Coffee Market Report August 17 2018

The respected Brazilian analysts Safras & Mercado have reported that so far 88% of the countries area under coffee has been harvested, with the conilon robusta coffee farms having mostly completed their new crop harvest and with the weather conditions favourable for harvesting, the arabica coffee farms coming close to completion.  While in terms of volume, it is related to approximately 38 million bags of new crop arabica coffees and to approximately 16 million bags of conilon robusta coffees, with approximately 7.3 million bags of arabica coffees still to be harvested. 

Meanwhile with the weaker Brazil Real this week countering to a degree the negative effects of the softer coffee terminal markets, there is still steady internal market new crop coffee trade reported.  But indications are that this trade is slow and steady, rather than aggressive in nature, which would usually have been expected in terms of a significantly large new crop. 

One would expect that many of the Brazilian farmers are conservative sellers of new crop coffees to cover their immediate financial requirements, while they await direction from the forthcoming October to March rain season.   Thinking that should there be any so far unforeseen problems with the spring and summer rain season, that a dry start to the season would both lower the next 2019 crop potential and buoy speculative sentiment within the terminal markets and to add value to their remaining new crop stocks.  

But the question is if the rains prove to be normal and indicate the potential for another good crop for the coming year, what effect this might have upon the markets for the last quarter of the year.  Albeit that with the funds and speculative sectors of the markets already well sold short, there might still be some limits to the short to medium term downside potential for the New York arabica coffee market.  There might however be some additional negative sentiment due for the London market, should significant volumes of new crop Brazil conilon robusta coffees start getting tendered to the certified stocks of this market. 

It is reported that physical trade within the Asian robusta markets is lacklustre at present, with the already well sold Vietnamese farmers now looking towards the start of their new crop harvest in approximately eight weeks’ time.   While following the decline in value of the reference prices of the London market, there is price resistance within the internal market in Indonesia. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 32.96 usc/Lb., while this equates to 31.29% 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 11,200 bags yesterday; to register these stocks at 2,115,055 bags.  There were meanwhile a smaller in number 10,265 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 219,763 bags. 

The commodity markets encountered a steady dollar yesterday and with many markets attracting corrective support, to see the overall macro commodity index showing some degree of buoyancy for the day.   The Oil, Sugar, Cocoa, London robusta Coffee, Cotton, Copper and Gold markets ended the day on a positive note, while the New York arabica Coffee market faltered and ended the day on a negative note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.09% higher; to see this index registered at 398.32.  The day starts with the U.S. Dollar steady and trading at 1.272 to Sterling, at 1.138 to the Euro and with the dollar buying 3.906 Brazilian Real, while North Sea Oil is steady and is selling at US$ 69.45 per barrel. 

The London market started the day yesterday trading marginally above par, while the New York market started the day on a positive note and with both markets taking a positive track, into the early afternoon trade.   As the afternoon progressed, the Markets started to add value, but with the New York market coming off the boil and heading back into negative territory, while the London market moved back towards par.  

The London market ended the day on a modestly positive note and with 30.8% of the earlier gains of the day intact, while the New York market ended the day on a negative note and with 59.1% of the earlier losses of the day intact.   This close and with the markets tending to falter in late trade does little to inspire confidence, but one might nevertheless expect to see some degree of caution in respect of the somewhat oversold nature of the New York market and slow producer selling activity from most origins, to set the markets for 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    1668 + 25                                             SEP    101.70 – 0.70

NOV   1596 + 4                                               DEC    105.35 – 0.65

JAN    1586 + 3                                               MAR   108.55 – 0.70

MAR   1594 + 2                                               MAY   110.90 – 0.75

MAY   1607 + 2                                                JUL    113.30 – 0.70

JUL    1622 + 3                                                SEP    115.65 – 0.70

SEP    1635 + 3                                                DEC   119.00 – 0.70

NOV   1649 + 3                                                MAR   122.25 – 0.75

JAN    1661 + 3                                                MAY   124.30 – 0.80

MAR   1672 + 3                                                JUL    126.35 – 0.80