Coffee Market Report August 31 2018

The respected Brazilian analysts Safras and Mercado who have forecast the new Brazil crop at what many see to be a conservative number of 60.5 million bags, have estimated that 94% of this new crop has been harvested.  While in terms of quality, they have estimate that it is good and with a relatively high percentage of bolder bean. 

In terms of weather in Brazil with the spring season starting this weekend, the main coffee districts are forecast to be mostly dry for the coming couple of weeks, but this is seasonally normal and with the new spring and summer rain season traditionally only due by early October.  There have though been some unseasonal rains in the recent weeks and some incidents of early flowering towards the next 2019 crop, with speculation being voiced that much of this might without follow on rains, suffering from abortion. 

It is however early days and while there are already reports that presume that the next 2019 Brazil crop and following this year’s bumper crop, shall suffer from biennial bearing and come in with numbers much lower than the present crop, these forecasts are having no impact upon short term market sentiment.   But there most certainly be focus on the rainfall reports out of Brazil in the month of October, as this shall determine the size and quality of the flowerings towards the coming years crop and in the meantime for the coming few weeks, one would expect Brazil weather news to have minimal influence upon market sentiment. 

The coffee robusta coffee markets in Asia are presently quiet with the Vietnam internal market stocks low and some degree of price resistance slowing business, while there is little in the way of selling aggression within the well sold internal market in Indonesia.   It is however and depending on the end of the rain season in Vietnam only five to six weeks before the new crop harvest is due to start, with the possibility that the large new conilon robusta coffee crop in Brazil shall come to the fore and provide for some degree of competition for the Vietnam coffees within the consumer markets.

 

One might speculate that despite the fact that the availability of four to five million bags of Brazil robusta coffees coming to the consumer markets in the coming months, shall be dwarfed by the volume of robusta coffee that is due from another bumper Vietnam crop, that they shall have an influence upon sentiment within the London market.    Thinking that if by late October the weather conditions in Brazil are looking normal and with good rains being experienced and indicating the possibility for another good crop in the coming year, that it shall inspire internal market conilon robusta coffee sales and with these surplus to domestic market demand coffees flowing towards the certified stocks of the market. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 33.61 usc/Lb., while this equates to 32.74% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,654 bags yesterday; to register these stocks at 2,203,744 bags.  There were meanwhile a largerer in number 17,879 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 193,095 bags. 

The commodity markets encountered a steady U.S. dollar and were mixed in trade yesterday, but with many markets tending softer and the overall macro commodity index taking a softer track for the day.   The Oil, Natural Gas, Suga and Orange Juice markets ended the day on a positive note that the Corn market was steady for the day, while the Cocoa, Coffee, Cotton, Copper, Wheat, Soybean, Gold 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 0.33% lower; to see this index registered at 399.88.  The day starts with the U.S. Dollar steady and trading at 1.302 to Sterling, at 1.168 to the Euro and with the dollar buying 4.150 Brazilian Real, while North Sea Oil is steady and is selling at US$ 77.40 per barrel. 

The London and New York markets started the day yesterday on an initial steady note, but with both market soon slipping to spend the morning trading marginally south of par and maintaining this stance into the early afternoon trade.   As the afternoon progressed and with a weaker Brazil Real having some influence upon sentiment and trade, the markets came under further pressure and slipped deeper into negative territory.   But while the London market only bounced back a little from the lows of the day, the New York market managed to attract sufficient support to make a respectable recovery from the earlier losses of the day. 

The London market ended the day on a negative note and with 77.4% of the earlier losses of the day intact, while the New York market ended the day on a modestly negative note and having recovered 89.1% of the earlier losses of the day.  This close and with the New York market that is due to close on Monday for the Labour Day holiday long weekend holiday and with the market having bounced back from the lows, might perhaps inspire some degree of confidence and set the markets for a steady start for early trade today.  Against the prices set yesterday, as follows: 

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

SEP    1606 – 15                                             SEP      98.95 + 0.30

NOV   1522 – 24                                             DEC    102.65 – 0.25

JAN    1518 – 23                                             MAR   106.00 – 0.25

MAR   1527 – 23                                             MAY   108.35 – 0.30

MAY   1542 – 22                                              JUL    110.70 – 0.30

JUL    1557 – 22                                              SEP    113.10 – 0.30

SEP    1573 – 23                                              DEC   116.50 – 0.35

NOV   1588 – 23                                              MAR   119.85 – 0.35

JAN    1600 – 23                                              MAY   121.95 – 0.35

MAR   1614 – 23                                              JUL    123.80 – 0.35