Coffee Market Report September 05 2018

The Uganda Coffee Development Authority have reported that the countries coffee exports for the month of July were 34,202 bags or 8.01% lower than the same month last year, at a total of 393,002 bags.   This performance has contributed to the countries cumulative coffee exports for the first ten months of the present October 2017 to September 2018 coffee year to be 183,343 bags or 4.77% lower than the same period in the previous coffee year, at a total of 3,661,636 bags. 

More significant though is while the Ugandan coffee exports for these ten months were only 4.77% lower, the value of these exports was US$ 61,638,488.00 or 13.42% lower than the same period in the previous coffee year.   This decline in value becoming a real problem for most producers and with the exception of Brazil, where the sharp devaluation of the Brazil Real has been able to assist to counter the softening international coffee prices. 

Likewise, the sharply higher yield for this year’s crop assist to lower unit production costs, to further assist the Brazilian coffee farmers to not suffer too much, from the softening of the international coffee prices.   Albeit that even for Brazil coffee farmers, this cannot really be considered a perfect year. 

An official of the Coffee Board of India is reported to have estimated that due to the damage caused by the excessive monsoon rains in south west India, that it is likely to cause losses of approximately 1.37 million bags.  These are however unofficial figures and for the present and in light of the high levels of consumer market stocks, the bumper new Brazil crop and the forecast for another bumper Vietnam crop due, are having no impact upon the prevailing bearish coffee market sentiment. 

Following reports from leading meteorologists in the U.S.A. and Australia that there is a good chance that a new El Niño phenomenon in the Pacific Ocean to start developing later this year, the Colombian Environment Minister is reported to have voiced concern over the potential for damaging dry weather conditions to start to impact in Colombia by November.   But with the El Niño still only a chance and in terms of an El Niño needing to be a severe one to really do high volumes of damage to the coffee farms in Colombia, this is not yet a supportive factor for coffee market sentiment. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 34.55 usc/Lb., while this equates to 34.06% 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 10,637 bags yesterday; to register these stocks at 2,223,426 bags.  There were meanwhile a smaller in number 1,373 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 210,984 bags. 

Many of the commodity markets with many returning from the U.S.A. Labour Day long weekend encountered renewed muscle for the U.S. dollar and with many markets tending softer, to see the overall macro commodity index taking a softer track for the day.   The Sugar, Cotton, Orange Juice, Corn and Soybean markets nevertheless ended the day on a positive note, while the Oil, Natural Gas, Cocoa, Coffee, Copper, Wheat, 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 0.39% lower; to see this index registered at 402.24.  The day starts with the U.S. Dollar steady and trading at 1.286 to Sterling, at 1.159 to the Euro and with the dollar buying 4.156 Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 76.90 per barrel. 

The London and New York markets started the day yesterday on a softer note and maintained a softer track, into the early afternoon trade.   As the afternoon progressed the New York market started to come under pressure and with sell stops being triggered moved swiftly deeper into negative territory and to twelve-year lows, which was soon followed by increased selling coming into play within the London market, which fell back to two and half year lows.   Both markets did however bounce back from the lows and in quite a dramatic fashion within the New York market, with the London market making a reasonable recovery and the New York market recovering most of the earlier losses of the day. 

The London market ended the day on a negative note and with 58.3% of the earlier losses of the day intact, while the New York market ended the day on a modestly negative note, having recovered 2.80 usc/Lb. or 88.9% of the earlier losses of the day by the close.    The ability of the volatile New York market to have bounced back yesterday and with the possibility that there is some degree of exhaustion on the part of the well sold funds, might assist towards 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    1543 – 23                                             SEP      97.75 – 0.35

NOV   1475 – 14                                             DEC    101.45 – 0.35

JAN    1475 – 12                                             MAR   104.75 – 0.35

MAR   1488 – 11                                             MAY   107.05 – 0.40

MAY   1506 – 10                                              JUL    109.40 – 0.35

JUL    1523 – 11                                              SEP    111.75 – 0.35

SEP    1540 – 11                                              DEC   115.20 – 0.35

NOV   1556 – 8                                                MAR   118.50 – 0.35

JAN    1570 – 6                                                MAY   120.50 – 0.45

MAR   1586 – 6                                                JUL    122.35 – 0.45