Coffee Market Report November 30 2018

The respected United States Department of Agriculture’s Foreign Agricultural Service have forecast that Colombia shall see coffee production for the new October 2018 to September 2019 coffee year increase by 476,000 bags or 3.44%, to total 14.3 million bags.   This they estimate shall result in bean coffee exports for the coffee year of 12,314,000 bags and exports of value-added roast and ground and soluble coffee, to the equivalent of 985,000 bags. 

The coffee districts in Brazil are reported to have had good rains during the month of November, which has been conducive to the setting of the next new 2019 coffee crop.   With the forecast for mixed but overall fair rains for the coming month of December, which presently eliminates any possibility of weather fears in terms of longer-term Brazil coffee supply.   Which is a forecast that contributes towards the bearish sentiment, on the part of the speculative sectors and the consumer industry sectors of the market. 

Meanwhile the worlds largest coffee cooperative Cooxupé in Brazil have voiced fears that due to good rains and sometimes multiple flowerings that the next crop shall have cherries maturing at different times and this as most farmers strip harvest, shall increase the percentages of lower quality coffees.   But one might comment that while this might be the case, the country with a domestic consumption of in excess of 21 million bags per annum and a domestic industry that can utilise secondary grade coffees, that this should not negatively affect the availability of acceptable coffees for the consumer markets.  

The physical coffee market for arabica coffees and with many producers still trying to resist the negative price dictates of the coffee terminal markets and many consumer industries complacent for the present, remains lacklustre for the present.   While aside from some speculation that follows the fortunes of the value of Brazil Real that comes to the fore to direct the New York arabica coffee market, there really is nothing in the way of fundamental news to support the market. 

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 38.59 usc/Lb., while this equates to 34.36% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen decrease by 280 bags yesterday; to register these stocks at 2,450,095 bags.  There was meanwhile a similar in number 285 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 45,907 bags. 

The commodity markets had a mixed day yesterday and with this contributing to an erratic day, for the overall macro commodity index.   The Oil, Sugar, Cocoa and Orange Juice markets ended the day on a positive note and the Corn and Gold markets ended the day on a relatively steady note, while the Natural Gas, Coffee, Cotton, Copper, Soybean 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 0.28% lower; to see this index registered at 405.73.   The day starts with the U.S. Dollar steady and trading at 1.279 to Sterling, at 1.139 to the Euro and with the dollar buying 3.851 Brazilian Real. 

The London market started the day yesterday trading mostly to the positive side of par, while the New York market started the day on the negative side of par and with the markets taking something of an erratic sideways stance and trading around par, into the early afternoon trade.  As the afternoon progressed both the markets attracted support and moved up into positive territory but this was short lived and the New York market came under pressure and move down into negative territory, while the London market moved back to trade around par before finally following the New York market south.  Setting the markets for soft end to the day. 

The London market ended the day on a negative note and with 45.4% of the earlier losses of the day intact, while the New York market ended the day on a more negative note and with 80% of the earlier losses of the day intact.   This close does little to inspire confidence and one might expect to see another hesitant near to steady start for early trade today, against the prices set yesterday, as follows: 

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

                                                                        DEC    108.50 – 1.60

JAN    1609 – 6                                               MAR   112.30 – 1.60

MAR   1625 – 5                                               MAY   115.15 – 1.55

MAY   1638 – 6                                                JUL    117.80 – 1.55

JUL    1650 – 8                                                SEP    120.35 – 1.55

SEP    1662 – 9                                                DEC   123.95 – 1.55

NOV   1675 – 9                                                MAR   127.50 – 1.55

JAN    1687 – 10                                              MAY   129.90 – 1.50

MAR   1700 – 10                                              JUL    132.25 – 1.50

MAY   1717 – 8                                                SEP    134.40 – 1.50

JUL    1729 – 8                                                DEC    137.35 – 1.45