Coffee Market Report August 09 2018

The Indonesian Association of Coffee Exporters and Industries have forecast that the countries coffee production for the forthcoming 2018 to 2019 coffee year shall increase by 1,500,000 bags or 15.79%, to bring to the fore coffee supply of 11 million bags for this new coffee year. 

The Association and presumably with the steadily increasing domestic coffee consumption have however forecast that the coffees available for export over this new coffee year, shall only increase by a relatively modest 500,000 bags or 6.38%, to total 8.33 million bags.   Thus, indicating that the larger crop shall not impact too dramatically, upon the already negative for the market short to medium term global surplus coffee supply. 

Meanwhile the physical coffee market and with the main northern hemisphere consumer markets still in summer holiday mood, is lacklustre at best.  While with the new crop on the horizon for the Central American producer bloc, there has been a steady stream of coffees looking for a home within the certified arabica coffee stocks of he New York market.   A factor that aside from the influence of the larger new Brazil coffee crop, that is contributing towards the prevailing bearish sentiment within the coffee markets. 

The question is now and following the completion of the larger new Brazil conilon robusta coffee crop that one would guess shall bring to the market approximately 4 million bags of surplus supply over domestic market demand, when these coffees shall start looking for a home within the consumer markets.   Making one speculate with the taste profile of these coffees not being very popular within the European market, that good volumes might start to look for a home within the certified robusta coffee stocks of the London market.   A factor that would most likely prove to be negative for sentiment, within this market. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 37.06 usc/Lb., while this equates to 33.39% 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 9,880 bags yesterday; to register these stocks at 2,071,961 bags.  There were meanwhile a smaller in number 8,010 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 129,537 bags. 

The commodity markets were mixed in trade yesterday, but with the influential oil markets coming under pressure, the overall macro commodity index took a softer track for the day.   The Natural Gas, Cocoa, Copper, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Oil, Sugar, Coffee, Cotton 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 0.44% lower; to see this index registered at 408.55.  The day starts with the U.S. Dollar showing some renewed muscle and trading at 1.287 to Sterling, at 1.160 to the Euro and with the dollar buying 3.771 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 70.90 per barrel. 

The London and New York markets started the day yesterday trading close to par, with both markets taking a modestly softer track into the early afternoon trade.   As the afternoon progressed both markets remained under pressure and with the New York market attracting sell stops to accentuate the losses, but while the New York market managed to bounce back from the lows, the London market remained on a steady downside track, towards an overall soft close. 

The London market ended the day on a very negative note and with 85.7% of the earlier losses of the day intact, while the New York market ended the day on a negative note and with, but with only 51.1% of the earlier losses of the day intact.  This close provides little in the way of confidence and especially with the Brazil Real losing a little weight, which would infer the possibility for increased price fixation selling out of Brazil.   Making one think that the markets are only due for 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    1655 – 13                                             SEP    107.85 – 1.20

NOV   1630 – 18                                             DEC    111.00 – 1.20

JAN    1625 – 21                                             MAR   114.30 – 1.25

MAR   1633 – 22                                             MAY   116.60 – 1.30

MAY   1646 – 22                                              JUL    119.00 – 1.30

JUL    1659 – 22                                              SEP    121.35 – 1.25

SEP    1672 – 22                                              DEC   124.80 – 1.20

NOV   1684 – 23                                              MAR   128.10 – 1.15

JAN    1696 – 23                                              MAY   130.10 – 1.20

MAR   1707 – 23                                              JUL    132.10 – 1.20