Coffee Market Report December 19 2018

Brazils agricultural statistics agency CONAB have reported that they assess the 2018 new coffee crop to have been 37% higher than the previous years crop, at a total of 61.65 million bags.   This based on a new arabica coffee crop of 47.48 million bags and a new conilon robusta coffee crop of 14.17 million bags, with this increase they relate to the favourable climate conditions over the second half of 2017 and throughout 2018. 

The CONAB crop reports are traditionally conservative in nature and mostly as much as 10% lower than what most see to be the reality of the crop and thus, one would think that this report assists to underpin the many trade and industry reports that assess the new 2018 Brazil crop to be approximately 65 million bags.  Thus, one would think that the report can be seen to be supportive for the speculative bears within the coffee markets, who have been pressurising prices lower for the year. 

There is meanwhile little in the way of fundamental news coming to the coffee markets and the adage no news is good news comes to mind, as there really are no climatic problems being experienced for any of the many coffee producer blocs.   Aside from the possibility of a new El Niño phenomenon developing and there are questions as to if it would be severe and perhaps damaging to the Pacific Rim coffee producers, one can foresee little chance for supportive news for the coffee markets on the medium term. 

One might speculate thought with the new crop coffees now due to come to the market from Mexico and Central America, if the farmers might be keeping an eye on the possibility of an El Niño and a chance that it might be severe and supportive for speculative sentiment and medium-term coffee prices.   As a reason to show some degree of short-term price resistance for their new crop coffees, which would assist towards the hardening of export price differentials. 

In the meantime, with the Christmas and New Year holidays now on a nearby horizon and the with many focused upon the month and year end books, the physical coffee trade is lacklustre and slow.   This expected to remain the case until early in the New Year, by when the pending first half of February Tet Holidays closing of the Vietnam trade, might trigger some increased pre-holiday activity in terms of the countries large new crop and some exporter and consumer industry activity for the London market. 

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 31.95 usc/Lb., while this equates to 32.14% 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 3,402 bags yesterday; to register these stocks at 2,457,743 bags.  There was meanwhile a larger in number 10,780 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 38,612 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 41,833 bags or 2.44% over the week of trade leading up to Monday 17th. December, to see these stocks registered at 1,755,833 bags. 

The commodity markets had a mixed day yesterday but with the influential Oil markets under severe pressure for the day, the overall macro commodity index took a softer track for the day.   The Natural Gas, Cocoa, London robusta Coffee, Corn, Soybean and Gold markets ended the day on a positive note, while the Oil, Sugar, New York arabica Coffee, Cotton, Copper, Orange Juice, Wheat 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 0.77% lower; to see this index registered at 399.3.   The day starts with the U.S. Dollar near to steady and trading at 1.266 to Sterling, at 1.139 to the Euro and with the dollar buying 3.912 Brazilian Real. 

The London and New York markets started the day yesterday trading around par and mostly to the positive side of par and with the New York market adding some value, into the early afternoon trade.   As the afternoon progressed the markets remained close to par for some hours of thin and lacklustre trade, before the New York market once again came under pressure and slipped back into negative territory, while the London market showed some degree of muscle to set the markets for a follow on mixed close for the day. 

The London market ended the day on a positive note and with 75% of the earlier gains of the day intact, while the New York market ended the day on a negative note and with 77.8% of the earlier losses of the day intact.   This close does little to inspire any confidence and continues to paint a dismal picture for the New York charts, which is likely to set the markets for another hesitant start for early trade today.   Against the prices set yesterday, as follows: 

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

                                                                        DEC      94.35 – 0.35

JAN    1458 + 8                                               MAR     99.40 – 0.70

MAR   1487 + 9                                               MAY   102.65 – 0.70

MAY   1502 + 9                                                JUL    105.40 – 0.70

JUL    1518 + 8                                                SEP    108.10 – 0.75

SEP    1536 + 8                                                DEC   111.90 – 0.70

NOV   1555 + 8                                                MAR   115.60 – 0.70

JAN    1574 + 8                                                MAY   118.10 – 0.65

MAR   1591 + 7                                                JUL    120.50 – 0.65

MAY   1611 + 4                                                SEP    122.80 – 0.65

JUL    1623 + 4                                                DEC    125.80 – 0.65