Coffee Market Report August 15 2018

The largest coffee cooperative in Brazil Cooxupé has reported that its farmer members have so far harvested 77.8% of their new coffee crop, which is well below the 87.9% that had been harvested at the same time last year.   However, with a significantly larger new Brazil crop coming in this year, one might presume that in terms of volume that there is little difference in the new crop stocks at hand, when compared to the same time last year. 

The coffee markets meanwhile, are devoid of any supportive fundamental news and the speculative and fund sectors of the markets continue to pressure the coffee markets lower, to set record net short sold positions within the New York market.   This selling pressure forcing the reference prices of the terminal markets ever lower and causing much stress for farmers within many producer countries, which is no doubt going to have an impact upon medium term coffee supply.   A factor that one would suggest shall start to come to the fore early in the coming year, which shall trigger a short covering rally for the coffee markets and particularly so, the volatile New York market. 

Meanwhile with the new crop cherries ripening and the year end harvest on the horizon, there is a steady flow of past crop Mexican and Central American coffees coming to the alternative market that is the Certified coffee stocks of the New York market.   This producer bloc now accounting for 75.58% of the stocks and followed by Peru, with a 11.25% share of the stocks.  The balance made up by the 7.87% share that come from the African producers Burundi, Rwanda and Uganda, while Colombia contributes to 2.56% of the stocks and with Brazil and Papua New Guinea almost equally, contributing to the balance of the stocks.  

Traditionally mid-August was considered the end of the Frost season for termination of the frost threat season for Brazil and thus now, all focus is upon the start of the new spring and summer rain season for Brazil that usually starts during the second half of September.   Albeit that it is not uncommon for the rains to be delayed into early October, by when and if there has been little rain over the main coffee districts of the country, the speculation of dry weather damage for the next 2019 crop would start to impact upon market sentiment.   But for the present and with medium term weather forecasts not indicating any medium to longer term threat of climatic problems for south east Brazil, coffee market sentiment remains bearish. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 35.02 usc/Lb., while this equates to 32.28% 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 7,390 bags yesterday; to register these stocks at 2,093,146 bags.  There were meanwhile a larger in number 12,776 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 234,997 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 6,167 bags or 0.51% over the week of trade leading up to Monday 13th. August, to see these stocks registered at 1,219,167 bags, on the day. 

The commodity markets were mixed in trade yesterday, to see the overall macro commodity index taking something of a sideways track for most of the day.   The Natural Gas, Sugar, Cocoa, Cotton, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Oil, Coffee, Copper 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 0.09% higher; to see this index registered at 400.84.  The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.271 to Sterling, at 1.133 to the Euro and with the dollar buying 3.866 Brazilian Real, while North Sea Oil is steady and is selling at US$ 70.35 per barrel. 

The London market started the day yesterday trading with modest buoyancy and the New York market started the day trading erratically either side of par, to set the markets on a steady track into the early afternoon trade.   As the afternoon progressed the New York market started to attract support and took on a positive stance while the London market slipped back towards par, but with the New York market hitting a ceiling and starting on a steady slide back into negative territory. 

The London market ended the day on a modestly negative note and with 80% of the earlier losses of the day intact, while the New York market ended the day on a very negative note and with 100% of the earlier losses of the day intact.   This close does little to inspire confidence, but with the New York market seemingly oversold and with the producer’s reluctant sellers into the soft price range that prevails, one might expect to see 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    1669 + 2                                               SEP    105.05 – 1.20

NOV   1620 – 4                                               DEC    108.50 – 0.80

JAN    1608 – 3                                               MAR   111.75 – 0.80

MAR   1615 – 3                                               MAY   114.05 – 0.85

MAY   1628 – 3                                                JUL    116.40 – 0.90

JUL    1642 – 3                                                SEP    118.75 – 0.95

SEP    1655 – 3                                                DEC   122.05 – 1.10

NOV   1668 – 3                                                MAR   125.35 – 1.15

JAN    1680 – 3                                                MAY   127.45 – 1.15

MAR   1691 – 3                                                JUL    129.45 – 1.20