Coffee Market Report July 26 2018

An official of the Association of Indonesian Coffee Exporters has voiced concern that due to weather issues and related to heavy rains that the present new crop harvest in the south of Sumatra, might be sharply lower than last year.   While in the same report the official Muchtar Lutfie, has noted that there are a number of traditional coffee farmers in this important robust coffee farming district that have lost confidence in coffee and are now, replacing coffee with alternative crops. 

This is very much an unofficial report and crop forecast and many might see it to perhaps be market manipulative in nature, which is likely to see the report being of little or no influence upon sentiment within the related London robusta coffee market.   A market that by now, is very much focused upon the prospects of good volumes of new crop conilon robusta coffees due soon to start being tendered to the certified stocks of the market. 

The moon is near to full and with Friday being the full moon, which is a time of usually clear nights and if accompanied by a cold front, becomes frost threatening to the southern coffee districts in Brazil.  But with no forecasts for especially cold weather due this week and over the weekend, there is not likely to be any chance of a frost factor coming to the fore to impact upon the prevailing bearish sentiment within the coffee markets. 

Thus, with the frost season due to terminate in approximately three weeks’ time, the focus is now very much upon the Brazil spring and summer rain season, which traditionally comes to the fore at the end of September.   For the present there is no indication that there should be any problems, but one can anticipate that in reaction to the prevailing soft reference prices of the coffee terminal markets, that any delay to the start of the rains shall inspire drought scare stories.  

The September 2018 to September 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 34.8 usc/Lb., while this equates to 31.35% 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 1,062 bags yesterday; to register these stocks at 2,059,389 bags.  There were meanwhile a smaller in number 781 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 38,709 bags. 

The commodity markets were mostly on the upside yesterday, to see the overall macro commodity index taking an upside track for the day.   The Oil, Natural Gas, Cocoa, Cotton, Copper, Orange Juice, Wheat, Corn, Gold and Silver markets ended the day on a positive note and the Sugar and New York arabica Coffee markets ended the day close to par, while the Cocoa and London robusta Coffee markets ended the day on a softer note.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.07% higher; to see this index registered at 411.58.  The day starts with the U.S. Dollar tending softer and trading at 1.320 to Sterling, at 1.173 to the Euro and with the dollar buying 3.688 Brazilian Real, while North Sea Oil is steady and is selling at US$ 73.70 per barrel. 

The London market started the day trading marginally south of par, while the New York market started the day with some modest buoyancy and with the markets maintaining this mixed stance, into the early afternoon trade.   As the afternoon progressed the New York market started to add some value, while the London market continued to take a sideways modestly negative track.   Late in the day both markets came under selling pressure and with sell stops coming into play, to see the London market increase its losses and the New York market swiftly fall into negative territory, but while the London market ended the day on a soft note, the New York market recovered to end the day on par for the day. 

The London market ended the day on a negative note and with 76.5% of the earlier losses of the day intact, while the New York market ended the day on steady note and with only 4.8% of the earlier gains of the day intact.   This close provides little in the way of confidence for the markets, but with the dollar weaker and likely to reduce price fixation selling pressure from the producers and with the funds and speculative sectors of the market possibly over sold, one might expect to see a steady rather than softer start for the markets today.   Against the prices set yesterday, as follows: 

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

JUL    1787 unch 

SEP    1680 – 13                                             SEP    111.00 + 0.05

NOV   1667 – 13                                             DEC    114.35 + 0.10

JAN    1669 – 11                                             MAR   117.90 + 0.05

MAR   1678 – 11                                             MAY   120.35 + 0.05

MAY   1690 – 11                                              JUL    122.75 + 0.05

JUL    1703 – 11                                              SEP    125.10 + 0.05

SEP    1714 – 11                                              DEC   128.45 unch

NOV   1726 – 11                                              MAR   131.70 unch

JAN    1738 – 11                                              MAY   133.70 – 0.05