Coffee Market Report November 15 2018

There are reports that due to a late flowering in March this year for many of the coffee districts in Mexico and Central America and some cold and wet weather in recent weeks, that the new crop harvest is running about four weeks late.   This has already delayed the harvest that has started in the lower grown districts and might delay the higher grown coffees from the region, in the coming months.  To result in the shipments of these higher grown new crop coffees to only start in February next year, rather than the usual start in January. 

Meanwhile as farmers in this important fine washed arabica producer bloc have mostly already invested this year in the necessary farm inputs to maximize their yield and crop potential, the region is expected to come to the fore with another good volume crop of approximately 21 million bags.  But unless there is some dramatic recovery for the related reference prices of the New York market, one might speculate that farm inputs might be less affordable for the coming year, which could be damaging for the potential of the follow-on October 2019 to March 2020 crop.  But this is a long way to the fore and for the present, such speculation is unlikely to have any influence upon the prevailing bearish market sentiment. 

In terms of consumer markets, the German Coffee Association DKV arranged for a meeting in Hamburg yesterday, to address the prospects for and how to do business, within the growing Chinese coffee market.  This meeting and with a number of speakers, designed to assist participants to understand the nature of the Chinese market, to understand how to do business to and within the market and to understand the legal aspects of doing business in and to this market. 

The Chinese market already experiencing growing consumption that is led by the many domestic and international coffee shop chains within this market, which one would think shall prove to be something of a shop window for the large middle class in the country and shall in time, as the hip coffee shop culture is becoming popular and as it has over the recent years in many other Asian countries, result in a growing at home coffee consumption culture.  Albeit that China is already a coffee producing and exporting country and could be expected as the domestic market grows, to produce increased volumes of coffee. 

Today is the Proclamação da República (Republic Day) holiday in Brazil, which is often with such near to weekend timing, is extended by many companies to include the following day.  This likely to reduce price fixation hedge selling of coffees against the terminal markets, which might assist to bring some degree of buoyancy for the markets for the end of the week. 

The March 2019 to March 2019 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 40.22 usc/Lb., while this equates to 34.61% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to remain unchanged yesterday; to register these stocks at 2,458,286 bags.  There were meanwhile 4,557 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 30,841 bags. 

The commodity markets encountered a weaker U.S. dollar yesterday, which assisted many markets to show some degree of buoyancy, to see the overall macro commodity index taking an upside track for the day.  The Oil, Natural Gas, Sugar, Coffee, Cotton, Copper, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Cocoa, Orange Juice and Wheat markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.17% higher; to see this index registered at 410.75.   The day starts with the U.S. Dollar steady and trading at 1.301 to Sterling, at 1.133 to the Euro and with the dollar buying 3.784 Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 64.35 per barrel. 

The London and New York markets started the day yesterday on a positive note, but with both markets drifting back to trade around par, for the early afternoon trade.  As the afternoon progressed the New York market started to add some value and to move into positive territory and followed by the London market, which was followed by increased gains for the New York market.  These gains within the New York market soon started to trigger buy stops and increased value, which was followed by more modest gains within the London market, but while the New York market managed to hold on to its higher value profile through to the close, the London market attracted selling pressure and to shed much of the gains of the day. 

The London market ended the day on a positive note and with 38.9% of the earlier gains of the day intact, while the New York market ended the day on a very positive note and with 92% of the earlier gains of the day intact.  This overall positive close and with Brazil off the field of play for the day in mind, might assist towards a degree of confidence and inspire a steady start for early trade today, against the prices set yesterday, as follows: 

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

NOV   1645 + 15                                             DEC    112.65 + 3.45

JAN    1663 + 7                                               MAR   116.20 + 3.45

MAR   1675 + 9                                               MAY   119.05 + 3.45

MAY   1687 + 9                                                JUL    121.75 + 3.35

JUL    1697 + 8                                                SEP    124.30 + 3.30

SEP    1707 + 7                                                DEC   127.85 + 3.30

NOV   1716 + 5                                                MAR   131.30 + 3.20

JAN    1727 + 5                                                MAY   133.65 + 3.15

MAR   1738 + 5                                                JUL    135.95 + 3.15

MAY   1755 + 5                                                SEP    138.00 + 3.15