Coffee Market Report April 25 2018

The coffee markets remain devoid of striking fundamental news for the present, with sentiment continuing to be driven by the negative perception of surplus global coffee supply for the second half of this year and into the coming year.  But with the New York arabica coffee market trading at the bottom end of the price range of thirty-five years ago and with the inflation of farm capital equipment, inputs and labour costs that have since occurred, there is no doubt that arabica coffee farmers are presently in a severe predicament.  

Global coffee consumption is though seen to be rising by more than 3 million bags per annum, which makes the prospects for a 5 million bags surplus coffee supply for the coming October 2018 to September 2019 coffee year relatively modest and especially so, if one is to anticipate that Brazil might be due for a biennially bearing lower crop for 2019.  While with the prevailing low arabica coffee prices also likely to have reduced farm inputs within the important fine washed arabica coffee producer bloc of Mexico and Central America, there is likely to be an approximate 2 million bags dip in production for the regions new crop. 

This makes one speculate that sentiment might start to turn during the second half of the year, to see short covering buying coming into play for the volatile New York market and some degree of price recovery due for this market later in the year.   But perhaps limited in its upside potential, by producer price fixation hedge selling of new crop coffees. 

The arbitrage between the New York arabica coffee market and the London robusta coffee market has broadened over the past few days but remains in terms of value and discount percentage relatively modest and one might speculate, that it is not a discount that one would expect to inspire consumer market industries to look to larger percentages of robusta coffees within their price sensitive coffee blends.  

The July 2018 to July 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 39.62 usc/Lb., while this equates to 32.89% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 8,160 bags yesterday; to register these stocks at 1,982,340 bags.  There were meanwhile a smaller in number 3,908 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 48,684 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 22,333 bags or 1.54% over the week of trade leading up to Monday 23rd. April, to see these stocks registered at 1,298,333 bags, on the day. 

The commodity markets were mixed in trade yesterday and with the U.S. dollar easing a little, to see the overall macro commodity index taking a modestly buoyant track for the day.  The Natural Gas, Cocoa, Coffee, Copper, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets had a day of buoyancy, while the Oil, Sugar and Cotton markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.28% higher; to see this index registered at 429.74.  The day starts with the U.S. Dollar showing a degree of modest buoyancy and trading at 1.396 to Sterling, at 1.221 to the Euro and with the dollar buying 3.473 Brazilian Real, while North Sea Oil is steady and is selling at US$ 74.65 per barrel. 

The London and New York markets started the day yesterday with a degree of buoyancy but with both markets soon slipping marginally below par and with the markets taking a modestly negative sideways track, into the early afternoon trade.  As the afternoon progressed both markets bounced back from their lows and with buy stops coming into plat t accentuate the gains, to make an overall positive recovery and to set both markets on a positive sideways track for the rest of the day’s trade. 

The London market ended the day on a positive note and with 72.2% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 81.1% of the earlier gains of the day intact.  This close is likely to inspire some degree of hesitant confidence but with the weight of producer price fixation selling pressure still hanging over the market and the Brazil Real having weakened further, one might expect to see little better than 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. 

MAY   1742 + 6                                               MAY   118.50 + 1.50

JUL    1782 + 13                                              JUL    120.45 + 1.50 

SEP    1759 + 11                                             SEP    122.50 + 1.50

NOV   1760 + 12                                             DEC    126.00 + 1.50

JAN    1762 + 12                                             MAR   129.50 + 1.50

MAR   1773 + 13                                             MAY   131.75 + 1.45

MAY   1785 + 13                                              JUL    133.90 + 1.40

JUL    1798 + 13                                              SEP    135.75 + 1.35

SEP    1810 + 13                                              DEC   138.45 + 1.25

NOV   1827 + 13                                              MAR   141.15 + 1.15