Coffee Market Report September 28 2018

Reports indicate that the recent rains over the major coffee district of the south of Minas Gerais in Brazil resulted in good flowerings for the majority of the farms and with more rains forecast for the coming days, the potential for these flowers to set.   This albeit still early days, bringing to the fore the perspective for follow on good crop for the coming year.    But following this year’s bumper harvest, many would speculate that biennial bearing factors would dictate that the next 2019 crop should be somewhat lower than this year’s crop. 

Meanwhile the Brazil Council of Coffee Exporters Cecafé have reported that Brazil’s cumulative coffee exports for the first eight months of this year were 4.5% higher than the same period in the previous year, at approximately 20.5 million bags.  While one would speculate that following the completion of the harvest of the large new crop and including a significantly higher volume of conilon robusta coffees that were not available in quantity for the second half of last year, that the exports for this year shall eventually prove to be significantly higher than the previous year.

 

With the month of September ending, the General Statistics Department of the Vietnam government have estimated that the coffee exports for the month shall be reasonable in volume, to total approximately 2.17 million bags.   This they say shall contribute to the country’s cumulative coffee exports for the first nine months of this year to be 19.6% higher than the same period in the previous year, to total approximately 24.3 million bags. 

Ahead of the new crop harvest the Vietnam Coffee and Cocoa Association Vicofa, have forecast that due to heavy rain cherry drop and to many farmers having switched from coffee to alternative tree crops, that the new coffee crop shall be approximately 2.3% lower than the previous crop, to total approximately 28.5 million bags.   This forecast is contrary to many other private trade and industry forecasts that might well exceed 30 million bags, but in terms of global coffee supply following the large new Brazil crop and including much higher volumes of conilon robusta coffees, one might not think that this latest forecast shall have much effect upon the presently bearish market sentiment. 

The Ivory Coast as West Africa’s largest robusta coffee producer have reported that the countries coffee exports for the month of August were 15,067 bags or 24.05% higher than the same month last year, at a total of 77,717 bags.   This has contributed to the country’s cumulative coffee exports for the first eight months of this year to be 232,333 bags or 45.82% higher than the same period in the previous year, at a total of 739,383 bags.   Thus, indicating that the country remains on track for the forecast for exports for this year, of in excess of 1 million bags. 

The January 2019 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 30.72 usc/Lb., while this equates to 30.94% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 5,143 bags yesterday; to register these stocks at 2,372,951 bags.  There were meanwhile a larger in number 8,826 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 87352 bags. 

The commodity markets were mixed in trade yesterday, to see the overall macro commodity index taking a generally sideways track for the day.    The Oil, Natural Gas, Coffee, Corn and Soybean markets ended the day on a positive note and the Sugar market ended the day on a steady note, while the Cocoa, Cotton, Copper, Orange Juice, Wheat, 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 0.34% higher; to see this index registered at 402.38.  The day starts with the U.S. Dollar steady and trading at 1.306 to Sterling, at 1.162 to the Euro and with the dollar buying 4.013 Brazilian Real, while North Sea Oil is steady and is selling at US$ 81.70 per barrel. 

The London and New York market dipped back into negative territory during trade yesterday, but with both markets bouncing off the lows of the day.   This brought with it the triggering of short covering buy stops, which assisted the markets to recover back into positive territory and with the New York market in particular, posting some good gains for the day. 

The London market ended the day on a positive note and with 62.5% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 86.1% of the earlier gains of the day intact.   This close does assist to inspire a degree of confidence and one might think that the markets could be due for a follow through steady start, against the prices set yesterday, as follows: 

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

NOV   1516 + 5                                               DEC      99.30 + 1.55

JAN    1512 + 4                                               MAR   102.65 + 1.50

MAR   1529 + 5                                               MAY   105.00 + 1.50

MAY   1544 + 5                                                JUL    107.40 + 1.55

JUL    1558 + 5                                                SEP    109.70 + 1.50

SEP    1574 + 4                                                DEC   113.10 + 1.50

NOV   1590 + 5                                                MAR   116.45 + 1.50

JAN    1605 + 6                                                MAY   118.55 + 1.45

MAR   1622 + 7                                                JUL    120.35 + 1.45

MAY   1624 + 7                                                SEP    122.10 + 1.50