Coffee Market Report August 23 2018

With the decline in the value of the reference prices of the New York the Colombian government has announced that in reaction to the requests from the Colombian Coffee Growers Federation, that they shall be investigating ways in which they can step in to assist the Colombian coffee industry. 

The Colombian Coffee Federation having made the point that with the present farm gate prices for coffee presently approximately 40% below what they would consider to be a viable and profitable price for farmers to justify growing coffee rather than alternative crops, that the prevailing prices are threatening to the future of the country’s coffee farming industry. 

The excessive rains in south west India with the monsoon rains this year having been more severe than usual, have been causing landslides and have damaged many farms, with a losses of coffee trees having been experienced on some of the farms.  So far these damage reports from coffee farms in Kerala and Karnataka are not accurately quantified, but there is no doubt that there shall be some damage to the potential for the forthcoming October 2018 to September 2019 coffee crop. 

This potential damage to the Indian crop is however in terms of the significantly larger new Brazil crop and the forthcoming repeat large new crop from Vietnam, is somewhat insignificant.   With the speculative and fund sectors of the coffee markets remaining bearish in sentiment and continue to maintain their significant short sold stance, within the coffee markets.   Particularly so, within the volatile New York arabica coffee market.   

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 30.68 usc/Lb., while this equates to 30.41% 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 9,985 bags yesterday; to register these stocks at 2,152,195 bags.  There were meanwhile a larger in number 11,730 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 203,955 bags. 

The commodity markets encountered a relatively steady U.S. Dollar and had a mixed day yesterday, to see the overall macro commodity index tending softer for much of the day.  The Oil, Sugar, Cocoa, Orange Juice and Gold markets ended the day on a positive note, while the Natural Gas, Coffee, Cotton, Copper, Wheat, Corn, Soybean and Silver markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.32% lower; to see this index registered at 399.71.  The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.288 to Sterling, at 1.157 to the Euro and with the dollar buying 4.040 Brazilian Real, while North Sea Oil is steady and is selling at US$ 73.55 per barrel. 

The London and New York markets started the day yesterday on a softer note, but with the London market returning to trade close to par into the early afternoon trade.   As the afternoon progressed and with the London market remaining mostly within modest negative territory, the New York market came under further pressure and with stop loss selling coming into play the market hit new twelve-year lows, but to bounce back from the lows and a near to 3 usc/Lb. recovery from the lows of the day taking the market up and well into positive territory.   This recovery for the New York market was however short lived and with a soft Brazilian Real not helping, selling pressure returned to take the New York market back into and to join the London market within negative territory. 

The London market ended the day on a negative note and with 68.4% of the earlier losses of the day intact, while the New York market likewise ended the day on a negative note and with 36.7% of the earlier losses of the day intact.  This close and the inability of the New York market to hold on to its short recovery into positive territory yesterday does little to inspire confidence, but one might think that there shall be some degree of caution hesitancy and the possibility 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    1637 – 14                                             SEP      96.40 – 1.55

NOV   1548 – 13                                             DEC    100.90 – 0.90

JAN    1536 – 13                                             MAR   104.25 – 0.90

MAR   1545 – 12                                             MAY   106.65 – 0.90

MAY   1561 – 12                                              JUL    109.10 – 0.90

JUL    1576 – 12                                              SEP    111.45 – 0.95

SEP    1592 – 13                                              DEC   114.90 – 1.00

NOV   1607 – 14                                              MAR   118.30 – 0.90

JAN    1619 – 14                                              MAY   120.35 – 0.80

MAR   1631 – 14                                              JUL    122.15 – 0.80