Coffee Market Report September 06 2018

The International Coffee Organisation have reported that the global coffee exports for the month of July were 4.6% higher than the same month last year, to total 10.11 million bags.   These exports they say, have contributed to the cumulative exports for the first ten months of the present October 2017 to September 2018 coffee year to be 0.9% higher than the same period in the previous coffee year, at a total of 101.2 million bags. 

In terms of these exports for the first ten months of the October 2017 to September 2018 coffee year, they report that the arabica coffee exports were 0.7% lower than the same period in the previous coffee year, at a total of 63.39 million bags.   While the exports of robusta coffees for these first ten months of the present coffee year were 3.6% higher than the same period in the previous coffee year, at a total of 37.81 million bags. 

These export numbers are relatively flat but with global consumption growth mostly related to the new markets in Asia and the middle east and to producer domestic market demand, the developed mainstream consumer market stocks in North America, Western Europe and Japan remain relatively large and sufficient to cater for in excess of three months of industry demand.   This factor contributing towards industry complacency in terms of their short-term view towards the coffee markets, while the fund and speculative sectors of the market look towards the pending impact of increased quantities of Brazil and Vietnam coffees as a reason to remain bearish in sentiment. 

While with the new Mexican and Central American crop also on the horizon and forecast to be in excess of 20 million bags on the nearby horizon, it is not assisting to buoy market sentiment.   In the meantime, this producer bloc contributing to 75.85% of the steadily rising certified coffee stocks of the New York exchange, which is a further factor that is contributing towards bearish sentiment.   Albeit that with the funds already heavily short sold into the New York market, it is difficult to foresee much more downside potential for this market.  But nothing is impossible with this speculative sector of the market. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 35.72 usc/Lb., while this equates to 34.41% 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 13,450 bags yesterday; to register these stocks at 2,236,876 bags.  There were meanwhile a larger in number 19,379 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 191,605 bags. 

Many of the commodity markets encountered some softening of the relative strong U.S. dollar yesterday, but with many markets nevertheless having a soft day, to see the overall macro commodity index taking a softer track for the day.   The Sugar, Coffee, Copper, Gold and Silver markets ended the day on a positive note, while the Oil, Natural Gas, Cocoa, Cotton, Orange Juice, Wheat, Corn and Soybean markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.25% lower; to see this index registered at 401.24.  The day starts with the U.S. Dollar steady and trading at 1.291 to Sterling, at 1.162 to the Euro and with the dollar buying 4.143 Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 76.40 per barrel. 

The London and New York markets started the day yesterday on a steady note and with the London market trading mostly to the positive side of par and the New York market showing modest buoyancy, into the early afternoon trade.  As the afternoon progressed the London market moved up to join the New York market within positive territory and setting a base for improved confidence, which brought with it short covering buy stops to accentuate the gains within both the markets and to set the markets on a track for a strong close for the day. 

The London market ended the day on a very positive note and with 92.9% of the gains of the day intact, while the New York market ended the day on a likewise very positive note and with 95.9% of the earlier gains of the day intact.   This close is most likely to be seen to be a corrective recovery rather than a reason to inspire confidence in a more positive direction for the markets, but there might still be some follow through support and a steady start due for early trade today.   Against the prices set yesterday, as follows: 

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

SEP    1567 + 24                                             SEP    100.10 + 2.35

NOV   1501 + 26                                             DEC    103.80 + 2.35

JAN    1499 + 24                                             MAR   107.10 + 2.35

MAR   1510 + 22                                             MAY   109.40 + 2.35

MAY   1528 + 22                                              JUL    111.75 + 2.35

JUL    1545 + 22                                              SEP    114.10 + 2.35

SEP    1562 + 22                                              DEC   117.45 + 2.25

NOV   1578 + 22                                              MAR   120.75 + 2.25

JAN    1591 + 21                                              MAY   122.65 + 2.15

MAR   1607 + 21                                              JUL    124.35 + 2.00