Coffee Market Report November 29 2018

The General Statistics Office in Vietnam and with the month of November coming to a close, have estimated that coffee exports for the month shall be approximately 2.33 million bags, which shall be worth approximately 264 million U.S. Dollars.   This they say shall contribute to the country’s cumulative coffee exports for the first eleven months of this year to be approximately 23% higher than the same period last year, at a total of 28.75 million bags. 

They do however highlight the negative effects of the prevailing soft international coffee prices in that while they report a 23% increase in the volume of coffee exports over these eleven months, that the revenue from these exports is only 2.9% higher than the same period last year, at approximately 3.3 billion U.S. Dollars.  This issue being a concern for Vietnam's mostly robusta coffee farmers, but with good farming practices and the resulting high yields, the countries coffee farmers remain mostly profitable. 

This is however not the case for coffee farmers within many other coffee producer nations globally, where the dictates of the reference prices of the coffee terminal markets, are forcing many farmers to liquidate new crop coffee stocks at loss making prices.   This factor and with many coffee farmers globally lacking the finance to provide the full range of inputs to support good yielding production for the coming year, shall most likely have a longer-term negative effect upon global coffee supply. 

But one would speculate that so long as there are good weather conditions over the Brazil coffee districts and so far, all indications are that this shall be the case, that Brazil is due another bumper coffee crop for 2019.   Thus with the efficient and still mostly profitable Brazilian coffee farmers unlikely to struggle to provide the inputs to support their next crop and along with Vietnam's farmers doing the same, the negative effects of the low prices upon global coffee production might only start to impact in the year after next. 

The Ugandan Coffee Development Authority UCDA have reported that the countries coffee exports for the month of October were 30,893 bags or 8.09% lower than the same month last year, at a total of 350,743 bags.  The dip in export volumes they appropriate to the lower crop volumes that are being experienced, within the south western coffee districts in the country. 

The March 2019 to March 2019 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 39.96 usc/Lb., while this equates to 35.08% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen decrease by 4,703 bags yesterday; to register these stocks at 2,450,375 bags.  There was meanwhile a smaller in number 1,925 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 45,622 bags. 

The commodity markets encountered a softening U.S. dollar yesterday, to see a number of markets showing some degree of buoyancy and to see the overall macro commodity index taking an upside track for the day.  The Natural Gas, Sugar, New York arabica Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Oil, Cocoa and London robusta Coffee markets ended the day on a negative note. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.91% higher; to see this index registered at 406.88.   The day starts with the U.S. Dollar steady and trading at 1.284 to Sterling, at 1.138 to the Euro and with the dollar buying 3.851 Brazilian Real. 

The London and New York markets started the day yesterday trading with a degree of buoyancy, but with the markets coming under pressure into the afternoon trade and moving down into negative territory and with the New York market posting losses of 1.90 usc/Lb., before bouncing off the lows.   The New York market and perhaps with some assistance coming from the positive nature of the overall macro commodity index and the marginally firmer Brazil Real to the dollar contributing towards some more positive sentiment, managed to work its way back up into positive territory, while the London market and with the perspective of good volumes of selling due from Vietnam, remained in negative territory. 

The London market ended the day on a negative note and with 85% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 70.6% of the earlier gains of the day intact.   The recovery in the New York market remains though under a cloud of negative fundamentals, which is not conducive towards confidence and one might think that there shall be some degree of hesitancy due for early trade today, to set the markets for only a near to steady start for early trade.   Against the prices set yesterday, as follows: 

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

                                                                        DEC    110.10 + 0.60

JAN    1615 – 30                                             MAR   113.90 + 0.60

MAR   1630 – 17                                             MAY   116.70 + 0.55

MAY   1644 – 15                                              JUL    119.35 + 0.60

JUL    1658 – 13                                              SEP    121.90 + 0.55

SEP    1671 – 12                                              DEC   125.50 + 0.55

NOV   1684 – 12                                              MAR   129.05 + 0.55

JAN    1697 – 13                                              MAY   131.40 + 0.50

MAR   1710 – 14                                              JUL    133.75 + 0.50

MAY   1725 – 14                                              SEP    135.90 + 0.50

JUL    1737 – 14                                              DEC    138.80 + 0.55