Coffee Market Report September 19 2018

The traditionally conservative Brazil governments agricultural statistics agency CONAB and the new crop harvest close to completion, have revised 3.2% higher from their May 2018 forecast the new Brazil crop.  This crop they now foresee to be 59.87 million bags and made up from 45.9 million bags of arabica coffees and 13.97 million bags of conilon robusta coffees. 

The same report has estimated that this larger crop that they say is 33.13% larger than the previous 2017 crop, they say has been harvested off 2.3% less land than the previous crop.  The report estimating that this year’s crop has come off approximately 2.15 million hectares, which would extrapolate to an overall yield of 1,671 Kgs., per hectare. 

It must be noted though in terms of the official CONAB overall crop report, that their assessment of the previous 2017 crop proved to be between 10% and 14% lower than many other private trade and industry post-harvest and marketing year assessments of the crop, which illustrates the conservative nature of the CONAB report.   A factor that somewhat underpins the many trade and industry new crop forecasts and reports that exceed the 62 million bags mark and with some, significantly higher in number and the report could be seen to be rather bearish for market sentiment. 

West Africa’s leading robusta coffee exporter the Ivory Coast have reported that the countries coffee exports for the month of July were 3,117 bags or 2.83% higher than the same month last year, at a total of 113,183 bags.   This contributes to the country’s cumulative coffee exports for the first seven months of 2018 to be 209,717 bags or 48.72% higher than the same period in the previous year, at a total of 640,183 bags.   Therefore, the country remains on track for exports for the year, which some industry players have forecast to be in excess of 1 million bags. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 28.17 usc/Lb., while this equates to 29.39% 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 8,583 bags yesterday; to register these stocks at 2,328,404 bags.  There were meanwhile a larger in number 20,181 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 98,807 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 53,500 bags or 4.19% over the week of trade leading up to Monday 17th. September, to see these stocks registered at 1,329,167 bags on the day. 

The commodity markets encountered a steady U.S. dollar yesterday and a mixed days trade, to see the overall macro commodity index taking a steady to positive track for the day.  The Oil, Natural Gas, Cocoa, London robusta Coffee, Copper and Wheat markets ended the day on a positive note, while the Sugar, New York arabica Coffee, Cotton, Orange Juice, 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 0.18% higher; to see this index registered at 399.11.  The day starts with the U.S. Dollar near to steady and trading at 1.315 to Sterling, at 1.168 to the Euro and with the dollar buying 4.159 Brazilian Real, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 79.45 per barrel. 

The London market started the day yesterday on a modest negative note, while the New York market started the day trading around par and with the London market recovering to trade around par and the New York market moving north into positive territory, for early afternoon trade.   As the afternoon progressed and with the London market trading quietly on a sideways track around par, the New York market started to attract renewed speculative selling pressure and triggering sell stops, to hit lows last seen in December 2005, before bouncing back from the lows.   While the London market attracted support, to move up into positive territory within late trade. 

The London market ended the day on a positive note and with 86.7% of the earlier gains of the day intact, while the New York market ended the day on a negative note and with 65.9% of the earlier losses of the day intact.   This mixed close does little to inspire confidence, but one might think that the New York market is by now oversold and that once again is due for a steady to corrective start for early trade today, while the London market might start to attract producer selling pressure.   To set the markets for a mixed start for early trade today, against the prices set yesterday, as follows: 

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

SEP    1533 + 12                                             SEP      92.00 – 1.45

NOV   1492 + 13                                             DEC      95.85 – 1.45

JAN    1498 + 12                                             MAR     99.20 – 1.55

MAR   1517 + 11                                             MAY   101.65 – 1.55

MAY   1536 + 11                                              JUL    104.00 – 1.60

JUL    1554 + 11                                              SEP    106.35 – 1.60

SEP    1570 + 11                                              DEC   109.80 – 1.60

NOV   1583 + 10                                              MAR   113.15 – 1.60

JAN    1597 + 10                                              MAY   115.20 – 1.60

MAR   1615 + 10                                              JUL    117.05 – 1.55