Coffee Market Report July 15 2018

13th. July, 2018.
The Brazil Exporters Association Cecafé have reported green coffee exports for the month of June, to total 2.4 million bags of primarily natural arabica coffees, while the report highlights the inclusion of a comparatively high 280,000 bags of Brazil Conilon exports to confirm the recovery of the current robusta crop on that of the previous year. This export report sees cumulative green coffee exports at a total 13 million bags for the first six months of the calendar year.

With the month of June the last month in the coffee marketing year, the overall decline in coffee exports from the July 2017 to June 2018 Brazil crop year when compared to the larger biennial bearing crop of the previous year, is unlikely to have any influence on the markets. The Brazil Exporters Association Cecafé have reported the country’s total green coffee exports for the coffee season ending June 2018, to have registered an 8.5% decline year on year in total green coffee exports, at 26.83 million bags.

The cumulative annual exports reported by Cecafé is made up of mainly natural arabica exports at 26.16 million bags, with a weather improved production that is reflected in the export performance for Conillon robusta and increase of 140% year on year exports to total 670,874 bags. The value added soluble export sector of the market has however posted a decline year on year of 7.6% to register this total in green bean equivalent, at 3.44 million bags. Thus, altogether and to include soluble coffee exports, Brazil coffee exports for the July 2017 to June 2018 coffee year, is reported at a lower overall 8.4% on that of the same time in the previous biennial higher bearing July 2016 to June 2017 coffee year at 30.29 million bags.

This lower figure has been anticipated by the markets for some time, as is the lower export performance year on year as a result of the lower biennial bearing crop in the July 2017 to June 2018 coffee season. This ahead of the new biennial bearing crop that is due for a much larger new crop and one that shall include good volumes of both Arabica and Conilon robusta coffees, to fuel a significant increase in coffee export volumes for the forthcoming July 2018 to June 2019 crop year.

The new June 2018 to July 2019 Brazil coffee harvest continues in conducive and locally based independent analysts, Safras & Mercados report that 53% of the total crop has already been harvested, which on their forecast estimates is around 32 million bags. As the Conilon robusta areas are earlier to start harvesting, the report indicates that around 75% of that crop is already complete. With a percentage of forward sales already concluded, the firmer Brazil Real to the US Dollar provides little incentive for producers to participate as sellers, for the time being there is resistance to the prevailing lower market value in the coffee markets and trade within the interior is muted.

The northern hemisphere, to include the traditional coffee consumer markets in Europe and USA., are entering the summer holiday season which traditionally anticipates a lull in consumer country roasting demand. This, together with the relatively comfortable volume of green coffee stocks that are being held within the consumer market warehouses, would suggest that the consumer markets in the northern hemisphere are likely to be more restrained in their shorter term buying activity.

The September 2018 to September 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 35.30 usc/Lb., while this equates to 31.65% 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 1,130 bags yesterday; to register these stocks at 2,050,987 bags. There was an increase by 642 bags to the number of bags pending grading for this exchange; to register these pending grading stocks at 35,140 bags.

The commodity markets registered an overall improvement yesterday, as economic and jobs data released by the USA were positively received in the markets and renew confidence within the commodity sector. It was a steady day for the Oil markets and a positive finish for Cocoa, robusta Coffee, Cotton, Copper, Corn, Gold, Orange Juice, Soybean, Wheat and Platinum, with a softer close for arabica Coffee, Sugar, Silver and Platinum markets. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets registered a positive gain on the day, by 0.9073% to close at 412.61. The day starts with the U.S. Dollar steady, trading at 1.316 to Sterling, at 1.165 to the Euro and with the Dollar buying 3.882 Brazilian Real, while North Sea Oil is steady in early trade and is selling at US$ 73.45 per barrel.

The coffee markets started the day on a mildly softer note yesterday and in narrow early morning range, London moved through par and into positive territory. New York followed a similarly positive track to touch the highs in the morning. The London market built on the momentum as the day progressed and maintained buoyancy in positive territory, the New York arabica market could not sustain the positive move, to see this market back to par and trading much unchanged, around par as the day progressed. The softer trend in New York perhaps weighed on sentiment in the latter part of the session in London, as this market gave back some ground toward the end of the day, as did New York slip through par and move into negative territory on the close. The markets set the close yesterday after a fair volume day, as follows:

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

JULY     1,780 + 28          JULY 108.70 - 0.50
SEPT    1,681 + 9            SEPT 111.55 - 0.50
NOV     1,666 + 4             DEC 115.10 - 0.50
JAN      1,665 + 3             MAR 118.70 - 0.55
MAR     1,674 + 2             MAY 121.15 - 0.60
MAY     1,686 + 2             JULY 123.55 - 0.60
JULY     1,700 + 3            SEPT 125.85 - 0.65
SEPT    1,712 + 3             DEC 129.20 - 0.70
NOV     1,724 + 3             MAR 132.50 - 0.65
JAN     1,735 + 30            MAY 134.60 - 0.65