief from the weaker Brazil Real shall be sufficient to attract farmers to price fix large volumes of their coming crop. 

One would speculate that this might not be the case and that many farmers would rather wait and take their chances closer to and or while harvesting and thereon to sell large volumes of new crop arabica coffees, which might well negate much of the reason for the usual bearish sentiment that comes with a weaker Brazil Real.   

The Brazil currency aside the markets nevertheless continue to suffer from the bearish sentiment that comes with the prospects for a significantly larger and surplus Brazil crop, with both markets remaining within the prevailing soft price trading range.   Albeit with the speculative and fund sectors of the New York market already significantly net sold into the market, that one might foresee this to be a factor that should limit the downside potential of the New York market.   But there are large volumes of new crop arabica and robusta coffees still to be price fixed and hanging over the markets, which one might think shall limit the possibility of any market recovery for the short term, for both markets. 

The May 2018 to May 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 39.39 usc/Lb., while this equates to 33.11% 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 4,485 bags yesterday; to register these stocks at 1,933,937 bags.  There were meanwhile larger in number 5,005 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 24,412 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 1,667 bags or 0.12% over the week of trade leading up to Monday 19th. March, to see these stocks registered at 1,368,167 bags, on the day. 

The commodity markets were mixed in trade yesterday and with the influential Oil markets coming to the fore with some buoyancy, to assist the overall macro commodity index to show some modest buoyancy for the day.  The Oil, Natural Gas, Cocoa, Cotton, Wheat and Soybean markets had a day of buoyancy, while the Sugar, Coffee, Copper, Orange Juice, Corn, 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 0.08% higher; to see this index registered at 422.99.  The day starts with the U.S. Dollar steady and trading at 1.401 to Sterling, at 1.226 to the Euro and with the dollar buying 3.312 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 66.35 per barrel. 

The London market started the day yesterday marginally south of par, while the New York market started the day with modest buoyancy, but to soon lose its way and to see both markets on a modestly softer track into the early afternoon trade.   As the afternoon progressed the London market lost some more weight and extended its losses, while the New York market maintained a mostly below par sideways stance, which was followed by a later in the day bounce back from the lows within the London market and to join the New York market modest south of par for the day. 

The London market ended the day on a negative note but having recovered 84.2% of the earlier losses of the day by the close, while the New York market ended the day on a negative note and with 57.1% of the modest losses of the day intact.   This close and with the Brazil Real softer does not inspire much in the way of confidence and one might expect to see only a near to steady start for early trade today against the prices set yesterday, as follows: 

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

MAR   1802 – 3

MAY   1754 – 3                                                MAY    118.95 – 0.40

JUL    1783 – 2                                                 JUL    121.05 – 0.40 

SEP    1784 – 2                                                SEP    123.20 – 0.40

NOV   1787 – 3                                                DEC    126.60 – 0.40

JAN    1791 – 4                                                MAR   130.05 – 0.35

MAR   1803 – 4                                                MAY   132.40 – 0.35

MAY   1816 – 4                                                 JUL    134.50 – 0.30

JUL    1828 – 5                                                 SEP    136.35 – 0.25

SEP    1839 – 5                                                 DEC   139.05 – 0.20