Coffee Market Report November 02 2018

The International Coffee Organisation ICO have reported that the global coffee exports for the month of September were 7.8% higher than the same month last year, at a total of 9.43 million bags.   This they report, has contributed to the global coffee exports for the just October 2017 to September 2018 coffee year to be 2% higher than the previous coffee year, at a total of 121.88 million bags. 

These exports over the past coffee year are made up from a 62.9/37.1 ration of arabica and robusta coffees, with the prevailing consumer market stocks of arabica coffees remaining relatively high.    A factor along with rising coffee supply for this new 2018/2019 coffee year, that fuels the bearish sentiment within the market. 

The National Coffee Institute in Honduras IHCAFE have reported that the countries coffee exports for the month of October were 91% higher than the same month last year, at a total of 99,509 bags.  Most of these coffees they say were related to carryover stocks from the past crop, but with the new harvest having started and many new maturing coffee trees coming into production, that they foresee that coffee exports for this new October 2018 to September 2019 coffee year shall increase by 13% to approximately 8.15 million bags. 

The National Coffee Institute in Costa Rica ICAFE have reported that the countries coffee exports for the month of October were 53% higher than the same month last year, at a total of 21,830 bags.  This rise they appropriate to sellers of presumably mostly past crop stocks, chasing the prices that came with the recovery of the reference prices of the New York market. 

The Brazil Trade Ministry have come to the fore with their preliminary coffee export figure for the month of October, which they say were 631,50219.28% bags or 19.28% higher than the same month last year, at a total of 3,275,443 bags.   One might presume that with a significantly larger new conilon robusta coffee crop this year, that much of this increase might be related to the export of these coffees which last year, were mostly absorbed by the domestic market demand. 

Meanwhile most of the main coffee districts in Brazil have reported above average rains for the month of October, which has contributed to good flowerings and cherry set.    But while it is too early to really talk numbers for the next 2019 Brazil coffee crop, there are some who say that so long as weather conditions remain normal and with regular rains for the next five to six months, that the next year’s crop might be close to a surplus supply 60 million bags.   A bearish factor if this proves to be correct, for the medium to longer term coffee market. 

Today is the Dia de Finados (All Souls’ Day) public holiday in Brazil and coming to the fore as a long weekend, which most likely already started to take some players of the field of play yesterday afternoon and shall most likely keep most internal market players out of the market for the day.  Thus, removing some of the negative effects of price fixation hedge selling from the international coffee markets, following what is reported to have already been a slow selling week on the part of the countries farmers. 

The January 2019 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 40.14 usc/Lb., while this equates to 34.07% 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 3,865 bags yesterday; to register these stocks at 2,444,217 bags.  There were meanwhile a larger in number 4,075 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 31,585 bags. 

The commodity markets encountered a softer U.S. dollar yesterday, which assisted most markets to have a day of buoyancy, to see the overall macro commodity index taking an upside track for the day.  The Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note and the Sugar market was steady for the day, while the Oil and Natural Gas markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.5% higher; to see this index registered at 415.26.  The day starts with the U.S. Dollar marginally softer and trading at 1.300 to Sterling, at 1.142 to the Euro and with the dollar buying 3.697 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 71.55 per barrel. 

The London and New York markets started the day yesterday on a modestly positive note and with both markets maintaining this stance, into the early afternoon trade.  As the afternoon progressed the New York market and with some emotional support from the softening dollar and the positive nature of the overall macro commodity index attracted speculative support and followed by the London market, with buy stops being triggered to set both markets on an upside track for the day. 

The London market ended the day on a very positive note and with 86% of the earlier gains of the day intact, while the New York market likewise ended the day on a very positive note, with 96.2% of the earlier gains of the day intact.   This close and with Brazil off the field of play for the day, might well inspire some degree of confidence, but the recovery does not come with any supportive fundamental news and one might guess the markets might only be due for a cautious steady start for early trade today, against the prices set yesterday, as follows: 

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

NOV   1694 + 37                                             DEC    117.80 + 5.10

JAN    1712 + 37                                             MAR   121.50 + 5.05

MAR   1724 + 35                                             MAY   124.05 + 5.05

MAY   1738 + 35                                              JUL    126.50 + 5.10

JUL    1752 + 35                                              SEP    128.85 + 5.10

SEP    1766 + 35                                              DEC   132.20 + 5.10

NOV   1781 + 35                                              MAR   135.55 + 5.10

JAN    1796 + 35                                              MAY   137.60 + 5.05

MAR   1808 + 35                                              JUL    139.45 + 5.05

MAY   1720 + 35                                              SEP    141.20 + 5.05