Coffee Market Report September 21 2018

The reports from Brazil indicate that many of the main coffee districts in the South East of the country have received reasonable rains over the past week, which is likely to bring some good flowering for the coming week.   This would dictate the need for fair follow on rains for the end of the month and the first half of October to set the flowering and the week by week rainfall reports shall be closely watched, albeit that for the present there are no voices of concern over the possibility of any weather problems for Brazil. 

Meanwhile with large new crop stocks in hand and assistance from a soft currency, the farmers and cooperatives have been steady sellers and exporters are well able to cover their forward sales commitments.   With indications that following a high volume of coffee exports in August, that this month shall prove to be another month of high volume of exports. 

One would think though that following yesterday afternoon’s hardening of the Brazil Real which brought with it slowing Brazil price fixation selling activity and speculative short covering in anticipation of the effects of this, that it shall be a quite end to the week for internal coffee trade in Brazil.   The currency perhaps due for considerable volatility with the forthcoming elections in just over two weeks’ time and to be followed in five weeks’ time, with the run off for the front runners in the Presidential election. 

The November 2018 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 31.35 usc/Lb., while this equates to 31.42% 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 10,914 bags yesterday; to register these stocks at 2,352,145 bags.  There were meanwhile a larger in number 13.319 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 120,440 bags. 

The commodity markets encountered a softening U.S. dollar yesterday and with many markets adding value later in the day, to see the overall macro commodity index taking a positive track for the day.  The Natural Gas, Cocoa, Coffee, Copper, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Oil, Sugar and Cotton markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.73% higher; to see this index registered at 404.17.  The day starts with the U.S. Dollar steady and trading at 1.326 to Sterling, at 1.178 to the Euro and with the dollar buying 4.076 Brazilian Real, while North Sea Oil is steady and is selling at US$ 79.05 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 and with the London market coming back to see both markets entering the early afternoon trade on a steady note.   As the afternoon progressed both markets started to show some modest buoyancy and with the Brazil Real starting to firm further, the New York market lead the way to attract support and finally in later trade to trigger short covering buy stops within both markets.   This accelerated the gains and set both markets for a relatively strong close, but with new selling pressure coming into play and capping the markets for the day. 

The London market ended the day on a very positive note and with 91.3% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 76.2 of the earlier gains of the day intact.   This close and with the Brazil Real presently holding its firmer rate of yesterday might assist to inspire some degree of confidence and set the markets for a steady start for early trade today, against the prices set yesterday, as follows: 

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

SEP    1568 + 17

NOV   1508 + 21                                             DEC      99.75 + 3.05

JAN    1509 + 17                                             MAR   103.10 + 3.05

MAR   1526 + 16                                             MAY   105.45 + 3.00

MAY   1542 + 15                                              JUL    107.80 + 2.95

JUL    1560 + 15                                              SEP    110.15 + 2.95

SEP    1576 + 15                                              DEC   113.55 + 2.90

NOV   1590 + 15                                              MAR   116.90 + 2.90

JAN    1604 + 15                                              MAY   118.95 + 2.90

MAR   1621 + 14                                              JUL    120.80 + 2.90