Coffee Market Report May 24 2018

The respected U.S. Department of Agriculture Global Agricultural Network USDA have reported that their previous forecast for Uganda to have a coffee crop of 4,350,000 bags for the present October 2017 to September 2018 remains unchanged, while the forecast that coffee production for the forthcoming October 2018 to September 2019 coffee year shall increase by 450,000 bags or 10.34%, to total 4.8 million bags.  This forthcoming crop they foresee, to be made up from 4 million bags of robusta coffees and 800,000 bags of arabica coffees.   

The same report foresees little change to the Ugandan domestic coffee demand, which they have pegged at 250,000 bags.  Therefore, anticipating that most of the countries coffee production shall be available for export, with the European market being the main market for Ugandan coffees.   Italy dominating this demand and accounting for 26% of Ugandan coffee exports and followed by Germany with a 19% share and Belgium with an 11% share, albeit that much of this coffee would be trade stocks, which finally flow into the European market in general. 

The Brazil truckers have vowed yesterday, to continue with their protests and to continue to bloc important internal transit routes and ports, with the high-volume ports of Santos and Paranaguá being particularly affected by disruptive blockades.   These protests having gained support from the University of Sao Paulo’s College of Agriculture, who have commented that high taxation on diesel is negatively affecting profitability for farmers, in terms of the high costs to move their produce to the markets and export costs. 

Warming weather in Brazil following the recent comments of the near freezing cold front that occurred in Brazil had some effect upon sentiment in the coffee markets yesterday, with the speculative bears once more coming to the fore for both markets.   Albeit that there has also been speculation that with the Pacific Ocean neutral and neither an El Niño or La Niña in play at present, that it might be conducive to more than normal cold fronts for South East Brazil over the mid-May to mid-August winter season.   A factor that is likely to bring with it much volatility for the coffee markets, over the next couple of months. 

The July 2018 to July 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 39.93 usc/Lb., while this equates to 33.46% 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 4,317 bags yesterday; to register these stocks at 2,010,961 bags.  There were meanwhile 574 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 48,342 bags. 

The commodity markets were mixed in trade yesterday and with renewed muscle for the U.S. dollar having a negative effect for many markets, with the overall macro commodity index taking very much a sideways track for the day.  The Natural Gas, Sugar, Cocoa, Orange Juice, Wheat, Corn and Soybean markets ended the day on a positive note, while the Oil, Coffee, Cotton, Copper, Gold and Silver markets ended the day on a softer note.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.26% higher; to see this index registered at 440.43.  The day starts with the U.S. Dollar tending marginally softer and trading at 1.337 to Sterling, at 1.170 to the Euro and with the dollar buying 3.628 Brazilian Real, while North Sea Oil is steady and is selling at US$ 79.20 per barrel. 

The London and New York markets started the day yesterday on a softer note and with both markets maintaining this soft stance, into the early afternoon trade.   As the afternoon progressed both markets started to come under increased selling pressure and with sell stops being triggered, to accentuate the losses.   The New York market did however manage to bounce back from a nearby low, but with the London market floundering and continuing on a mostly downside track, to see the markets heading towards a rather dismal end to the day.  

The London market ended the day on a very negative note and with 90.7% of the earlier losses of the day intact, while the New York market ended the day on a negative note 65.2% of the earlier losses of the day intact.   This close tends to paint a negative picture for the charts and does little to inspire confidence, which is likely to inspire a cautious and possibly little better than a steady start for early trade today, against the prices set yesterday, as follows: 

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

MAY   1726 – 34 

JUL    1751 – 39                                              JUL    119.35 – 1.50 

SEP    1741 – 32                                             SEP    121.65 – 1.50

NOV   1746 – 31                                             DEC    125.20 – 1.50

JAN    1748 – 31                                             MAR   128.65 – 1.50

MAR   1756 – 30                                             MAY   130.90 – 1.50

MAY   1761 – 27                                              JUL    132.95 – 1.50

JUL    1760 – 24                                              SEP    134.80 – 1.50

SEP    1770 – 18                                              DEC   137.45 – 1.50

NOV   1781 – 18                                              MAR   140.05 – 1.55