Coffee Market Report April 27 2018

Reuters report that the European Coffee Federation ECF have reported that the port warehouse stocks held within reporting warehouses in the ports in Belgium, Germany, France and Italy decreased by 28,250 bags or 0.26% during the month of February, to register these stocks at the end of the month at 10,691,750 bags.   These stocks do not however include the unreported stocks from the industry on site inventory stocks, the transit bulk container stocks and stocks being held within non-reporting warehouses throughout Western and Eastern Europe. 

This said and with the combination of West and East Europe consuming approximately 1.05 million bags of coffee a week, one might guess that the additional stocks that were not included in the report, might contribute to as much as 2.5 million bags to the reported stocks.   Thus, indicating that as at the end of February, the European coffee stocks might have been close to the equivalent of close to a relatively safe, twelve weeks of Western and Eastern European roasting demand.   A factor that supports the prevailing bearish sentiment, on the part of the speculative sector of the coffee markets. 

The Uganda Coffee Development Authority have reported that the countries coffee exports for the month of March were 76,570 bags or 18.68% lower than the same month last year, at a total of 333,346 bags.  This following a good performance in October and November last year, results in the cumulative coffee exports for the first six months of the present October 2017 to September 2018 coffee year to still be 83,806 bags or 3.72% higher than the same period in the previous coffee year, at a total of 2,336,996 bags. 

The dip in terms of Ugandan coffee exports is however meaningless in terms of rising global coffee supply for the short the medium term, which comes with the significantly larger Vietnam new crop and soon to be followed by the significantly larger new Brazil crop.    With the latter Brazil crop continuing to influence speculative negative sentiment and assisted to a degree, by the softer nature of the Brazil Real that indicates that despite the soft reference price of the dollar-based coffee terminal markets, that Brazilian farmers shall still be willing sellers of new crop coffees. 

One might nevertheless still speculate that Brazils farmers are experienced businessmen and that even though they shall bring in a surplus new coffee crop this year, that the countries arabica coffee farmers who presently have minimal stocks in hand, shall not look to become excessively aggressive sellers of new crop coffees.  Rather that they shall look to more controlled selling volumes and to limit discounts, while building up stocks to cater for any possible weather-related issues that might develop for what is more than likely to be a biennially bearing lower new coffee crop, for next year. 

The Ivory Coast the leading robusta coffee producer in West Africa have reported that the countries coffee exports for the first three months of this year were 38,350 bags of 27.18% lower than the same period last year, at a total of 102,733 bags.   This relatively modest export performance is perhaps more price related than any indication of problems with the new crop, which has been forecasted to fuel robusta coffee exports of in excess of 1 million bags for the year. 

The July 2018 to July 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 39.32 usc/Lb., while this equates to 32.86% 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 13,276 bags yesterday; to register these stocks at 1,991,190 bags.  There were meanwhile a smaller in number 990 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 38,814 bags. 

The commodity markets were mixed in trade yesterday, to see the overall macro commodity index retaining some modest buoyancy for the day.  The Oil, Natural Gas, Sugar, Coffee, Cotton and Orange Juice markets had a day of buoyancy, while the Cocoa, Copper, 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 0.06% higher; to see this index registered at 430.42.  The day starts with the U.S. Dollar steady and trading at 1.391 to Sterling, at 1.209 to the Euro and with the dollar buying 3.475 Brazilian Real, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 75.40 per barrel. 

The London market started the day yesterday on a positive note and with the New York market starting the day with modest buoyancy and soon adding some value, to see both markets on a positive track in early afternoon trade.   As the afternoon progressed the markets managed to maintain a mostly sideways positive stance and towards an overall positive close, for the day. 

The London market ended the day on a positive note and with 84.6% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 67.6% of the earlier gains of the day intact.  This close might inspire some degree of confidence and set the markets for a steady start for early trade today, against the prices set yesterday, as follows: 

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

MAY   1738 + 14                                             MAY   117.60 + 0.75

JUL    1771 + 11                                             JUL    119.65 + 1.15 

SEP    1752 + 11                                             SEP    121.75 + 0.80

NOV   1753 + 13                                             DEC    125.25 + 0.80

JAN    1755 + 14                                             MAR   128.80 + 0.85

MAR   1765 + 15                                             MAY   131.00 + 0.75

MAY   1777 + 17                                              JUL    133.10 + 0.70

JUL    1790 + 17                                              SEP    134.95 + 0.65

SEP    1802 + 17                                              DEC   137.60 + 0.60

NOV   1819 + 17                                              MAR   140.25 + 0.55