Coffee Market Report June 21 2018

Brazil’s and the world’s largest coffee cooperative Cooxupé who have estimated that they would be producing and providing for export approximately 8% more arabica coffee from this year’s crop, have estimated that as at Friday last week, their members had harvested approximately 15.7% of their new crop coffees.   This they say is a little below the 17.5% factor as at the same time last year but when one is to apply the larger volume of coffee expected from this year’s crop, the actual volume harvested so far, would not really be much lower than the same time last year. 

The Coffee Federation of Colombia have come to the fore in protest over the prevailing international coffee prices and in particular the New York market, which is used as a reference for the prices applied to export the countries fine washed arabica coffees.   The head of the Federation Roberto Velez having told journalists that the present low prices are and embarrassment and are dictating price levels for the countries farmers that are barely break even, which one would comment is not only a problem for Colombia, as it is a similar problem for arabica coffee farmers in general. 

Unfortunately for the global coffee farming community there is very little and in reality, nothing much that can be done, to counter the negative influences of the speculative funds who dominate market direction and who have sold the markets short and by nature, have accentuated the decline in terminal market price levels.   Prices that shall most likely impact on the longer term, in declining investment into fertilisers and chemicals for many farmers and with the resulting decline in farm yields for many farmers.   A factor that might well come to the fore by the end of the year with forecasts for more modest crop levels for many arabica coffee producers, for the coming year. 

But in the meantime, and unless there are some unforeseeable at present climatic problems developing for one or the other of the main coffee producer blocs, there really is very little short-term price relief foreseen for the global coffee producer communities.   Many farmers within these communities and including both arabica and robusta coffee farmers already giving consideration to alternative and relatively high value nut and fruit crops, such as avocados and macadamia nuts. 

The combination of reduced farm inputs and a turn to alternative crops is likely to stall any potential growth in global coffee production, while in the meantime there is a steady growth in global coffee consumption.  But it shall take a couple of years for this latter factor of increasing consumption levels to catch up with the present overall high-volume production levels and it is not a factor that can soon come to the fore to add value to the international coffee prices. 

The September 2018 to September 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 39.77 usc/Lb., while this equates to 34.09% 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 4,147 bags yesterday; to register these stocks at 2,054,114 bags.  There was meanwhile a larger in number 5,405 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 26,553 bags. 

The commodity markets had a mixed day yesterday and with many markets showing some degree of buoyancy, to see the overall macro commodity index taking a positive track for the day.  The WTI US Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Orange Juice, Wheat, Corn and Soybean markets ended the day on a positive note, while the Brent Oil, 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 0.4% higher; to see this index registered at 421.43.  The day starts with the U.S. Dollar showing some degree of renewed muscle and trading at 1.313 to Sterling, at 1.154 to the Euro and with the dollar buying 3.771 Brazilian Real, while North Sea Oil is tending softer in early trade and is selling at US$ 73.50 per barrel. 

The London and New York markets started the day yesterday with modest buoyancy and with both markets retaining support, to maintain a positive stance into the early afternoon trade.  As the afternoon progressed the London market remained within positive territory, while the New York market attracted some selling pressure and a brief dip into modest negative territory but to soon recover and to see both markets heading towards a steady and modestly positive close. 

The London market ended the day on a positive note and with 45.5% of the earlier gains of the day intact, while the New York market likewise ended the day on a positive note and with 33.3% of the earlier gains of the day intact.  This close does not though inspire much in the way of confidence and with a firmer dollar to the Brazil Real in play today and its indication of possible selling due from Brazil later in the day, one might expect to see little better than a near to steady start for early trade today against the prices set yesterday, as follows: 

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

JUL    1706 + 10                                              JUL    113.65 – 0.45 

SEP    1695 + 10                                             SEP    116.65 + 0.25

NOV   1694 + 9                                               DEC    120.10 + 0.25

JAN    1699 + 6                                               MAR   123.60 + 0.25

MAR   1711 + 6                                               MAY   125.95 + 0.20

MAY   1723 + 6                                               JUL    128.20 + 0.25

JUL    1735 + 6                                               SEP    130.20 + 0.20

SEP    1747 + 4                                               DEC   133.10 + 0.15

NOV   1761 + 4                                               MAR   135.95 + 0.10

JAN    1766 + 6                                               MAY   137.70 + 0.10