Coffee Market Report September 20 2018

The coffee markets aside from the building debate between coffee producers as to how to do something about the soft nature of the reference prices of the coffee terminal markets, are devoid of any striking fundamental news.  With the large new Brazil crop this year, the prospects for another large new Vietnam crop soon to start being harvested, steadily rising New York certified stock levels and a weak Brazil Real encouraging new crop sales, continuing to fuel speculative bearish sentiment. 

The problem is that while producers are addressing the global consumer market industries to see what they can do to assist to buoy prices, the very nature of free trade and the stiff competition within the consumer markets, really does not allow for the consumer market industries to assist.  Leaving producers aside from the few that have gained relief from weakening currencies, to have to suffer the pain of selling new crops at close to cost and often, below cost of production. 

There have though been some questions coming to the fore, as to what impact might next months elections in Brazil might have upon the value of the Brazil Real.  With thoughts being voiced that should there be some economic confidence building results coming to the fore, it might assist towards a recovery for the currency.   A factor that would dampen selling spirits on the part of the farmers and coffee cooperatives and in anticipation of this, it would likely encourage some short covering activity to assist to buoy value within the New York market.  

The November 2018 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 29.25 usc/Lb., while this equates to 30.25% 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 12,827 bags yesterday; to register these stocks at 2,341,231 bags.  There were meanwhile a smaller in number 8,314 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 107,121 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, Sugar, New York arabica Coffee, Cotton, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Natural Gas, Cocoa, London robusta Coffee, Copper and Orange Juice markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.54% higher; to see this index registered at 401.26.  The day starts with the U.S. Dollar steady and trading at 1.315 to Sterling, at 1.168 to the Euro and with the dollar buying 4.130 Brazilian Real, while North Sea Oil is showing a degree of buoyancy and is selling at US$ 80.00 per barrel. 

The London market started the day yesterday on a modestly negative note, while the New York market started the day trading around par but soon losing its way, to join the London market within modestly negative territory into the early afternoon trade.  As the afternoon progressed the London market moved further into negative territory while the New York market attracted some support to recover and move up into positive territory and to set the markets for a mixed close for the day. 

The London market ended the day on a negative note and with 50% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 63% of the earlier gains of the day intact.   This mixed close and despite some corrective buoyancy for the New York market does little to inspire confidence, but one might think that there shall be some degree of caution and set the markets for a hesitant steady start, for early trade today.   Against the prices set yesterday, as follows: 

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

SEP    1551 + 18

NOV   1487 – 5                                               DEC      96.70 + 0.85

JAN    1492 – 6                                               MAR   100.05 + 0.85

MAR   1510 – 7                                               MAY   102.45 + 0.80

MAY   1527 – 9                                                JUL    104.85 + 0.85

JUL    1545 – 9                                                SEP    107.20 + 0.85

SEP    1561 – 9                                                DEC   110.65 + 0.85

NOV   1575 – 8                                                MAR   114.00 + 0.85

JAN    1589 – 8                                                MAY   116.05 + 0.85

MAR   1607 – 8                                                JUL    117.90 + 0.85