Coffee Market Report October 12 2018

The weather reports from Brazil confirm normal rainfall for the main coffee districts so far this month, which is supportive for a fair to good crop for next year.  With further rains due for the weekend, to further support the prevailing lack of concern over the prospects for some problems for the longer term coffee supply from Brazil. 

The Climate Prediction Centre of the U.S.A. National Weather Service have upped their forecast for a new El Niño phenomenon to develop within the Pacific Ocean by the end of year, to now foresee a 70% to 75% chance of this to occur.   There is though no indication as to how severe this might be, as a mild El Niño would not be damaging to the potential crops from the Pacific rim coffee producing countries and likewise, to coffee producers further afield. 

The respected Brazilian analyst Safras & Mercado have estimated that so far approximately 51% of the bumper new crop coffees had been sold by the farmers, with what the estimate to be 48% of the new arabica crop coffee sold and 62% of the new conilon robusta coffee crop coffees sold.   But indications are that with good volumes of sales in hand and with the firmer Brazil Real influencing internal market prices, that there is a degree of internal market price resistance developing and internal market trade is slowing. 

The Brazil market is off the field of play for today, with the country celebrating the Nossa Senhora de Aparecida public holiday, which shall along with the distraction of the Swiss Coffee Trade Association meetings and Dinner, shall dull physical coffee trade for the day. 

Vietnam have been experiencing frequent rains over the past few weeks, but are anticipating the dry winter season to soon kick in and to trigger the start of the new coffee harvest.   This harvest expected to bring to the fore another large new crop, while in the meantime and with the improved reference prices of the international coffee terminal markets, internal market sales of the modest past crop stocks still in hand have picked up in volume. 

The January 2019 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 35.83 usc/Lb., while this equates to 31.74% 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 6,483 bags yesterday; to register these stocks at 2,420,604 bags.  There were meanwhile a smaller in number 3,511 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 57,577 bags. 

The commodity markets along with the equity markets, were once again under pressure yesterday, to see the overall macro commodity index having an erratic day.   Sugar, Cocoa, New York arabica Coffee, Cotton, Copper and Gold markets nevertheless ended the day on a positive note and the London robusta Coffee market on a steady note, while the Oil market lead the way for many other markets to end the day on a negative note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.12% higher; to see this index registered at 415.01.   The day starts with the U.S. Dollar steady and trading at 1.323 to Sterling, at 1.159 to the Euro and with the dollar buying 3.782 Brazilian Real, while North Sea Oil is showing some degree of buoyancy and is selling at US$ 81.35 per barrel. 

The London and New York markets started the day yesterday on a softer note and with both markets coming under early pressure and with sell stops being triggered, to accentuate the losses, but with both markets soon managing to bounce back from the lows and to enter the early afternoon trade on a more modest negative note.  However as the afternoon progressed the New York market started to attract support and to move up into positive territory which was followed late in the day by a recovery for the London market, to see the New York market end off with some degree of muscle and the London market on something of a sideways track. 

The London market ended the day on a steady note and having recovered the earlier $ 27.00 losses of the day and with 25% of the modest gains of the day intact, while the New York market ended the day on a positive note and with 62.5% of the earlier gains of the day intact.   This close and with Brazil and many of the consumer market industries off the field of play for the day, might well inspire a 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. 

NOV   1691 + 9                                               DEC    112.90 + 1.00

JAN    1699 + 1                                               MAR   116.50 + 1.00

MAR   1714 + 1                                               MAY   118.95 + 1.00

MAY   1727 + 1                                                JUL    121.25 + 1.00

JUL    1739 + 1                                                SEP    123.60 + 1.05

SEP    1751 – 1                                                DEC   126.90 + 1.00

NOV   1764 – 2                                                MAR   130.15 + 1.00

JAN    1778 – 2                                                MAY   132.20 + 1.00

MAR   1794 – 2                                                JUL    133.95 + 1.00

MAY   1806 – 2                                                SEP    135.70 + 1.00