Coffee Market Report November 14 2018

The coffee markets are devoid of any striking supportive fundamental news for the present, but rather repetitive reports that confirm the bearish nature of the markets, in terms of the global surplus coffee supply.   Perhaps the only glimmer of some degree of threat to longer term coffee production, are the forecasts for a 70% chance for a new El Niño phenomenon to develop within the Pacific Ocean. 

But this would in reality unless it proves to be a strong El Niño, would not really be much of a threat to 2019 coffee production.  While in terms of Brazil and following this year’s bumper crop, an El Niño would bring with it increased rains for South East Brazil, which would be supportive for the development of another large coffee crop for 2019. 

Meanwhile with the fund and speculative sectors of the New York market having already short covered and liquidated much of their recent record short sold positions within the New York market, it would seem unlikely that lacking any supportive fundamental news, that they shall continue to buy back into the market.  This making one speculate that there really is not much upside potential for the coffee markets from this sector of the market, while with substantial quantities of new crop coffees soon due from Vietnam, Mexico, Central America and Colombia, there is the potential for negative pressure due form increased volumes of producer price fixation hedge selling activity. 

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 37.18 usc/Lb., while this equates to 32.98% 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 1,930 bags yesterday; to register these stocks at 2,458,286 bags.  There was meanwhile a larger in number 2,475 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 35,398 bags. 

The commodity markets encountered a steady U.S. dollar yesterday, but with the Oil markets falling out of bed for the day and many other markets under pressure, to see the overall macro commodity index taking a softer track for the day.  The Natural Gas, Cocoa, London robusta Coffee and Copper markets ended the day on a positive note, while the Oil, Sugar, Cotton, Orange Juice, 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 0.67% lower; to see this index registered at 406.02.   The day starts with the U.S. Dollar steady and trading at 1.298 to Sterling, at 1.129 to the Euro and with the dollar buying 3.803 Brazilian Real, while North Sea Oil remains under pressure and selling at US$ 63.95 per barrel. 

The London and New York markets started the day yesterday with some modest buoyancy, while the New York market was trading erratically either side of par but with the London market soon slipping back to par and the New York market into modest negative territory, for the early afternoon trade.   As the afternoon progressed and the Americas entering the field of play, the New York market started to attract increased selling pressure and extended the losses, while the London market remained on something of a sideways track and close to par.  The London market continued to end the day on a steady note, while the New York market did bounce of the lows of the day, before ending the day on a softer note. 

The London market ended the day on a steady to modestly positive note and with 33.3% of the earlier modest gains of the day intact, while the New York market ended the day on a negative note but having recovered 55.4% of the earlier losses of the day.   This close does little to inspire confidence and still paints a rather dismal picture for the charts, but with the London market having remained steady and the New York market managing to bounce back from the lows, it might inspire a degree of cautious hesitancy.  Making one think that the markets shall be due for something of a steady start for early trade today, against the prices set yesterday, as follows: 

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

NOV   1630 – 1                                               DEC    109.20 – 0.95

JAN    1656 + 2                                               MAR   112.75 – 1.25

MAR   1666 + 2                                               MAY   115.60 – 1.30

MAY   1678 unch                                            JUL    118.40 – 1.25

JUL    1689 unch                                            SEP    121.00 – 1.20

SEP    1700 – 2                                                DEC   124.55 – 1.20

NOV   1711 – 1                                                MAR   128.10 – 1.10

JAN    1722 unch                                            MAY   130.50 – 0.80

MAR   1733 + 1                                                JUL    132.80 – 0.40

MAY   1750 + 1                                                SEP    134.85 – 0.10