Coffee Market Report July 20 2018

The respected Brazilian Analysts Safras & Mercado have estimated that already approximately 60% of the overall new crop has been harvested, which they relate to 13.5 million bags of conilon robusta coffees and 23.5 million bags of arabica coffees having been harvested.    While in the meantime the weather conditions for the main coffee districts in Brazil remain dry and relatively warm, which is assisting to accelerate the progress of the new crop harvest. 

The question might be now and with general expectations for a new Brazil conilon robusta coffees that shall provide something in the order of a four to six million bags of surplus to domestic market demand, is when these new crop coffees shall start to look for a home within the consumer markets.   With the possibility as the cup profile is not popular with a good number of the European based roasters, that these coffees could start being tendered to the certified stocks of the London market and by nature, capping the upside potential for this market. 

Meanwhile reports indicate that with the relatively soft nature of the reference prices of London terminal market, that internal market trade in Vietnam is encountering some degree of price resistance and it overall slow.  While in the meantime the Indonesian robusta coffee harvest is picking up in volume in Sumatra and that one might expect that the countries domestic market demand might soon be covered, which is likely within the next six to eight weeks see new crop Indonesian robusta coffees soon coming to the fore at more competitive asking export differentials.    

The September 2018 to September 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 32.96 usc/Lb., while this equates to 30.29% 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 524 bags yesterday; to register these stocks at 2,056,209 bags.  There were meanwhile a larger in number 1,427 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 32,057 bags. 

The commodity markets were mixed in trade yesterday, but with the overall macro commodity index tending softer for the day.   The U.S. Oil, Natural Gas, Coffee, Orange Juice, Wheat, Corn and Soybean markets ended the day on a positive note, while the Brent Oil Sugar, Cocoa, Cotton, 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 0.12% lower; to see this index registered at 404.82.  The day starts with the U.S. Dollar steady and trading at 1.302 to Sterling, at 1.166 to the Euro and with the dollar buying 3.829 Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 71.45 per barrel. 

The London and New York markets started the day yesterday on a steady note and with modest buoyancy, but to soon slip back into modest negative territory and to take a softer stance into the early afternoon trade.  As the afternoon progressed though, both markets started to attract support and with buy stops coming into play, to move back into positive territory.   The London market once having stepped up into more positive territory managed to maintain a sideways positive track through to the close, while the New York market somewhat faltered in late trade, to limit the recovery for the day. 

The London market ended the day on a positive note and with 80.8% of the early gains of the day intact, while the New York market ended the day on a likewise positive note and with 50% of the earlier gains of the day intact.   This close while positive in nature might in terms of the negative sentiment being generated by the advent of he new larger Brazil crop limit follow through support to perhaps only inspire a steady start for early trade today against the prices set yesterday, as follows: 

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

JUL    1763 + 24                                              JUL    105.25 + 0.65 

SEP    1672 + 21                                             SEP    108.80 + 0.65

NOV   1663 + 22                                             DEC    112.25 + 0.65

JAN    1665 + 22                                             MAR   115.90 + 0.65

MAR   1675 + 22                                             MAY   118.35 + 0.60

MAY   1687 + 22                                              JUL    120.80 + 0.60

JUL    1699 + 21                                              SEP    123.15 + 0.60

SEP    1710 + 21                                              DEC   126.55 + 0.55

NOV   1722 + 21                                              MAR   129.80 + 0.50

JAN    1735 + 23                                              MAY   131.85 + 0.45