Coffee Market Report June 01 2018

In general terms business and activity has been slow internally in Brazil with the focus and preoccupation on the events surrounding the trucker strike all week.  Physical movement of coffee has been limited and while there are indications that the strike is over and that trade is returning to normal, there are bound to be shipment delays and a catch up on backlog in the main ports affected.  There is meanwhile sufficient coffee supply in the pipeline albeit that there could be short term replacement costs, however many consumer market industry players are well covered for their nearby coffee requirements.  These couple of months between current crop year exports and the new harvest and coffee year which starts in July each year, are traditionally lower export months for Brazil.  Thus, while the disruption in export flow are likely to result in lower export registrations for May and perhaps even June, exports from Brazil can be anticipated to register monthly increases in volume of shipments to consumer markets once the backlog is cleared and the new coffee crop coffees begin to flow, through July and August. 

The news that the Brazilian oil workers have halted refineries and rigs on Wednesday for a seventy-two-hour strike, have added to the economic reprimand that is targeted toward the current Brazil government and Petrobras the state led largest Latin American oil producer.  The national holiday yesterday has meanwhile added to the muted business environment with limited activity expected to close off the tumultuous week. 

The July 2018 to July 2018 contracts arbitrage between the London and New York markets widened yesterday, to register this at 44.23 usc/Lb., while this equates to 35.76% 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 3,428 bags yesterday; to register these stocks at 2,019,146 bags.  There was a further increase by 1,021 bags to the number of bags pending grading for this exchange; to register these pending grading stocks at 48,652 bags.

It was a mixed day for the commodity markets yesterday. The seemingly renewed speculative investor confidence in the political arena in Italy dampened through the day, with later reports out of the U.S.A. for an intention to levy additional trade tariffs on imports of aluminum and steel, which were mostly negatively received by the markets.  It was a softer day for Oil, Silver, Soybean, Cocoa and a flat day for Gold, a positive day for Coffee, Corn, Cotton, Sugar, Wheat, Platinum and Palladium.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets settled 0.067% lower; to see this index registered at 438.63.  The day starts with the US Dollar steady and trading at 1.326 to Sterling, at 1.167 to the Euro, and buying 3.722 Brazilian Real, while North Sea Oil is steady, selling at US$ 75.45 per barrel.

The coffee markets opened the day on a mildly positive note, with Brazil observing Corpus Christi holiday and limited producer selling activity on the markets yesterday, both markets posted an incrementally higher track in the morning session.  The mid-morning session in both markets settled within a narrow range above par where levels held steady until the afternoon where a resurgence of buyer activity along with a softer US Dollar met with limited sellers and triggered stops along the way, to gap higher as the afternoon progressed.  The upward momentum lost traction in London as the day drew to a close.  This while robusta exports are gaining momentum from the new crop out of Indonesia and Vietnam maintains selective selling activity at the top of the market, London settled within the middle of the trading range of the day.  New York managed to hold on to much of the gains of the day, to set the close in New York at the top of the days’ trading range.  The markets set the close yesterday, on a buoyant note as follows:

London Robusta US$/MT        New York Arabica Usc/Lb.

JULY   1,752 + 20                      JULY 123.70 + 3.40
SEPT  1,744 + 21                       SEPT 125.95 + 3.45
NOV    1,748 + 19                       DEC 129.45 + 3.40
JAN     1,753 + 20                      MAR 132.90 + 3.45
MAR    1,764 + 21                      MAY 135.15 + 3.50
MAY     1,774 + 22                      JULY 137.10 + 3.50
JULY    1,784 + 23                     SEPT 138.90 + 3.45
SEPT   1,798 + 25                      DEC 141.40 + 3.40
NOV    1,812 + 27                       MAR 144.00 + 3.45