Coffee Market Report December 20 2018

The Australian Government Bureau of Meteorology have reported that while the sea temperatures within the Pacific Ocean being at El Niño levels, the rest of the atmospheric indicators such as cloudiness and pressure patterns remain neutral.   Thus, so far while there remains a strong chance for a full El Niño to develop for the first half of the coming year, the report seeming indicate that it is still not certain that there shall be a pronounced climate changing El Niño phenomenon due for the Pacific Rim coffee producing countries. 

The March 2019 to March 2019 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 32.49 usc/Lb., while this equates to 32.22% 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 580 bags yesterday; to register these stocks at 2,458,323 bags.  There was meanwhile a larger in number 6,840 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 31,772 bags. 

The producer bloc of Mexico and Central America and dominated by Honduras coffees presently account for 1,939,951 bags or 78.91% of the coffees within the Certified stocks of the New York market and followed by Peru, who account for 301,113 bags or 12.25% of the stocks.   The African producers and made up by Burundi, Rwanda and Uganda account for 151,480 bags or 6.16% of these stocks, while Brazil, Colombia, India and Papua New Guinea account for the balance 2.68% of the stocks. 

While in terms of the location of these stocks, it is the certified European warehouses of the New York exchange and dominated by the warehouses in Antwerp who account for 2,081,477 bags or 84.67% of the stocks, as they do for 29,572 bags or 93.08% of the coffees pending grading for the exchange. 

The commodity markets had a mixed day yesterday and with some degree of buoyancy for the U.S. Dollar in anticipation of the U.S. Federal Banks 0.25% interest rate hike, to see the overall macro commodity index on a relatively steady track for the day.    The Oil, Sugar, Cocoa, Coffee and Copper markets ended the day on positive note, while the Natural Gas, Cotton, Orange Juice, Wheat, Corn, Soybean, Gold 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 0.35% higher; to see this index registered at 400.71.   The day starts with the U.S. Dollar steady and trading at 1.263 to Sterling, at 1.138 to the Euro and with the dollar buying 3.898 Brazilian Real. 

The London and New York markets started the day yesterday trading to the positive side of par and with the London market soon adding value, to see the markets enter the early afternoon trade with a positive stance within the London market and the New York market on par.   As the afternoon progressed and with the Brazil Real adding a little value, the New York market started to attract support and moved up into positive territory and with buy stops being triggered, to accentuate the gains.   The London market followed suit but in a less aggressive manner, while the New York market hit something of a ceiling to limit the gains of the day in late trade.  

The London market ended the day on a positive note and with 87% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 58% of the earlier gains of the day intact.   This positive close does not come with any supportive fundamental news but there might be some influence coming with the pre-holiday season slowing of producer selling pressure, as might there be some pre-holiday industry fixation buying in play.   But with the charts not really providing any idea of direction and one can only guess what might be due for follow through trade and one might expect to see another cautious and hesitant start for early trade today, against the prices set yesterday, as follows: 

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

JAN    1477 + 19                                             MAR   100.85 + 1.45

MAR   1507 + 20                                             MAY   104.00 + 1.35

MAY   1523 + 21                                              JUL    106.80 + 1.40

JUL    1539 + 21                                              SEP    109.50 + 1.40

SEP    1558 + 22                                              DEC   113.30 + 1.40

NOV   1577 + 22                                              MAR   117.05 + 1.45

JAN    1596 + 22                                              MAY   119.55 + 1.45

MAR   1614 + 23                                              JUL    121.95 + 1.45

MAY   1637 + 26                                              SEP    124.25 + 1.45

JUL    1649 + 26                                              DEC    127.30 + 1.50