Coffee Market Report July 27 2018

The respected Brazilian Analysts Safras & Mercado have estimated that with approximately 26 million bags of new crop arabica coffees and 15 million bags of new crop conilon robusta coffees already harvested, that approximately 68% of the new Brazil coffee crop has been harvested.    Of which most of the new conilon robusta coffee crop is now getting close to completion, with the rest of the harvest now related to the harvest of approximately a further 25 million bags plus of arabica coffees. 

The weather over the main coffee districts in Brazil remains mostly dry and is conducive to new crop cherry development and to good harvest conditions, which is likely to see most of the rest of the new Brazil arabica coffee farmers harvesting over the next two to three weeks.   Albeit that some of the higher grown arabica coffee farms might still have quite some weeks to the fore, to complete their new crop harvest.

 Meanwhile there are reports of some degree of internal market price resistance, as the consumer market buyers follow the soft terminal markets south, while with the Brazil Real having halted it slide, these markets dictate unfavourable internal market prices.   But with most of the major players within the main stream consumer markets more focused upon the summer holiday season and physical trade lacklustre in nature, there is seemingly not very much excitement within the internal market at present. 

The question shall be what the sentiment of the farmers in the second half of September shall be, by when the new crop shall be complete while the post-holiday consumer market industry buyers are likely to be more active.  As if the new spring rains have not started to come to the fore, it might inspire many farmers to hold onto stocks as an insurance against the chance of follow on dry weather, which would be damaging for the next 2019 coffee crop.   But of course, if the Brazil rain season kicks in with normal conditions, one has to anticipate that it shall inspire the speculative and fund sectors of the market to maintain their prevailing bearish posture. 

Vietnam has had near perfect weather conditions over the main coffee growing districts this year, which inspires forecasts from the trade within the country for a new year end crop of in excess of 30 million bags.   This further contributing to the bearish nature of the speculative and fund sectors of the international terminal markets, which presently lack any weather-related scare stories to change sentiment. 

The September 2018 to September 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 34.62 usc/Lb., while this equates to 31.6% 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 5,900 bags yesterday; to register these stocks at 2,053,489 bags.  There were meanwhile a larger in number 8,250 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 46,959 bags. 

The commodity markets were mixed in trade yesterday and encountered some renewed muscle for the U.S. dollar, to see many markets losing their way and to see the overall macro commodity index taking something of a sideways track for the day.   The Oil, Cocoa, Cotton, Corn and Soybean markets ended the day on a positive note and the Natural Gas market was steady for the day, while the Sugar, Coffee, Copper, Orange Juice, Wheat, 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 0.21% lower; to see this index registered at 410.74.  The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.309 to Sterling, at 1.164 to the Euro and with the dollar buying 3.745 Brazilian Real, while North Sea Oil is steady and is selling at US$ 74.400 per barrel. 

The London and New York markets started the day yesterday with a degree of buoyancy and to see both markets taking a positive track, into the early afternoon trade.  As the afternoon progressed the New York market started the come under pressure and to slip back into negative territory, while the London market for a while, maintained a steady positive stance.   The New York market and with the firmer dollar possibly playing its part started to trigger sell stops and dipped further south before taking a negative sideways track through to the close, while the London market started to falter and finally set on a steady downside track into negative territory. 

The London market ended the day on a negative note and with 84.8% of the earlier losses of the day intact, while the New York market ended the day on likewise negative note and with 82.9% of the earlier losses of the day intact.   This close contributes towards a negative picture for the charts and does little to inspire confidence and with the dollar continuing to show some muscly, one might expect to see little better than a near to steady start for  early trade today, gainst the prices set yesterday, as follows: 

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

JUL    1787 unch 

SEP    1652 – 28                                             SEP    109.55 – 1.45

NOV   1643 – 24                                             DEC    112.85 – 1.50

JAN    1645 – 24                                             MAR   116.35 – 1.55

MAR   1655 – 23                                             MAY   118.80 – 1.55

MAY   1668 – 22                                              JUL    121.20 – 1.55

JUL    1681 – 22                                              SEP    123.55 – 1.55

SEP    1692 – 22                                              DEC   126.95 – 1.50

NOV   1704 – 22                                              MAR   130.20 – 1.50

JAN    1716 – 22                                              MAY   132.20 – 1.50