Coffee Market Report September 12 2018

The latest assessment of the traditionally very conservative Brazil Institute of Geography and Statistics for the new Brazil coffee crop that they now estimate at 57.4 million bags, is proving to be yet another negative nail for sentiment within the coffee markets.  One would usually see this institutes numbers to be approximately 10% below reality and if one is to extrapolate the number, it is supportive for the many other forecasts that had pegged this crop at between 62 million and 64 million bags. 

The forecasts for early spring rains due over the main coffee districts in Brazil and the softening of the Brazil Real relative to the U.S. dollar over and above the prospects for a surplus coffee supply for the new October 2018 to September 2019 coffee year, had its impact within the volatile New York market yesterday.  A market that looks to fundamental news that aside from some problems in India, is nothing but negative in nature. 

This is a dismal situation for coffee farmers in both the Mexican and Central American producer bloc and Vietnam, with their new crop harvest now only a few weeks away from starting, as they focus upon soft reference prices within the coffee terminal markets.  While with the mainstream coffee markets in Europe, North America and Japan having had an extraordinarily hot summer that has impacted upon overall coffee consumption, it has resulted in more than sufficient stocks at hand within these markets, to limit the volumes of nearby demand.  

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 33.41 usc/Lb., while this equates to 33.26% 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 11,245 bags yesterday; to register these stocks at 2,275,034 bags.  There were meanwhile a larger in number 17,634 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 172,454 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 32,500 bags or 2.61% over the week of trade leading up to Monday 10th. September, to see these stocks registered at 1,275,667 bags on the day. 

Many of the commodity markets encountered a relatively steady U.S. dollar yesterday and with a mixed day for the markets, to see the overall macro commodity index taking a steady track for most of the day.  The Oil and Gold markets ended the day on a positive note and the London robusta coffee market ended the day on a steady note, while the Sugar, Cocoa, New York arabica Coffee, Cotton and Copper 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 402.45.  The day starts with the U.S. Dollar steady and trading at 1.300 to Sterling, at 1.158 to the Euro and with the dollar buying 4.152 Brazilian Real, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 79.25 per barrel. 

The London market started the day yesterday trading marginally south of par and the New York market started the day with modest buoyancy and with both the markets heading into the early afternoon trade, on a steady note.    As the afternoon progressed the London market initially added some value and the New York market struggled to maintain par, with the New York market attracting sell stop and heading south on steady negative track and the London market slipping back towards par. 

The London market ended the day on a modestly positive note and with 9.1% of the earlier gains of the day intact, while the New York market ended the day on a negative note and with 55.2% of the earlier losses of the day intact.  This close does little to inspire confidence and one might think that the markets are due for little better than 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    1544 + 7                                               SEP      96.20 – 1.30

NOV   1478 + 1                                               DEC    100.45 – 0.80

JAN    1481 unch                                           MAR   103.85 – 0.80

MAR   1496 – 1                                               MAY   106.30 – 0.80

MAY   1513 – 2                                                JUL    108.70 – 0.80

JUL    1530 – 2                                                SEP    111.05 – 0.80

SEP    1547 – 2                                                DEC   114.45 – 0.85

NOV   1561 – 1                                                MAR   117.75 – 0.85

JAN    1574 + 1                                                MAY   119.75 – 0.85

MAR   1591 + 1                                                JUL    121.50 – 0.85