Coffee Market Report August 08 2018

The International Coffee Organisation have increased their assessment for global coffee consumption for the present October 2017 to September 2018 coffee year by 0.82%, to now foresee a consumption factor of 161.23 million bags.   This they now adjudge and based on the smaller 2017 Brazil, shall result in a deficit coffee supply for the present coffee year of 2.67 million bags. 

This report and an indication of a marginal deficit coffee supply for the present coffee year has no impact upon market sentiment, as the present October 2017 to September 2018 coffee year also encountered what could be considered to be excessive consumer market stocks.   But what is really having an impact in negating the supportive influence of the assessment for deficit supply for the present coffee year, is that large new Brazil coffee crop and its contribution towards something in the order of 5 million to 8 million bags global coffee surplus supply for the forthcoming October 2018 to September 2019 coffee year. 

This perception of surplus supply continues to depress prices within the coffee terminal markets, with the speculative and fund sectors of the market sold short and perhaps one could consider them to be excessively so for the New York market.   While of late there has been little in the way of weather issues for the tropical belt around the world and within which, coffee is grown.    The question is how long this might continue, as outside of the tropics there have been some severe weather problems and the chances are that in time, there has to weather issues coming to the fore for the tropics as well.  

Making one comment that with global coffee consumption steadily rising and with the soft prices over the past year likely to have some negative impact upon yields for many producers, that there is a probability that the coffee markets shall start to encounter a change in sentiment by the first quarter of next year.   But perhaps even earlier, should Brazil not have a normal rain season during the last quarter of this year.  Albeit that this latter dry weather in Brazil factor is for the present, not being forecast.  

Some of the main coffee districts in South East Brazil have been in receipt of somewhat unseasonal rains over the past few days, which will assist the coffee trees that have encountered the stress of both the dry winter season and the harvest.   But there have been some that have voiced fears that the rains might trigger early flowering for the next 2019 crop, which would most likely be aborted and shall have impact upon the potential for next year’s crop.   But this has yet to be seen, to be believed. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 37.07 usc/Lb., while this equates to 33.1% 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 3,120 bags yesterday; to register these stocks at 2,062,081 bags.  There were meanwhile a larger in number 18,054 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 121,527 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 13,333 bags or 1.09% over the week of trade leading up to Monday 6th. August, to see these stocks registered at 1,213,000 bags, on the day. 

The commodity markets were mixed in trade yesterday, to see the overall macro commodity index taking a modest upside track for the day.   The Oil, Natural Gas, New York arabica Coffee, Copper, Soybean, Gold and Silver markets ended the day on a positive note, while the Sugar, Cocoa, London robusta Coffee, Cotton, Orange Juice, Wheat and Corn markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.03% higher; to see this index registered at 410.35.  The day starts with the U.S. Dollar tending softer and trading at 1.295 to Sterling, at 1.162 to the Euro and with the dollar buying 3.752 Brazilian Real, while North Sea Oil is near to steady and is tending softer and is selling at US$ 72.65 per barrel. 

The London and New York markets started the day yesterday trading close to par, but with the New York market soon moving up into modest positive territory and adding value, to see the London market steady and the New York market sporting a positive stance into the early afternoon trade.   As the afternoon progressed the New York market maintained a positive stance and the London market moved deeper into negative territory but with the New York market bouncing back from a nearby ceiling and the London market bouncing back from the lows towards a relatively steady close for the day. 

The London market ended the day on a negative note and with 40% of the earlier losses of the day intact, while the New York market ended the day on a positive note, but with only 13.3% of the earlier gains of the day intact.  This close provides little in the way of an indication of direction and one might expect to see only a near to steady start due for early trade today, against the prices set yesterday, as follows: 

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

SEP    1668 – 14                                             SEP    109.05 + 0.30

NOV   1648 – 4                                               DEC    112.20 + 0.20

JAN    1646 – 2                                               MAR   115.55 + 0.05

MAR   1655 – 1                                               MAY   117.90 unch

MAY   1668 unch                                            JUL    120.30 unch

JUL    1681 unch                                            SEP    122.60 – 0.05

SEP    1694 + 1                                                DEC   126.00 – 0.05

NOV   1707 + 1                                                MAR   129.25 – 0.05

JAN    1719 + 1                                                MAY   131.30 – 0.05

MAR   1730 + 1                                                JUL    133.30 – 0.05