Coffee Market Report November 01 2018

The Indonesian government trade data from Sumatra which is the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month of October were 23,683 bags or 7.13% lower than the same month last year, at a total of 308,340 bags. 

This number indicates a slow start for the new October 2018 to September 2019 coffee year, following the relatively dismal 2017 to 2018 coffee year, where the Sumatran robusta coffee exports were 3,007,755 bags or 65.24% lower than the same period in the previous 2016 to 2017 coffee year, at a total of 1,602,292 bags.  But there are still eleven months to the fore and the new robusta crop due to start in the second quarter of next year, which might assist to buoy Sumatran robusta coffee exports for the second half of the present coffee year.  

There is though in terms of Indonesia a steadily growing domestic coffee consumption, which even if the new 2019 Sumatran robusta coffee crop brings to the fore improved numbers, shall absorb more of this coffee.  Thus, for the present, one cannot for the present foresee any dramatic medium to longer term increase in Indonesian robusta coffee supply for the coming year.  But with another good Vietnam robusta coffee crop starting to come to the market and an injection of four to five million bags of new crop Brazil conilon robusta coffees now available for the consumer markets, the modest supply of robusta coffee from Indonesia is not a matter of concern. 

Weather forecasts from North America and Australia continue to indicate an approximate 70% chance for a new El Niño phenomenon to develop within the Pacific Ocean, but with no indication as to how intense this possible new phenomenon might be.   With market players having to keep in mind that should this El Niño phenomenon become reality and in not too harsh a manner, that it is in fact a positive factor for rains in South East Brazil and the development of the new 2019 Brazil crop, albeit that it might bring with it some dryer weather for the Pacific rim coffee producing countries. 

The January 2019 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 36.72 usc/Lb., while this equates to 32.58% 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 8,139 bags yesterday; to register these stocks at 2,440,352 bags.  There were meanwhile a smaller in number 7,607 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 27,510 bags. 

The commodity markets had a mixed but mostly softer day of trade yesterday, to see the overall macro commodity index taking a modestly softer track for the day.   The Natural Gas, Cocoa, New York arabica Coffee, Orange Juice and Soybean ended the day on positive note and the London robusta Coffee was near to steady for the day, while the Oil, Sugar, Cotton, Copper, Corn, 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 0.2% lower; to see this index registered at 409.14.  The day starts with the U.S. Dollar steady and trading at 1.285 to Sterling, at 1.134 to the Euro and with the dollar buying 3.722 Brazilian Real, while North Sea Oil is steady and is selling at US$ 74.55 per barrel. 

The London market started the day yesterday taking a marginally softer stance, while the New York market started the day trading around par and with the London market recovering, to see both markets trading around par for early afternoon trade.   As the afternoon progressed the London market attracted selling pressure and triggered sell stops to dip back to hit four-week lows, while the New York market maintained a degree of buoyancy.   But with the London market bouncing off the lows to recover and to end the day close to par, while the New York market ended the day on a modestly positive note. 

The London market ended the day on a near to steady note and having recovered 93.3% of the earlier losses of the day, while the New York market ended the day on a modestly positive note and with 30% of the earlier gains of the day intact.   This close does not provide much indication of direction and one might think that the markets are due for another cautious and 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   1657 – 1                                               DEC    112.70 + 0.30

JAN    1675 – 1                                               MAR   116.45 + 0.20

MAR   1689 – 3                                               MAY   119.00 + 0.25

MAY   1703 – 3                                                JUL    121.40 + 0.20

JUL    1717 – 3                                                SEP    123.75 + 0.25

SEP    1731 – 3                                                DEC   127.10 + 0.20

NOV   1746 – 2                                                MAR   130.45 + 0.25

JAN    1761 – 2                                                MAY   132.55 + 0.35

MAR   1773 – 2                                                JUL    134.40 + 0.40

MAY   1785 – 2                                                SEP    136.15 + 0.50