Coffee Market Report August 03 2018

The respected Brazilian Analysts Safras & Mercado have reported that as so far, approximately 75% of the new Brazil coffee crop has been harvested.  Talking in terms of approximately 30 million bags of arabica coffees and 15 million bags of conilon robusta coffees, with the latter conilon robusta coffee crop close to completion and anticipation of a further 15 million bags of arabica coffee still to be harvested. 

The South East of Brazil encountered a short spell of good rains, which has been welcomed by the coffee farmers.  Many farms have had no rain for over two months and albeit a seasonal factor and not unexpected, the rains have brought with them relief for the post-harvest and being harvested coffee trees. 

In the meantime, with farm coffee stocks building up, the soft nature of the reference prices of the international coffee terminal market is posing a problem for Brazils coffee farmers, as despite some weakness in the country’s currency, it does not completely counter the declining value.  This is contributing to a degree of price resistance and a lack of selling aggression, to result in a quiet internal coffee market for the present. 

Reuters report that traders in Vietnam anticipate that coffee exports for the month of August shall slow and total between 1.67 to 2 million bags.  While they report that farm stocks are now quite low and with the soft nature of the international market and the lacklustre demand from the main consumer markets that are still within the summer holiday season, the internal market activity is likewise lacking aggression. 

Meanwhile the new Indonesian robusta coffee crop harvest is peaking and is likely to see prices falling and becoming more export market friendly, which shall likely see increasing volumes coming to the export markets in the coming weeks.   These coffees likely to be accompanied by sales of new crop conilon robusta coffees that shall contribute to steady robusta coffee supply, ahead of the anticipated large new Vietnam crop that is due to start being harvested in approximately ten to eleven weeks’ time. 

Market sentiment in terms of the New York market is encountering rising certified arabica stock levels, which supports the prevailing bearish sentiment and to a lesser degree, there are coffees trickling into the certified robusta coffee stocks of the London market.   This alternative market likely in a couple of months’ time and so long as the spring rains come to Brazil in good order, likely to start to attract good volumes of new crop conilon robusta coffees. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 36.03 usc/Lb., while this equates to 32.72% 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 2,705 bags yesterday; to register these stocks at 2,060,396 bags.  There were meanwhile a larger in number 10,840 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 105,789 bags. 

The commodity markets were mixed in trade yesterday and with a stronger U.S. dollar in play, to see the overall macro commodity index taking a steady track for the day.  The Brent Oil, Sugar, Cocoa, Cotton, Wheat and Corn markets ended the day on a positive note and the U.S. Oil and Natural Gas markets were steady for the day, while the Coffee, Copper, Orange Juice, Soybean, Gold and Silver markets ended the day on negative note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.16% higher; to see this index registered at 407.17.  The day starts with the U.S. Dollar steady and trading at 1.301 to Sterling, at 1.158 to the Euro and with the dollar buying 3.750 Brazilian Real, while North Sea Oil is steady and is selling at US$ 73.25 per barrel. 

The London market started the day yesterday trading close to par, while the New York market started the day trading on a softer note and with the London market soon joining the New York market in negative territory and remaining so, into the early afternoon trade.  As the afternoon progressed the New York market triggered sell stops to accentuate the losses of the day and with the London market likewise losing some more weight, but with the markets bouncing back off the lows and heading towards a more modest negative close for the day. 

The London market ended the day on a negative note and with 31.6% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 63.2% of the earlier losses of the day intact. This close continues to paint something of a negative picture for the charts and is unlikely to inspire confidence to possibly set the markets another 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 – 6                                               SEP    106.70 – 1.35

NOV   1633 – 6                                               DEC    110.10 – 1.20

JAN    1632 – 8                                               MAR   113.65 – 1.20

MAR   1643 – 9                                               MAY   116.10 – 1.15

MAY   1656 – 9                                                JUL    118.50 – 1.10

JUL    1670 – 8                                                SEP    120.85 – 1.10

SEP    1682 – 9                                                DEC   124.25 – 1.00

NOV   1695 – 9                                                MAR   127.50 – 0.90

JAN    1706 – 10                                              MAY   129.50 – 0.90

MAR   1717 – 10                                              JUL    131.50 – 0.90