Coffee Market Report November 22 2018

The respected Coffee Network report that is related to brokers International F C Stone is reported to have come to the fore with their forecast, that they foresee global coffee supply surplus for the present coffee year of approximately 11 million bags.  This indicating that there is an approximate 6.8% surplus coffee supply on the cards and further supports the prevailing bearish sentiment within the coffee markets, with so far, no supportive fundamental news in play. 

The physical coffee markets are meanwhile lacklustre in nature and with producer internal market price resistance tending to encounter resistance from consumer market industries, which is likely to further reduce the presently high consumer market coffee stocks.   But unless there is some supportive weather-related news coming to the fore for the markets, one cannot really foresee the producers being able to resist the negative price dictates of the international coffee markets. 

While with such a large surplus coffee supply foreseen by all market players and with forecasts that vary between 7 million to 12 million bags, there is no doubt that global coffee stocks are due to increase significantly during the coming year.  This despite an approximate 2 to 3 million bags of global consumption increase per annum, to contribute to some degree of insurance for medium term coffee supply for the consumer markets, even if there might be some damaging weather due for any of the major coffee producers.   Thus, limiting for the present, the medium-term upside potential for the coffee markets. 

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 40.18 usc/Lb., while this equates to 35.31% 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 1,076 bags yesterday; to register these stocks at 2,455,443 bags.  There were meanwhile a larger in number 8,000 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 24,986 bags. 

The commodity markets ahead of the Thanksgiving Day public holiday in the U.S.A. were mostly buoyant in trade yesterday, to see the overall macro commodity index taking a positive track for the day.  The Oil, Sugar, Cotton, Copper and Gold markets ended the day on a positive note, while the Cocoa and Coffee markets ended the day on a negative note.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.41% higher; to see this index registered at 410.39.   The day starts with the U.S. Dollar steady and trading at 1.278 to Sterling, at 1.139 to the Euro and with the dollar buying 3.797 Brazilian Real. 

The London and New York markets started the day yesterday trading on the positive side of par and with both markets taking this steady stance, into the early afternoon trade.   As the afternoon progressed and with some modest degree of softening of the value of the Brazil Real having an influence upon sentiment, the markets started to come under pressure and to see both markets moving down into negative territory.  With the markets continuing to head towards a soft close for the day. 

The London market ended the day on a negative note and with 52.6% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 69.6% of the earlier losses of the day intact.  This close and the steady flow of negative fundamental news that is coming to the market, does little to inspire any confidence.   However, with the U.S.A. markets closed for the Thanksgiving Day holiday today, one might not expect any excitement for the London market today, against the prices set yesterday, as follows: 

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

NOV   1585 – 14                                             DEC    110.30 – 0.35

JAN    1615 – 10                                             MAR   114.10 – 0.80

MAR   1623 – 14                                             MAY   116.95 – 0.80

MAY   1636 – 15                                              JUL    119.55 – 0.85

JUL    1648 – 17                                              SEP    122.15 – 0.85

SEP    1659 – 18                                              DEC   125.70 – 0.85

NOV   1671 – 19                                              MAR   129.25 – 0.85

JAN    1685 – 19                                              MAY   131.65 – 0.85

MAR   1699 – 19                                              JUL    133.95 – 0.85

MAY   1720 – 21                                              SEP    136.00 – 0.85