Coffee Market Report July 04 2018

The Trade Ministry in Brazil have reported that the countries coffee exports for the month of June were 252,262 bags or 13.24% higher than the same month last year, at a total of 2,157,363 bags.   Likewise, the coffee exports for the month of June were an even larger 743,646 bags or 52.6% increase over the coffee exports in May. 

These rising export volumes are ahead of the rising volumes of new crop coffee supply, which should result in reasonable quantities of Brazil coffees coming to the consumer markets, for the rest of the year.   But the question is with the farmers having to sell against the prevailing soft reference prices of the coffee terminal markets and despite some relief coming from the weak local currency relative to the dollar, if there shall indeed be any aggressive internal market selling activity in Brazil. 

One would suspect that despite all evidence confirms that Brazil’s farmers are presently bringing in a bumper new crop, that there shall be some degree of price resistance and muted selling activity on the part of many farmers, until they can assess the quality of the new October to March summer rain season and the related flowerings, towards the next crop.   Thinking that while it is unlikely that there shall be any weather problems developing for the prospects of the next 2019 Brazil crop that weather is often unpredictable and that many farmers might take a wait and see approach to the short-term market and build up some coffee stocks, rather than rushing in to cash in the new crop coffees. 

This is aside from the uncertainty over the Brazil exchange rate, which might be influenced to further weaken, if the scheduled October elections become indecisive and do not underpin stability and economic recovery.   Thus, making one think that while the speculative sectors of the international coffee market have so far been aggressively selling short the coffee markets in anticipation of the bumper new Brazil crop, that there is the potential that a slower and lower in volume delivery of this crop, might be a trigger for many to look to buy in some profit and that the New York arabica coffee market might be seen to be at its potential lows for the year.   Albeit that this thought is very much personal speculation and it is not impossible, for the unpredictable funds to take the markets even lower. 

The September 2018 to September 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 35.47 usc/Lb., while this equates to 31.7% 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 3,365 bags yesterday; to register these stocks at 2,064,501 bags.  There were meanwhile a smaller in number 1,345 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 13,823 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 18,667 bags or 1.72% over the week of trade leading up to Monday 2nd. July, to see these stocks registered at 1,068,167 bags, on the day. 

The commodity markets had a mixed day yesterday and with many players within the U.S. markets already focused on today’s Independence Day holiday, with the overall macro commodity index taking something of a sideways track for the day.  Natural Gas, Coffee, Orange Juice, Wheat, Corn, Gold and Silver markets ended the day on a positive note and the Oil and Cotton markets were near to steady, while the Sugar, Cocoa, Copper and Soybean markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.42% higher; to see this index registered at 418.14.  The day starts with the U.S. Dollar marginally softer and trading at 1.321 to Sterling, at 1.167 to the Euro and with the dollar buying 3.898 Brazilian Real, while North Sea Oil is steady and is selling at US$ 77.00 per barrel. 

The London market started the day yesterday on a steady note, but with the New York market starting the day with modest buoyancy and soon moving up into positive territory and with the London market shrugging off selling pressure, to join the New York market in positive territory by the early afternoon trade.   As the day progressed both markets took a positive track but while the London market managed to maintain most of its gains, the New York market suffered from late in the day selling. 

The London market ended the day on a positive note and with 80% of the earlier gains of the day intact, while the New York market ended the day on only a modestly positive note and with only 20% of the earlier gains of the day intact.   This close does little to inspire much confidence, but with the New York market closed today, one might think that the London market trading solo, shall take a slow and steady stance for early trade today against the prices set yesterday, as follows: 

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

JUL    1735 + 3                                                JUL    108.35 + 0.55 

SEP    1685 + 8                                               SEP    111.90 + 0.25

NOV   1677 + 6                                               DEC    115.30 + 0.20

JAN    1681 + 5                                               MAR   118.85 + 0.15

MAR   1691 + 3                                               MAY   121.25 + 0.15

MAY   1705 + 3                                                JUL    123.65 + 0.15

JUL    1717 + 3                                                SEP    125.90 + 0.10

SEP    1730 + 4                                                DEC   129.00 unch

NOV   1743 + 5                                                MAR   132.25 – 0.10

JAN    1754 + 5                                                MAY   134.15 – 0.10