Coffee Market Report August 01 2018

Brazil’s largest coffee cooperative Cooxupé have reported that 65.1% of their members new crop coffee harvest has been completed, which is well behind the 76% factor that had been harvested at the same time last year.  One must however recognise that with general expectations for an approximately 15% larger new arabica coffee crop this year, that in terms of volume that the harvest is marginally larger than the volume that had been harvested at the same time last year. 

The Ivory Coast has reported that the country’s exports of robusta coffees are 206,600 bags or 64.48% higher than the same period last year, at a total of 527,000 bags.   This seemingly indicating that the countries coffee community have learnt to accept the reality of the prevailing soft international coffee prices, to show little in the way of internal market price resistance. 

In terms of the worlds third largest robusta coffee producer Indonesia, where average farm yields are approximately 50% below their potential, there are now many active extension service programs in play to assist farmers to improve their agricultural practices and to increase yields and profitability.   This is likewise the case for the countries much smaller arabica coffee farming community, with Indonesia presently lying ninth in terms of global arabica coffee producers. 

One must presume that in time and despite limited improvements in yield in the recent years, that with improving education and communication, that these programs shall start to impact.   However, with a steadily growing domestic coffee consumption and culture, that the potential for increasing yields might not have a sharp impact upon global coffee supply. 

Meanwhile and despite the soft terminal market prices, these markets are still managing to attract additional coffees for certification for the stocks held against these markets, which underpins the perception of surplus supply.   A factor that is assisting to maintain bearish sentiment, on the part of the speculative and fund sectors of these markets. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 38.85 usc/Lb., while this equates to 34.35% 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 1,960 bags yesterday; to register these stocks at 2,057,796 bags.  There were meanwhile a larger in number 3,255 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 40,942 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 27,167 bags or 2.27% over the week of trade leading up to Monday 30th. July, to see these stocks registered at 1,226,333 bags. 

The commodity markets encountered some modest renewed muscle for the U.S. dollar yesterday and a number of markets tending to slip, to see the overall macro commodity index taking a softer track for the day.  The Cotton, Copper, Wheat, Corn and Soybean markets ended the day on a positive note and the Gold and Silver markets were steady for the day, while the Oil, Natural Gas, Sugar, Cocoa, Coffee and Orange Juice markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.17% lower; to see this index registered at 411.48.  The day starts with the U.S. Dollar steady and trading at 1.309 to Sterling, at 1.167 to the Euro and with the dollar buying 3.754 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 72.75 per barrel. 

The London and New York markets started the day trading around par and with both markets taking a hesitant and erratic sideways track at close to par, to take a modestly positive stance into the early afternoon trade.   As the afternoon progressed the markets came under some added selling pressure and while there was some degree of resistance within the London market, the New York moved lower and soon followed by the London market and with both markets moving on towards a soft close. 

The London market ended the day on a negative note and with 75% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 83.3% of the earlier losses of the day intact.   This close paints something of a negative picture for the charts and is unlikely to inspire confidence, which with a more robusta U.S. dollar in play, is likely to inspire thoughts of potential price fixation selling pressure from Brazil.   Thus, one might expect to see little better than a near to steady start for early trade today, against the prices set yesterday, as follows: 

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

SEP    1644 – 16                                             SEP    109.90 – 1.50

NOV   1637 – 15                                             DEC    113.10 – 1.50

JAN    1639 – 14                                             MAR   116.60 – 1.45

MAR   1651 – 14                                             MAY   119.00 – 1.45

MAY   1664 – 14                                              JUL    121.40 – 1.40

JUL    1676 – 14                                              SEP    123.70 – 1.45

SEP    1688 – 14                                              DEC   127.00 – 1.40

NOV   1701 – 14                                              MAR   130.15 – 1.40

JAN    1712 – 14                                              MAY   132.15 – 1.40

MAR   1723 – 14                                              JUL    134.15 – 1.35