Coffee Market Report November 16 2018

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 261,353 bags or 4.06% during the month of October, to register these stocks at 6,176,867 bags at the end of the month.   The overall Green Coffee stocks reported, do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 570,000 bags per week, would conservatively have been at least 1.1 million bags. 

Suggesting that if one is to consider the additional unreported stocks the end month stocks, this would equate to more than twelve weeks of roasting activity, which most would consider to be a very safe reserve.    Especially so ahead of the pending deliveries from large new Mexican and Central American crop, a new Colombian main crop, a large new Vietnam crop and the ongoing potential surge of new crop deliveries from Brazil. 

There is though the factor of the prevailing soft nature of the reference prices of the coffee terminal markets, which might cause some degree of internal market price resistance within some producer countries.  This and along with the delays in the Mexican and Central American new crop harvest, might delay any growth in the U.S.A and North America coffee stocks in general, for a couple of months.   

It has been a dry week for many of the main coffee districts in Brazil this week, but a new cold front is on the horizon, to bring good rains for South East Brazil and to assist to add to the already good ground water retention levels.   Thus, for the present, the talk out of Brazil is for another large coffee crop due for the coming year and this talk, adding to the prevailing bearish sentiment within the coffee markets. 

Meanwhile and despite Brazil celebrating their Proclamação da República (Republic Day) holiday yesterday, which would have reduced price fixation hedge selling activity out of the country other than sell stops that might have been in place, the New York market still came under pressure.   With the managed money funds and speculative sectors of the market most probably once again, selling short into this market. 

Vietnam is now in full harvest of their new crop, which is forecast by many, to be in excess of 30 million bags and with these new crop coffees due to start impacting upon global coffee supply within the coming weeks.  Thus while Indonesia is post-harvest and low on robusta coffee stocks until April next year, there is with the added input from the larger new Brazil conilon robusta crop and the African robusta coffees, a steady flow of robusta coffees due for the consumer markets.     

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 37.69 usc/Lb., while this equates to 33.12% 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 1,065 bags yesterday; to register these stocks at 2,459,351 bags.  There were meanwhile a larger in number 4,556 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 26,285 bags. 

The commodity markets had a mixed day yesterday, but with the overall macro commodity index taking a softer track for the day.  The Oil, Cocoa, London robusta Coffee, Copper, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Natural Gas, Sugar, New York arabica Coffee, Cotton, and Orange Juice markets ended the day on a negative note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.76% lower; to see this index registered at 407.62.   The day starts with the U.S. Dollar steady and trading at 1.280 to Sterling, at 1.134 to the Euro and with the dollar buying 3.784 Brazilian Real, while North Sea Oil is steady and is selling at US$ 65.65 per barrel. 

The London and New York markets started the day yesterday on a modestly 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 come under pressure and with sell stops being triggered to accentuate the losses, which briefly had some negative influence upon the London market.  The markets did however bounce of the lows and set the London market for a modestly positive close, which the New York market regained some of its sharp losses for the day. 

The London market ended the day on a modestly positive note and with 44.4% of the earlier gains of the day intact, while the New York market ended the day on a negative note and with 70.6% of the earlier losses of the day intact.  This mixed close does little to inspire confidence and one might think that the markets are due for another hesitant steady start for early trade today, against the prices set yesterday, as follows: 

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

NOV   1642 – 3                                               DEC    110.05 – 2.60

JAN    1667 + 4                                               MAR   113.80 – 2.40

MAR   1678 + 3                                               MAY   116.60 – 2.45

MAY   1692 + 5                                                JUL    119.25 – 2.50

JUL    1704 + 7                                                SEP    121.80 – 2.50

SEP    1716 + 9                                                DEC   125.35 – 2.50

NOV   1725 + 9                                                MAR   128.80 – 2.50

JAN    1736 + 9                                                MAY   131.15 – 2.50

MAR   1747 + 9                                                JUL    133.45 – 2.50

MAY   1764 + 9                                                SEP    135.50 – 2.50