Coffee Market Report May 02 2018

With the month of April over the Trade Ministry in Brazil have reported that the countries coffee exports for the month were 486,207 bags or 25.21% lower than the same month last year, at a total of 1,442,682 bags.  This relatively sharp dip in exports and with past crop stocks dwindling is most likely also related to the internal market price resistance to the low-price dictates of the soft New York market, which has inflated the exporters asking differentials for prompt shipment arabica coffees.  

Many consumer market industry players are however already relatively well covered for their nearby coffee requirements and with still relatively high volumes of arabica coffee stocks within the mainstream consumer markets, many consumer roasters can wait for three more months and to take advantage of the forecasted bumper coffee crop that is due from Brazil.   A factor that is likely see Brazil continue to report relatively modest coffee export volumes for this and the follow on two months, until the new arabica coffee crop coffees start to surge in volume in August. 

The International Coffee Organisation have reported that the global coffee exports for the month of March were 0.9% lower than the same month last year, to total 10.81 million bags.   This they report has contributed to the cumulative global coffee exports for the first six months of the present October 2017 to September 2018 coffee year to be 0.6% lower than the same period in the previous coffee year, at a total of 59.6 million bags. 

What is noticeable in this report though is that the global arabica coffee exports for the month of march were 5.6% lower than the same month last year and contributed to only 58.56% of the total coffee exports for the month, whereas the robusta coffee exports for the month were 6.7% higher than the same month last year and contributed to 41.44% of the global coffee exports for the month.   This factor no doubt reflecting the surging volumes of new crop robusta coffees that are flowing into the market from Vietnam, as against the slow price resistant sales of arabica coffees from Brazil.  

This is though with the pending bumper new Brazil crop and including significant volumes of new crop arabica coffees a short-term factor and one can expect that by August this year, that the global coffee export numbers shall start to increase in number.   While in the meantime and with still relatively good levels of unsold consumer market stocks being available, that these stocks shall slowly but steadily decline over the coming couple of months. 

The July 2018 to July 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 42.47 usc/Lb., while this equates to 34.03% 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 1,094 bags yesterday; to register these stocks at 1,992,112 bags.  There were meanwhile a larger in number 1,308 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 32,356 bags. 

The Certified Robusta Coffee stocks held against the London market were seen to decrease by 15,667 bags or 1.21% over the week of trade leading up to Monday 30th. April, to see these stocks registered at 1,282,667 bags, on the day. 

The commodity markets encountered renewed muscle for the U.S. Dollar yesterday, which proved to be a negative factor within selected markets, but it was a Labour Day holiday within many countries and this took many players off the field of play for the day.   The Natural Gas, Cocoa, Coffee, Cotton, Orange Juice, Wheat, Corn and Soybean markets had a day of buoyancy, while the Oil, Sugar, Copper, 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 0.22% higher; to see this index registered at 434.26.  The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.359 to Sterling, at 1.199 to the Euro and with the dollar buying 3.507 Brazilian Real, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 74.65 per barrel. 

The London and New York markets started the day yesterday trading on a surprising negative note, which with most producers off the field of play something of a surprise.   But with perhaps some negative influence coming to the speculative sector of the markets, with the softer nature of the Brazil Real and its ability to attract increased price fixation volumes from Brazil.   Both markets entered the early afternoon trade in negative territory but as the afternoon progressed and with the North Americans entering the market, both markets started to attract support and to move back into positive territory.  This positive stance which was assisted by most producers being on holiday and not bringing price fixation selling pressure into play, was sustained for a couple of hours and then started to trigger buy stops, which accentuated the gains and set both markets for a strong close, albeit that profit taking did bring both markets back from their highs by the close. 

The London market ended the day on a positive note and with 66.3% of the earlier gains of the day intact, while the New York market ended the day on a very positive note and with 81.6% of the earlier gains of the day intact.  This close might inspire some degree of confidence, but with producers coming back from yesterday’s holiday and back onto the field of play today and bringing with them price fixation selling pressure, it might well set the market of a corrective softer start for early trade today, against the prices set yesterday, as follows: 

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

MAY   1779 + 62                                             MAY   122.60 + 1.95

JUL    1815 + 59                                              JUL    124.80 + 2.00 

SEP    1797 + 55                                             SEP    127.00 + 2.05

NOV   1795 + 53                                             DEC    130.45 + 2.10

JAN    1795 + 51                                             MAR   133.90 + 2.10

MAR   1803 + 50                                             MAY   136.15 + 2.10

MAY   1808 + 44                                              JUL    138.30 + 2.20

JUL    1821 + 44                                              SEP    140.20 + 2.30

SEP    1833 + 44                                              DEC   142.90 + 2.40

NOV   1848 + 44                                              MAR   145.55 + 2.40