Coffee Market Report December 13 2018

There was little in the way of news coming to the coffee markets yesterday, post the evidence of the extended speculative short sold status of the volatile New York market and with the follow-on selling activity within the market, that this has most probably been further extended.   A factor that leaves the market open for short covering profit taking activity, which is the only support factor for this market at present. 

Meanwhile with a large new Vietnam robusta coffee crop well on the way and rising internal market farm and trade stocks, the London market remains under pressure from the prospects of increased volumes of price fixation selling pressure.  While with this new crop already starting to come into play in terms of the probability of large volumes of new crop robusta coffee exports due for the first quarter of the coming year, there is nothing available to support speculative sentiment within this market. 

There shall though be an interruption to the export activity from Vietnam for the first half of February next year, as the country starts to celebrate the Tet New Year holiday on Saturday 2nd. February and leading up to the Tet New Year day on Tuesday 5th. February and with the celebrations and holiday to continue through to Sunday 10th. February. 

These Tet New Year holidays to celebrate the start of the Year of the Pig are lavishly celebrated and at quite some expense and with the reference prices of the London market dictating narrowed profit margins for the countries robusta coffee farmers, it is likely that they shall have to liquidate higher volumes of new crop stocks than they had to early this year, to finance their celebrations.  This prospect of increased volumes of sales is a factor, that is likely to keep negative pressure on the London market for the short term.  

The March 2019 to March 2019 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 34.01 usc/Lb., while this equates to 33% 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 1,415 bags yesterday; to register these stocks at 2,447,746 bags.  There was meanwhile a larger in number 9,110 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 66,086 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 53,333 bags or 3.21% over the week of trade leading up to Monday 10th. December, to see these stocks registered at 1,714,000 bags. 

The commodity markets had a mixed day yesterday and with the U.S. dollar tending to fall back a little, to see the overall macro commodity index taking a modest upside track for the day.   The Cocoa, New York arabica Coffee, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Oil, Natural Gas, Sugar, London robusta Coffee, Cotton and Copper markets ended the day on a softer note.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.23% higher; to see this index registered at 406.61.   The day starts with the U.S. Dollar steady and trading at 1.261 to Sterling, at 1.136 to the Euro and with the dollar buying 3.855 Brazilian Real. 

The London market started the day yesterday trading around par and the New York market on a modestly positive note and to see the London market soon move up to join it in positive territory, to see the markets taking a modestly positive track into the early afternoon trade.  Both markets did though soon falter and move back to trade around par, before the New York market and with a firming Brazil Real assisting to buoy sentiment attracted support and moved back up into positive territory and accompanied by the London market.    The London market did however soon encounter a ceiling of selling activity and slipped back to trade around par and below par for late trade, while the New York market likewise hit a ceiling to limit its gains. 

The London market ended the day on a negative note and with 100% of the earlier modest losses of the day intact, while the New York market ended the day on a positive note and with 48.3% of the earlier gains of the day intact.   This close and with the markets having struggled to hold onto the earlier gains of the day, provides little in the way of direction and one might think to see only a slow and hesitant steady start due for early trade today.   Against the prices set yesterday, as follows: 

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

                                                                        DEC      97.75 + 0.10

JAN    1499 – 3                                               MAR   103.05 + 0.70

MAR   1522 – 5                                               MAY   106.10 + 0.50

MAY   1537 – 3                                                JUL    108.80 + 0.45

JUL    1552 – 3                                                SEP    111.50 + 0.45

SEP    1569 – 3                                                DEC   115.20 + 0.45

NOV   1586 – 3                                                MAR   118.85 + 0.45

JAN    1603 – 3                                                MAY   121.30 + 0.45

MAR   1618 – 1                                                JUL    123.70 + 0.45

MAY   1639 – 1                                                SEP    126.00 + 0.45

JUL    1651 – 1                                                DEC    129.00 + 0.45