Coffee Market Report September 14 2018

The Brazil new crop harvest is mostly completed and with scattered rain showers starting to come to many of the main coffee districts, but nothing general and intensive is so far being forecast for the month.   But it is really the month of October that traditionally is the start of the full spring and summer rain season for the Brazil coffee districts and so far, the intermittent rain reports are not a matter of concern.  

Meanwhile the soft nature of the Brazil Real that is trading today at 4.206 to the U.S. dollar has assisted Brazil’s coffee farmers to counter the negative nature of the soft reference prices of the international coffee terminal markets, to see fuel steady internal market selling of new crop coffees.  Albeit that despite the assistance of the soft exchange rate, the internal market coffee prices in Brazil are still not very profitable for many farmers. 

There is though some added assistance, in that aside from the assistance that comes with the exchange rate, the fact that overall coffee farm yields for this year’s new crop were on average 25% higher than the previous crop, it has contributed to lower unit costs of production.   A factor that assists towards profitable coffee sales, for the majority of the Brazilian coffee farmers and will ensure a steady stream of new crop coffees coming to the consumer markets in the coming months. 

The Climate Prediction Centre of the National Weather Service of the U.S.A. in its monthly report, has reported that they foresee a 50% to 55% chance for a new El Niño phenomenon to start to develop in the Pacific Ocean before the end of the year.  Furthermore a 65% to 70% chance for an El Niño to develop early in the coming year, but while this phenomenon can be threatening for coffee production for the Pacific Rim producers and even further afield, this is only if it develops into a severe rather than modes El Niño.  Thus for the present, there is little in the way of market reaction to this possible threat. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 32.61 usc/Lb., while this equates to 32.4% 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 11,390 bags yesterday; to register these stocks at 2,298,706 bags.  There were meanwhile a smaller in number 10,494 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 142,308 bags. 

Many of the commodity markets encountered a further softening of the U.S. dollar yesterday, but this did little to assist many of the markets and many markets came under pressure through the day, to see the overall macro commodity index taking a softer track for the day.   The Natural Gas and Copper markets nevertheless ended the day on a positive note, while the Oil, Sugar, Cocoa, Coffee, Cotton, Orange Juice, Wheat, Corn, 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 0.59% lower; to see this index registered at 402.46.  The day starts with the U.S. Dollar steady and trading at 1.311 to Sterling, at 1.169 to the Euro and with the dollar buying 4.206 Brazilian Real, while North Sea Oil is steady and is selling at US$ 77.90 per barrel. 

The London and New York markets started the day yesterday trading around par, but with the London market soon coming under pressure and moving south into negative territory, while the New York market remained relatively steady and trading around par, into the early afternoon trade.   As the afternoon progressed the New York market and in line with the softening nature of the overall macro commodity index came under pressure and moved back to join the London market within negative territory.  Both markets proceeding to take a negative track, through to the close. 

The London market ended the day on a negative note and with 84.2% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 80.6% of the earlier losses of the day intact.   This close does not assist to paint a pretty picture for the charts and with the soft Brazil Real in play, 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    1555 – 27                                             SEP      96.40 – 1.45

NOV   1500 – 16                                             DEC    100.65 – 1.45

JAN    1508 – 13                                             MAR   104.05 – 1.45

MAR   1526 – 12                                             MAY   106.45 – 1.45

MAY   1544 – 12                                              JUL    108.85 – 1.45

JUL    1561 – 12                                              SEP    111.20 – 1.45

SEP    1578 – 12                                              DEC   114.65 – 1.40

NOV   1591 – 12                                              MAR   117.95 – 1.35

JAN    1604 – 11                                              MAY   120.00 – 1.35

MAR   1620 – 11                                              JUL    121.80 – 1.35