Coffee Market Report May 23 2018

The respected U.S. Department of Agriculture Global Agricultural Network USDA have reported that they had reduced their earlier coffee production forecast for Indonesia for the countries April 2017 to March 2018 coffee year by 2.75%, to have pegged production for the just completed national coffee year at a total of 10.9 million bags.   The report with the new April 2018 to March 2019 coffee year having started and based on favourable weather conditions off late, have forecast Indonesian coffee production to rise by 500,000 bags or 4.72%, to potentially total 11.1 million bags. 

The report bases this 4.72% increase in production in Indonesia for the April 2018 to March 2019 coffee year on a 16.7% increase in arabica coffee production, which they foresee to be 1.4 million bags.  Along with a 3.19% increase in robusta coffee production, which they foresee to be 9.7 million bags. 

But while the USDA foresee 500,000 bags increase in coffee production from Indonesia for the countries new coffee year, they also forecast that domestic coffee consumption shall increase by 340,000 bags or 9.55% over the same period and to total 3.9 million bags.  Thus, indicating that in terms of consumer market coffee supply there shall be only a marginal increase in Indonesian coffee availability for the consumer market industries. 

In the meantime with a vibrant domestic coffee market and one that is mostly price sensitive, the early in the coffee year robusta coffees attract good domestic market support and good price premiums, which make them mostly uncompetitive within the consumer markets.  But this is surpassed with the Indonesian arabica coffees, which having been branded in recent years by leading speciality coffee shop chains, have significantly inflated the value of these coffees relative to the international arabica coffee prices. 

Despite a concession by the Brazil government to lower the tax on fuel, the truckers who are presently disrupting deliveries into and out of the ports of Santos and Paranaguá, have vowed to continue their strikes today.   The truckers complain that the concession announced by the government is only a fraction of the tax on diesel fuel and their demands are for an elimination of taxes on diesel, with estimated that approximately 300,000 truck drivers were involved in the protests at the ports and on the main transit routes in 23 of Brazil’s states. 

It is early day’s still and so far, this has seemingly had little impact upon Brazil’s coffee exports, but if it is not soon solved it would have an impact on both the export activity of Brazil coffees.   While with the new and larger Brazil crop now on a close by horizon, one would imagine that there would be problems with internal transport and delivery of coffees to the export ports.  But one would imagine that the Brazil government would not allow for this to become such a dramatic issue and one way or another, there will be some form of agreement that shall allow for a return to normality. 

The July 2018 to July 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 39.66 usc/Lb., while this equates to 32.82% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were unchanged yesterday; to register these stocks at 2,015,278 bags.  There were meanwhile 6,216 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 47,768 bags. 

The Certified Robusta coffee stocks held against the London coffee exchange were seen to increase by 12,167 bags or 0.92% over the week of trade leading up to Monday 21st. May, to see these stocks registered at 1,335,667 bags, on the day. 

The commodity markets were mixed in trade yesterday, but with many markets experiencing some degree of buoyancy, to see the overall macro commodity index taking a modestly positive track for the day.  The Brent Oil, Natural Gas, Sugar, New York arabica Coffee, Copper, Orange Juice, Wheat, Corn, Gold and Silver markets ended the day on a positive note and the Soybean market was steady for the day, while the U.S. Oil, Cocoa, London Robusta Coffee and Cotton markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.46% higher; to see this index registered at 439.30.  The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.340 to Sterling, at 1.176 to the Euro and with the dollar buying 3.647 Brazilian Real, while North Sea Oil is steady and is selling at US$ 79.40 per barrel. 

The London market started the day yesterday marginally south of par, while the New York market started the day with early buoyancy and to see the markets continue this mixed stance, into the early afternoon trade.   As the afternoon progressed the New York market came under some pressure and to briefly join the London market in negative territory, but to soon recover and proceed towards a positive end to the day, while the London market remained south of par. 

The London market ended the day on a negative note but having recovered 68.7% of the earlier losses of the day by the close, while the New York market ended the day on a positive note and with 52% of the earlier modest gains of the day intact.   This positive close in New York and the ability of the London market to bounce back from the lows and along with the Brazil Real having halted its negative slide might assist towards some degree of confidence, to set the markets for 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   1760 – 23 

JUL    1790 – 5                                                JUL    120.85 + 0.65 

SEP    1773 – 4                                               SEP    123.15 + 0.70

NOV   1777 – 4                                               DEC    126.70 + 0.75

JAN    1779 – 5                                               MAR   130.15 + 0.80

MAR   1786 – 6                                               MAY   132.40 + 0.80

MAY   1788 – 7                                                JUL    134.45 + 0.80

JUL    1784 + 1                                                SEP    136.30 + 0.80

SEP    1788 + 1                                                DEC   138.95 + 0.80

NOV   1799 + 1                                                MAR   141.60 + 0.80