Coffee Market Report October 17 2018

The mostly short covering rally within the New York market and with the perspective on the part of many that the with the prevailing negative coffee fundamentals that the market was oversold, stalled in trade yesterday.  One would think though that with the dismal prices of late that the market has been dictating for the arabica coffee farmers, that producer price fixation selling also played a part in the pressure upon the market. 

Good weather conditions for most of the main coffee districts in Brazil and the early perspective that this shall contribute towards a reasonable 2019 crop for Brazil, is also contributing towards negative sentiment.  Which has already been fuelled by the bumper new crop in Brazil this year, which with good Mexican, Central American and Vietnam crops on the horizon, is bringing to the fore estimates for an over 8 million bags surplus coffee supply for this new October 2018 to September 2019 coffee year. 

The January 2019 to December 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 38.04 usc/Lb., while this equates to 32.33% 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 720 bags yesterday; to register these stocks at 2,423,004 bags.  There were meanwhile a larger in number 3,335 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 56,850 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 17,333 bags or 1.2% over the week of trade leading up to Monday 15th., to see these stocks registered at 1,467,333 bags. 

The commodity markets experienced a mixed day yesterday, but with many markets softening, to see the overall macro commodity index taking a softer track for the day.   The Oil, Natural Gas, Cocoa, London robusta Coffee and Orange Juice markets ended the day on a positive note, while the Sugar, New York arabica Coffee, Cotton, Copper, Wheat, 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 0.1% lower; to see this index registered at 420.87.   The day starts with the U.S. Dollar steady and trading at 1.318 to Sterling, at 1.156 to the Euro and with the dollar buying 3.725 Brazilian Real, while North Sea Oil is steady and is selling at US$ 81.40 per barrel. 

The London and New York markets started the day yesterday on a positive note and the New York market started the day around par, but with the both markets slipping back into negative territory, for the early afternoon trade.  As the afternoon progressed both markets moved back to trade around par and while the London market then moved back up into positive territory, the New York market started to come under selling pressure and moved back into negative territory.   

The London market ended the day on a modestly positive note and with 30% of the earlier gains of the day intact, while the New York market ended the day on a negative note and with 66.7% of the earlier losses of the day intact.   This close and the reversal of the fortunes of the New York market is likely to dent confidence and bring to the fore a degree of caution, to perhaps set the market for only a hesitant near to steady start for early trade today.   Against the prices set yesterday, as follows: 

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

NOV   1744 + 6                                               DEC    117.65 – 1.70

JAN    1755 + 3                                               MAR   121.30 – 1.65

MAR   1769 + 2                                               MAY   123.70 – 1.65

MAY   1783 + 3                                                JUL    126.10 – 1.60

JUL    1797 + 6                                                SEP    128.35 – 1.65

SEP    1813 + 10                                              DEC   131.65 – 1.60

NOV   1825 + 10                                              MAR   134.90 – 1.55

JAN    1837 + 10                                              MAY   136.90 – 1.60

MAR   1851 + 10                                              JUL    138.60 – 1.65

MAY   1863 + 10                                              SEP    140.25 – 1.65