Coffee Market Report April 13 2018

There have been rains experienced this week within the northern and eastern conilon robusta districts of Brazil and with a new cold front coming in to bring rains to the southern arabica coffee districts for the country, which will proceed to bring rains over and most of the main coffee districts of the country in the coming week.   These rains very favourable for the development of the new Brazil crop, which is forecast to be a bumper and surplus new crop. 

Meanwhile ahead of the new crop that is due in terms of the conilon robusta coffees to start in a couple of weeks’ time and in terms of the arabica coffees by the end of the coming month, the reports indicate that internal market sales of past crop stocks are somewhat lacklustre.  This due to the combination of both declining past crop stocks and the negative influences of the soft nature of the international coffee terminal markets, which result in some degree of price resistance.   Albeit that with the Brazil Real softer and presently trading at around 3.4 to the U.S. dollar, it is assisting to bring to the fore some value to the internal market coffee prices. 

The Indonesian robusta fly crop coffee are coming to the market in steady volumes at present, with the vibrant domestic roasting industry demand assisting to buoy internal market prices and resulting in the exporters to remain largely uncompetitive within the consumer markets.   Volumes shall however start to increase with the main crop that shall start to impact by June this year, but with the domestic market demand likely to buoy prices for quite some months and to result in relatively modest Indonesian exports until well into the third quarter of the year. 

The U.S. Governments National Weather Service’s Climate Prediction Centre and post the modest La Niña phenomenon within the Pacific Ocean, have followed on from their counterparts in Australia and likewise, forecast neutral conditions to prevail for the coming months.   This likely to relate to normal weather conditions for the Pacific Rim coffee producing countries, which is likely to be conducive to good volumes of coffee production for these countries.  Further supporting the prevailing bearish sentiment within the coffee markets. 

The July 2018 to July 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 41.26 usc/Lb., while this equates to 34.38% 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 2,251 bags yesterday; to register these stocks at 1,956,756 bags.  There were meanwhile a larger in number 5,601 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 84,082 bags. 

The commodity markets were mixed and with most markets relatively flat yesterday, to see the overall macro commodity index taking a somewhat flat track for the day yesterday.  The Natural Gas, Sugar, London robusta Coffee, Orange Juice, Corn and Soybean markets had a day of buoyancy and the U.S. Oil market was steady for the day, while the Brent Oil, Cocoa, New York arabica Coffee, Cotton, Copper, Wheat, 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 0.1% lower; to see this index registered at 427.12.  The day starts with the U.S. Dollar steady and trading at 1.422 to Sterling, at 1.232 to the Euro and with the dollar buying 3.412 Brazilian Real, while North Sea Oil is steady and is selling at US$ 71.85 per barrel. 

The London and New York markets started the day yesterday trading with modest buoyancy but with both market soon drifting back into modest negative territory and remaining modestly south of par, into the early afternoon trade.  As the afternoon progressed the markets came under further pressure and moved south into deeper negative territory but with the markets managing to bounce off the lows and to see the London market move back into modest positive territory in late trade, while the New York market ended the day modestly south of par. 

The London market ended the day on modestly positive note and with 25% of the earlier gains of the day intact, while the New York market ended the day on a modestly negative note and with 31.2% of the earlier losses of the day intact.    This mixed close and with both markets either side but relatively close to par for the end of the day is likely to inspire a cautious and hesitantly steady start for early trade today, against the prices set yesterday, as follows: 

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

MAY   1711 + 9                                               MAY   117.90 – 0.25

JUL    1736 + 2                                                JUL    120.00 – 0.25 

SEP    1728 + 2                                               SEP    122.00 – 0.30

NOV   1730 + 2                                               DEC    125.30 – 0.30

JAN    1732 + 2                                               MAR   128.75 – 0.35

MAR   1741 + 2                                               MAY   131.10 – 0.35

MAY   1754 + 3                                                JUL    133.20 – 0.40

JUL    1768 + 4                                                SEP    135.05 – 0.45

SEP    1781 + 4                                                DEC   137.75 – 0.55

NOV   1786 + 4                                                MAR   140.50 – 0.55