Coffee Market Report March 29 2018

The General Statistics Office in Vietnam and with export registrations for the month of March in hand, have estimated that the countries coffee exports for the month shall be approximately 3 million bags.   With this number in hand they have further estimated that the countries coffee exports for the first three months of this year shall be 12.7% higher than the same period last year, at a total of approximately 8.5 million bags. 

However, despite the rising volumes of coffee exports and with the soft reference prices of the international coffee markets against which these exports are priced, the General Statistics Office in Vietnam have estimated that these exports for the first quarter of this year shall bring in 3.7% less value than the same period last year, at approximately 989 million U.S. dollars.   This decline in value and despite the significant rise in volume, well illustrates the general problem for global coffee producers that comes with the speculative negative pressure that is driving the coffee terminal markets ever lower. 

The Brazilian Coffee Exporters Association Cecafé have come to the fore with a forecast that following the delivery of a significantly larger new coffee crop this year, that the country is likely to export approximately 35 million bags of coffee during the next October 2018 to September 2019 coffee year.  This over and above the estimated domestic consumption of 22 million bags, which they forecast for the next coffee year.  

The Cecafé forecast that indicates a coffee delivery to the combination of the consumer markets and domestic markets for the coming October 2018 to September 2019 coffee year of 57 million bags and despite the potential for minimal carryover stocks, further underpins the many forecasts that are now in play, for a new crop of more than 60 million bags. 

One might speculate that there is perhaps some reality to the significant rise in potential coffee exports for the coming coffee year, as with the potential for a surplus new and relatively low cost of production conilon robusta crop soon to start, it is likely that while arabica coffee farmers shall not be dumping coffee and shall rather rebuild and bank stocks, that the conilon farmers shall be aggressive sellers. 

The Kenya government that has seen the countries coffee production decline from a 1987/1988 peak of 2.15 million bags per annum to the present production approximately 800,000 bags per annum is actively trying to find ways to inspire small scale farmers to grow coffee, with the state Coffee Directorate coming to the fore with subsidies for fertilizer subsides and debt relief programs for small scale coffee farmers.   But despite these support programs they admit that they are struggling to convince the rural youth to not migrate to the more exciting lifestyle of urban employment and culture, which is a major hinderance to the recovery of the country’s coffee industry.   This despite the relatively high prices that the consumer market buyers continue to pay, for main grade Kenya coffees. 

The May 2018 to May 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 39.32 usc/Lb., while this equates to 33.39% 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 4,699 bags yesterday; to register these stocks at 1,947,935 bags.  There were meanwhile a smaller in number 421 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 25,867 bags. 

The commodity markets encountered some renewed muscle for the U.S. dollar yesterday, with impacted negatively upon most markets, to see the overall macro commodity index heading south for the day.  The Coca, Orange Juice and Soybean market nevertheless had a day of buoyancy, while the Oil, Natural Gas, Sugar, Coffee, Cotton, Copper, Wheat, 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 0.3% lower; to see this index registered at 422.19.  The day starts with the U.S. Dollar showing a degree of buoyancy and trading at 1.408 to Sterling, at 1.232 to the Euro and with the dollar buying 3.321 Brazilian Real, while North Sea Oil is steady and is selling at US$ 68.05 per barrel. 

The London and New York markets started the day yesterday marginally south of par and with the New York market soon coming under pressure, to move settle back into negative territory, to see the London market remaining with a degree of buoyancy and the New York market taking a softer track into the early afternoon trade.   As the afternoon progressed the London market initially held its positive value and contrary to the continued softening of the New York market, but came off the boil in later trade and moved back into modest negative territory and while the New York market continued its softer track. 

The London market ended the day on a negative note and 54.5% of the earlier losses of the day intact, while the New York market ended the day on a more negative note and with 75% of the earlier losses of the day intact.   This close does little to inspire, but with both markets closed for the Easter holiday tomorrow and with month end book squaring activity in play, one might think that the markets are due for an erratic but steady start for early trade today against the prices set yesterday, as follows:  

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

MAR   1777 – 6

MAY   1729 – 6                                                MAY    117.75 – 1.20

JUL    1751 – 6                                                 JUL    119.80 – 1.20 

SEP    1753 – 4                                                SEP    122.00 – 1.20

NOV   1757 – 4                                                DEC    125.45 – 1.15

JAN    1761 – 4                                                MAR   128.95 – 1.15

MAR   1772 – 5                                                MAY   131.30 – 1.15

MAY   1784 – 6                                                 JUL    133.40 – 1.15

JUL    1798 – 6                                                 SEP    135.25 – 1.15

SEP    1811 – 6                                                 DEC   138.00 – 1.10