Coffee Market Report May 11 2018

The traditionally conservative Brazilian Institute of Geography and Statistics IBGE and with the new crop cherries maturing on the trees, has increased its forecast for the new 2018 coffee crop, which they now foresee to be 55.3 million bags.   This made up from 42.2 million bags of arabica coffees and 13.1 million bags of conilon robusta coffees, while with the conservative nature of this body coming to the fore with such a high figure, it tends to hint at the reality of the many other forecasts that have come to the fore, which indicate a new crop of more than 60 million bags. 

Meanwhile it has been mostly dry and warm over the main coffee districts so far this month, which is assisting to accelerate the maturing on the new crop cherries and with harvesting having already started for many conilon robusta coffee farmers and the start of the new arabica coffee crop now only a few weeks to the fore.  But despite some assistance from a weaker Brazil Real in terms of the negative aspects of the soft nature of international coffee terminal market prices, there is apparently no forward selling aggression on the part of the farmers.  

Following on from the Australian Governments Bureau of Meteorology report, the U.S. Governments National Weather Service’s Climate Prediction Centre have agreed with the neutral conditions that prevail within the Pacific Ocean but have said that there is a near to 50% chance for a new El Niño phenomenon to start to develop during the last quarter of this year.   This is of course not yet a factor that anyone might see as a threat, as unless the El Niño is intense in nature, it can with the warmer weather that it brings to Colombia and Brazil be beneficial for coffee production.  

The July 2018 to July 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 40.49 usc/Lb., while this equates to 33.87% 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 275 bags yesterday; to register these stocks at 1,994,265 bags.  There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 68,414 bags. 

The commodity markets were mixed in trade yesterday and with the Euro gaining some ground against the U.S. Dollar, to see the overall macro commodity index taking a modestly positive track for the day.  The Natural Gas, New York arabica Coffee, Copper, Orange Juice, Soybean, Gold and Silver markets ended the day on a positive note, while the Oil, Sugar, Cocoa, London robusta Coffee, Cotton, Wheat and Corn markets ended the day on a softer note.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.54% higher; to see this index registered at 437.71.  The day starts with the U.S. Dollar steady and trading at 1.351 to Sterling, at 1.191 to the Euro and with the dollar buying 3.551 Brazilian Real, while North Sea Oil is showing some degree of buoyancy and is selling at US$ 77.85 per barrel. 

The London market started the day yesterday on a softer note, while the New York market started the day on a steady note and trading close to and either side of par, with the markets maintaining this mixed stance into the early afternoon trade.   As the afternoon progressed the New York market started to pick up support and to move into positive territory, while the London market bounced back from the lows to trade closer to par and to set the markets for a relatively steady end to the day’s trade. 

The London market ended the day on a modestly negative note and having recovered 78.9% of the earlier losses of the day, while the New York market ended the day of a positive note and with 84.2% of the earlier gains of the day intact.  This close and with both markets relatively steady for the day, might assist towards a follow through steady start for early trade today, against the prices set yesterday, as follows: 

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

MAY   1740 – 2                                               MAY   116.30 + 0.80

JUL    1743 – 4                                                JUL    119.55 + 0.80 

SEP    1736 – 6                                               SEP    121.85 + 0.75

NOV   1742 – 2                                               DEC    125.30 + 0.75

JAN    1748 + 1                                               MAR   128.85 + 0.80

MAR   1758 + 2                                               MAY   131.15 + 0.80

MAY   1770 + 7                                                JUL    133.35 + 0.80

JUL    1783 + 8                                                SEP    135.25 + 0.70

SEP    1795 + 8                                                DEC   137.95 + 0.70

NOV   1809 + 8                                                MAR   140.60 + 0.60