Coffee Market Report August 30 2018

Further to the report from the General Statistical Office in Vietnam that estimated that the countries coffee exports for the first eight months of this year are 14.8% higher than the same period last year, they have reported that the revenue from these exports is 3.1% lower than that of the same period last year.  This clearly illustrating the problems that coffee farmers globally and with the exception of the few countries that have benefited from weakening currency relative to the U.S. dollar, are presently facing. 

It is however a much worse situation for most producer countries as even at the present price levels, the efficient and high yielding Vietnamese coffee farmers are mostly still able to make profit out of their coffee crops.  But the profits shall be diminished and there is the possibility that many farmers within this the second largest coffee producer, shall be looking to plant alternative and more profit sustainable crops, such as avocado and macadamia nuts.   A factor that might cap the steady growth that has been experienced over the recent years, in the Vietnam coffee industry. 

The Bureau of Meteorology in Australia have reaffirmed that there is a 50% chance for a new El Niño phenomenon to develop within the Pacific Ocean in the coming months, but with no indication of how intense this might be.   Thus, in terms of short term weather factors as they relate to the coffee markets and aside from the potential damage to the new Indian crop that has come with the excessive monsoon rains in south west India, there is little in the way of weather related supportive news for the depressed and short sold coffee markets. 

This aside, the markets remain devoid of any striking fundamental news and remain focused upon the evidence of the large new Brazil crop, the forthcoming new Colombian main crop, the forthcoming large new Vietnam crop and the forthcoming Mexican and Central American crop, which shall all start to impact during the last quarter of this year.   While in the meantime, with the certified stocks of the volatile New York market steadily rising, it confirms that there is no shortage of coffee ahead of the surge of new crop coffee supply that is shortly due to come into play and supports the bearish sentiment of the speculative and managed money fund sectors of the coffee market.  

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 32.77 usc/Lb., while this equates to 31.85% 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 7,599 bags yesterday; to register these stocks at 2,205,398 bags.  There were meanwhile a smaller in number 1,582 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 210,974 bags. 

The commodity markets encountered a softening of the U.S. dollar yesterday and with many markets showing some degree of buoyancy, to see the overall macro commodity index taking a positive track for the day.   The Oil, Natural Gas, Sugar, Cocoa, London robusta Coffee, Orange Juice, Wheat, Corn and Soybean markets ended the day on a positive note and the New York arabica Coffee market was near to steady for the day, while the Cotton, Copper, Gold and Silver markets ended the day on a negative note.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.37% higher; to see this index registered at 401.21.  The day starts with the U.S. Dollar steady and trading at 1.308 to Sterling, at 1.169 to the Euro and with the dollar buying 4.106 Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 76.20 per barrel. 

The London market started the day yesterday trading on a steady note and remaining close to par, while the New York market started the day with modest buoyancy, but with both markets taking a modestly negative stance, into the early afternoon trade.   As the afternoon progressed the markets moved back up into positive territory, but while the London market continued to maintain a positive stance for the rest of the day, the New York market fell back to take a sideways stance and trading around par for the rest of the day. 

The London market ended the day on a positive note and with 58.8% of the earlier gains of the day intact, while the New York market ended the day on a modestly negative note and with 33.3% of the earlier losses of the day intact.   This close was overall flat in nature and does little to influence direction and one would think that it shall lead towards another hesitantly steady start for early trade today, against the prices set yesterday, as follows:  

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

SEP    1621 + 3                                               SEP      98.65 – 0.60

NOV   1546 + 10                                             DEC    102.90 – 0.15

JAN    1541 + 13                                             MAR   106.25 – 0.15

MAR   1550 + 13                                             MAY   108.65 – 0.10

MAY   1564 + 13                                              JUL    111.00 – 0.15

JUL    1579 + 13                                              SEP    113.40 – 0.15

SEP    1596 + 14                                              DEC   116.85 – 0.15

NOV   1611 + 14                                              MAR   120.20 – 0.15

JAN    1623 + 14                                              MAY   122.30 – 0.15

MAR   1637 + 14                                              JUL    124.15 – 0.15