Coffee Market Report August 16 2018

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 8,600 bags or 0.13% during the month of July, to register these stocks at 6,835,629 bags at the end of the month.   The overall Green Coffee stocks reported, do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 570,000 bags per week, would conservatively have been at least 1.1 million bags.   If one is to consider the additional unreported stocks the end month stocks, this would equate to more than thirteen and half weeks of roasting activity, which most would consider to be a very safe reserve. 

This relatively high level of coffee stocks within North America is of course ahead of the delivery of new crop coffees from the larger new Brazil crop this year, but one might imagine that with the soft nature of the reference prices of the international coffee and some degree of internal market price resistance within Brazil, that there might not be a surge of new Brazil coffees coming to significantly buoy the already more than sufficient stocks.   Albeit that this issue of the larger Brazil crop, the pending year end repeat large new Vietnam crop and along with the pending new year end Mexican and Central American crop and on top of good levels of consumer market coffee stocks, continues to fuel bearish sentiment within the global coffee markets. 

Presently with the exception of the excessive rains that are being encountered in South West India and over many of the coffee producing districts, there are no other weather issues being reported as being threatening to medium to longer term coffee production.   While the Australian governments Bureau of Meteorology still only foresee a 50% chance for a new El Niño phenomenon to develop in the Pacific Ocean in the coming months, which results in global coffee weather reports have no impact upon the prevailing bearish sentiment within the coffee markets. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 33.79 usc/Lb., while this equates to 31.88% 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 10,709 bags yesterday; to register these stocks at 2,103,855 bags.  There were meanwhile a smaller in number 4,969 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 230,028 bags. 

The commodity markets and with the combination of a robust U.S. dollar and fears of trade wars developing were on the back foot yesterday, to see the overall macro commodity index taking a downside track for the day.   The Oil, Coffee, Cotton, Copper and Silver markets ended the day on a very soft note, while the Natural Gas, Sugar, Cocoa, Orange Juice, Wheat, Corn, Soybean and Gold markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.7% lower; to see this index registered at 394.03.  The day starts with the U.S. Dollar tending a little softer and trading at 1.273 to Sterling, at 1.139 to the Euro and with the dollar buying 3.902 Brazilian Real, while North Sea Oil is showing some degree of buoyancy and is selling at US$ 69.00 per barrel. 

The London and New York markets started the day yesterday on a steady note and trading close to par, but the London market soon started to attract some selling pressure and slipped back into modest negative territory, to see a softer London market and a relatively steady New York market enter the early afternoon trade.   As the afternoon progressed the London market came under more pressure and with sell stops being triggered to accentuate the losses and soon followed by the New York market, which fell back to price levels last seen over four and three-quarter years ago and before the markets managed to steady and head towards an overall very soft close for the day.  

The London market ended the day on a very negative note and with 77.8% of the earlier losses of the day intact, while the New York market ended the day on a likewise very negative note and with 84.7% of the earlier losses of the day intact.   This close does little to inspire confidence, but with the thoughts that the New York market in particular is somewhat oversold and with the U.S. dollar tending to steady rather than show more muscle, one might suspect that the markets shall open on a steady to perhaps even register some small degree of corrective buoyancy for early trade today.   Against the prices set yesterday, as follows: 

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

SEP    1643 – 26                                             SEP    102.40 – 2.65

NOV   1592 – 28                                             DEC    106.00 – 2.50

JAN    1583 – 25                                             MAR   109.25 – 2.50

MAR   1592 – 23                                             MAY   111.65 – 2.40

MAY   1605 – 23                                              JUL    114.00 – 2.40

JUL    1619 – 23                                              SEP    116.35 – 2.40

SEP    1632 – 23                                              DEC   119.70 – 2.35

NOV   1646 – 22                                              MAR   123.00 – 2.35

JAN    1658 – 22                                              MAY   125.10 – 2.35

MAR   1669 – 22                                              JUL    127.15 – 2.30