Coffee Market Report March 23 2018

The Uganda Coffee Development Authority have reported that the countries coffee exports for the month of February were 7,206 bags or 1.81% lower than the same month last year, at a total of 390,677 bags.  This following a good performance in October and November last year, results in the cumulative coffee exports for the first five months of the present October 2017 to September 2018 coffee year to still be 158,926 bags or 8.62% higher than the same period in the previous coffee year, at a total of 2,003,560 bags. 

The weather reports from Brazil have confirmed good widespread rains this month for all the main coffee districts, which is sealing the positive prospects for the new coffee crop that has been widely forecast to be something of a bumper crop.    With the new conilon robusta coffee crop already starting in some districts but due to start being harvested in volume by the end of next month, while the new arabica coffee crop shall have started by June but to only really impact in volume by the end of July.   

While with the Central Bank of Brazil in reaction to the falling inflation rate having dropped the interest rate to a 32 year low of 6.5%, the Brazil Real has lost some more weight and is assisting to bring some more domestic value for coffee sales against the soft reference prices of the international market.   A factor that along with the forecasts for a larger new Brazil crop to come, is contributing towards the bearish sentiment within the speculative sector of the market. 

There are conflicting forecasts coming to the fore from Indonesia in terms of the new robusta coffee crop for this year, with some forecasts pointing to excessive rains as reason to believe in a smaller crop this year, while others are talking in terms of a larger crop for this year.   But in the meantime, with strong domestic market demand for new crop coffees the early coffees that are already coming to fore as attracting keen buying interest and in terms of domestic market prices relative to the international market, are presently making the asking Indonesian robusta coffee price differentials uncompetitive within the consumer market. 

The May 2018 to May 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 39.98 usc/Lb., while this equates to 33.6% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to remain unchanged yesterday; to register these stocks at 1,933,162 bags.  There were meanwhile 4,125 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 38,170 bags. 

The commodity markets were mixed in trade yesterday but with the with many markets on the back foot, to see the overall macro commodity index taking a softer track for the day.   The Sugar, Cocoa, New York arabica Coffee, Wheat, Corn and Gold markets had a day of buoyancy, while the Oil, Natural Gas, London robusta Coffee, Cotton, Copper, Orange Juice, Soybean and Silver markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.21% lower; to see this index registered at 424.05.  The day starts with the U.S. Dollar steady and trading at 1.411 to Sterling, at 1.233 to the Euro and with the dollar buying 3.315 Brazilian Real, while North Sea Oil is showing some degree of buoyancy and is selling at US$ 69.40 per barrel. 

The London market started the day yesterday on a marginally softer note, while the New York market started the day with modest buoyancy, but with the London market coming under pressure and slipping further into negative territory, while the New York market took a positive stance into the early afternoon trade.   As the afternoon progressed the New York market slipped back to par and started to trade either side of par, while the London continued to maintain a softer stance towards a mixed close for the markets for the day. 

The London market ended the day on a negative note and with 52.6% of the earlier losses of the day intact, while the New York market ended the day on a modestly positive note and with 25% of the earlier gains of the day intact.    This mixed close provides little in the way of market direction but one might suspect that there shall be some degree of caution and a hesitant near slow and steady start for early trade today against the prices set yesterday, as follows: 

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

MAR   1789 – 11

MAY   1742 – 10                                              MAY    119.00 + 0.15

JUL    1770 – 11                                               JUL    121.20 + 0.20 

SEP    1772 – 9                                                SEP    123.40 + 0.15

NOV   1775 – 7                                                DEC    126.80 + 0.15

JAN    1777 – 7                                                MAR   130.25 + 0.15

MAR   1787 – 7                                                MAY   132.45 + 0.05

MAY   1800 – 7                                                 JUL    134.50 + 0.05

JUL    1812 – 7                                                 SEP    136.30 + 0.05

SEP    1823 – 7                                                 DEC   139.00 + 0.05