Coffee Market Report December 21 2018

The Brazilian analysts Safras & Mercados have increased by 5.29% their earlier estimate for this year’s Brazil crop, to now estimate the crop to have been 63.7 million bags.  This report joins so many others which have recently been increasing their assessment of the crop, with the steady and repetitive input on the fact that Brazil has had a bumper crop this year, continuing to fuel bearish sentiment. 

Meanwhile the reports out of Brazil indicate that the internal market trade is very slow, as many are already focused upon the forthcoming Christmas and New Year summer holidays, rather than business.  While with farmers and coffee cooperatives having already concluded good volumes of sales, there is no pressure to cash in the remaining stocks.   These slow sales and along with some degree of internal market price resistance in Mexico and Central America, lessening the volumes of exporter price fixation selling into the New York market and assisting for some degree of buoyancy within this short-sold market. 

The mainstream consumer markets in the northern hemisphere are likewise lacklustre in terms of trade, with most players now concentrating on the forthcoming holidays and the month and year end book squaring, rather than coffee purchases.   Contributing towards only limited influence upon the fortunes of the coffee terminal market, from the physical coffee trade.   Albeit that in terms of the New York market in particular, it is the speculative and fund sectors of the market that have the main influence on direction. 

The March 2019 to March 2019 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 33.37 usc/Lb., while this equates to 32.56% 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 4,455 bags yesterday; to register these stocks at 2,462,778 bags.  There was meanwhile a larger in number 4,600 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 27,172 bags. 

The commodity markets and with the Oil markets taking a tumble and despite a softening of the U.S. dollar had a mostly down day yesterday, to see the overall macro commodity index taking a softer track for the day.   The Coffee, Wheat and Silver markets nevertheless ended the day on a positive note, while the Oil, Natural Gas, Sugar, Cocoa, Cotton, Copper, Orange Juice, Corn, Soybean and Gold markets ended the day on a softer note.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.05% lower; to see this index registered at 396,50.   The day starts with the U.S. Dollar steady and trading at 1.265 to Sterling, at 1.145 to the Euro and with the dollar buying 3.842 Brazilian Real. 

The London and New York markets started the day yesterday trading around par but with both markets soon moving into modest positive territory, into the early afternoon trade.    As the afternoon progressed and with trade thin in the New York market but more active in the London market, the markets started to add value and with the firming Brazil Real, assisting to buoy speculative sentiment within the New York market. 

The London market ended the day on a positive note and with 70.8% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 86.8% of the earlier gains of the day intact.   This positive close does not come with any supportive fundamental news but with the firmer nature of the Brazil Real having an influence and the apparent stability within the markets over the past couple of days, it might assist towards some degree of confidence and set the markets for a follow through steady start for early trade today.   Against the prices set yesterday, as follows: 

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

JAN    1494 + 17                                             MAR   102.50 + 1.65

MAR   1524 + 17                                             MAY   105.65 + 1.65

MAY   1541 + 18                                              JUL    108.40 + 1.60

JUL    1557 + 18                                              SEP    111.20 + 1.70

SEP    1575 + 17                                              DEC   115.05 + 1.75

NOV   1593 + 16                                              MAR   118.80 + 1.75

JAN    1612 + 16                                              MAY   121.30 + 1.75

MAR   1633 + 19                                              JUL    123.70 + 1.75

MAY   1655 + 18                                              SEP    125.95 + 1.70

JUL    1667 + 18                                              DEC    129.00 + 1.70