Coffee Market Report April 20 2018

Following good early in the month rains in Brazil this has been mostly for this week, but the forecast is for more rains for many of the main coffee districts to start to impact during the second half of next week and therefore, it is overall a normal April rain season for the coffee farmers.  Thus, with good ground water retention levels within the country and the new crop coffee cherries filling out, the forecast for a bumper new Brazil coffee crop continues to fuel negative sentiment for the speculative sector of the short sold and relatively soft coffee markets.  

The Ethiopian Coffee and Tea Development and Marketing Authority have reported that the countries coffee exports for the first eight months of their July 2017 to June 2018 coffee year were 409,724 bags or 21.79% higher than the same period in the previous 2016/2017 financial year, at a total of 2,290,288 bags.  However, with the negative influences of the soft international coffee market prices over the recent months, the income from these exports is only 47.57 million U.S. Dollars or 10.95% higher than the same period in the previous financial year, at a total of 481.86 million U.S. Dollars. 

This dip in income in terms of unit prices for coffee exports in Ethiopia, well illustrates the problems that coffee producers globally are encountering, in terms to seeking to make profit out of new crop coffee sales.   A problem that continues and is causing some degree of internal market price resistance within many coffee producing countries, but with many farmers unable to raise finance to carry stocks their ability stand firm against the negative price dictates of the coffee terminal markets is somewhat limited.   Albeit that this factor is contributing to firmer asking export differentials from many of the more in demand coffee qualities, which are favoured within the main coffee consumer markets. 

The July 2018 to July 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 36.10 usc/Lb., while this equates to 31.05% 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 6,978 bags yesterday; to register these stocks at 1,972,192 bags.  There were meanwhile a larger in number 7,832 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 72,059 bags. 

The commodity markets were mostly on the backfoot yesterday, but with the influential Oil markets maintaining buoyancy, the overall macro commodity index took only a modestly softer track for the day.  The Oil and Cocoa markets had a day of buoyancy and the Sugar markets were steady for the day, while the Natural Gas, Coffee, Cotton, Copper, Orange Juice, Wheat, 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 0.48% lower; to see this index registered at 431.41.  The day starts with the U.S. Dollar steady and trading at 1.407 to Sterling, at 1.234 to the Euro and with the dollar buying 3.384 Brazilian Real, while North Sea Oil is steady and is selling at US$ 73.80 per barrel. 

The London market started the day yesterday trading modestly south of par, while the New York market started the day trading with modest buoyancy and with the London market soon coming under additional pressure from origin price fixation selling and followed by some negative pressure coming into play for the New York market, to see the London market taking a softer track and the New York market hesitantly trading around par, into the early afternoon trade.  As the afternoon progressed both markets started to attract additional selling and certainly not being assisted by the soft nature of the overall macro commodity index and to slide deeper into negative territory.  The markets did however manage to bounce back from the lows and head towards a what ended off, as soft end to the day’s trade. 

The London market ended the day on a modestly negative note and with 29% of the earlier losses of the day intact, while the New York market ended the day on a negative note and with 60.3% of the earlier losses of the day intact.  This close is unlikely to inspire any confidence but with perhaps the ability of the markets to have been able to bounce back from the lows, might assist towards a hesitantly steady start for early trade today, against the prices set yesterday, as follows: 

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

MAY   1730 – 5                                                MAY   114.25 – 0.65

JUL    1767 – 5                                                JUL    116.25 – 0.90 

SEP    1746 – 6                                               SEP    118.40 – 0.90

NOV   1744 – 8                                               DEC    121.90 – 0.90

JAN    1746 – 9                                               MAR   125.45 – 0.90

MAR   1757 – 10                                             MAY   127.80 – 0.90

MAY   1768 – 10                                              JUL    130.05 – 0.80

JUL    1781 – 10                                              SEP    132.00 – 0.75

SEP    1792 – 12                                              DEC   134.85 – 0.65

NOV   1805 – 4                                                MAR   137.65 – 0.60