Coffee Market Report June 19 2018

The respected U.S. Department of Agriculture Global Agricultural Network USDA have published their latest Coffee World Markets Trade and Overview for 2018/2019, to forecast world coffee production for the coming year to potentially be 11.40 million bags higher than the previous year. The year on year increase is reasoned in part by increased production foreseen in the robusta sector with both Indonesia and Vietnam anticipated to register a respective 5% and 2% increase in production for the coming year. The greatest contribution to the overall forecast increase in production is primarily the year on year biennial production to come from Brazil for their new July 2018 to June 2019 crop that is forecast to register a cumulative increase of 9.30 million bags of combined arabica and conilon robusta production, to reach a forecast 60.20 million bags.

The prospects of an overall larger production to come from Brazil is a factor that has already had an influence upon sentiment within the coffee futures markets. This new crop harvest has begun in the robusta coffee growing regions and is soon to start within the arabica regions and is a crop that is anticipated to sufficiently contribute toward Brazil’s local consumption, as well as fuel increased shipments to consumer markets in the next couple of months and bolster internal inventory within Brazil that is generally considered to be at a low ahead of this crop and that will lead into the next biennial bearing lower crop to come in July 2019.

The USDA report has included their forecast global coffee consumption for the same period to reach a new record at 163.20 million bags.

The September 2018 to September 2018 contracts arbitrage between the London and New York markets widened yesterday, to register this at 40.89 usc/Lb., while this equates to 34.79% 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 2,705 bags yesterday; to register these stocks at 2,047,779 bags. There was meanwhile a decrease of 4,520 bags in the number of bags pending grading for this exchange; to register these pending grading stocks at 25,556 bags.

The commodity markets were mixed and mostly lower on Friday, following announcements from the largest consumer economy U.S.A., that new tariffs would be imposed on Chinese goods. Separately the leading in influence Oil markets registered a softer day on speculation of future production increases from the Middle East and Russia. With the Oil markets lower on the day and the US Dollar mildly positive, it was a softer day across the board, to include Gold, Silver, Platinum and Palladium, Sugar, Coffee, Corn, Wheat, Cotton and Copper, the few exceptions in the basket of commodities, Cocoa and Orange Juice, which bucked the overall lower macro trend, to finish on a positive note. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.177% lower, to see this index registered at 427.50. The day starts with the U.S. Dollar steady and trading at 1.326 to Sterling, at 1.159 to the Euro, with the US Dollar buying 3.73 Brazilian Real, while North Sea Oil is steady in early trade and selling at US$ 71.02 per barrel.

The coffee markets started the day marginally below par in London and on a softer track in New York. The lower trend in New York mirrored in London as the morning progressed, with both markets setting a new, lower floor for the early morning session. The Brazil Real regained a degree of value against the US Dollar ahead of the America’s opening for business and resistance at the lows inspired a marginal recovery that was still below par in New York. The afternoon session flitted around unchanged in London but with trade volumes picking up pace toward the latter end of the day, a softer close but off of the days lows and in the middle of the trading range for this market. The New York market seemed similarly rangebound at midsession with speculative selling pressure met later in the session by underlying buyer support and this market registered another hefty volume day, with a close on the day, at the upper end of the trading range for the day, to set the close in both markets on a buoyant note on Friday, as follows:

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

JULY   1,706 - 7                JULY  115.20 - 0.50
SEPT  1,690 - 11               SEPT 117.55 - 0.40
NOV    1,695 - 12              DEC   121.00 - 0.50
JAN     1,704 - 12              MAR  124.50 - 0.50
MAR    1,716 - 13              MAY  126.85 - 0.50
MAY    1,728 - 14              JULY  129.05 - 0.45
JULY   1,735 - 16              SEPT 131.00 - 0.45
SEPT 1,748 - 15               DEC  133.80 - 0.40
NOV   1,762 - 15               MAR  136.60 - 0.35
JAN    1,765 - 16               MAY  138.30 - 0.35