Coffee Market Report January 16 2019

Brazil’s Coffee Exporters Association Cecafé have reported that the countries green coffee exports for 2018 were 15% higher than the previous year, at a total of 31.52 million bags.   With these exports buoyed by the introduction of a larger new conilon robusta coffee crop, which allowed for the export of 2.48 million bags of conilon robusta coffees during 2018, as against a very modest 295,623 bags exported in the previous year. 

The association have also speculated that following the bumper 2018 crop and with surplus Brazil coffee supply, that the green coffee exports from Brazil might increase further and total around 33 million to 34 million bags of green coffee.   In this respect one might speculate that with the forecast for a larger new conilon robusta coffee crop for 2019 and well in excess of domestic market demand, that rising exports of these robusta coffees in the second half of this year would alone support the prospects for rising Brazil coffee exports for this year. 

These Brazil green coffee export figures are though aside from the exports of value-added soluble coffees which along with a domestic consumption of in excess of 21.5 million bags per annum, would account for an approximate 25 million bags of further green coffee disappearance per annum.    Thus, the report would indicate that Brazil is due to absorb something in the order of 59 million bags during 2019, which would further indicate something in the order of 4 million bags of carryover stocks from last year’s bumper crop.  A factor that even with a biennially bearing lower 2019 arabica coffee crop and unforeseen climatic problems aside, shall ensure steady Brazil coffee supply into 2020. 

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 50,948 bags or 0.84% during the month of December, to register these stocks at 6,132,991 bags at the end of the month.   The overall Green Coffee stocks reported, do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 570,000 bags per week, would conservatively have been at least 1.1 million bags. 

Suggesting that if one is to consider the additional unreported stocks the end month stocks, this would equate to more than twelve weeks of roasting activity, which most would consider to be a very safe reserve.    Especially so ahead of the pending deliveries from large new Mexican and Central American crop, which shall join the steady deliveries from Colombia, Brazil and Vietnam. 

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 32.04 usc/Lb., while this equates to 31.63% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 348 bags yesterday; to register these stocks at 2,474,186 bags.  There was meanwhile a larger in number 17,384 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 47,939 bags. 

The commodity markets had a mixed but overall lacklustre and flat day yesterday, to see the overall macro commodity index taking something of a sideways track for the day.   The Oil, Sugar, Copper and Orange Juice markets ended the day on a positive note and the London robusta Coffee market ended the day on a steady note, while the Natural Gas, Cocoa, New York arabica Coffee, Cotton, 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 0.24% lower; to see this index registered at 401.12.   The day starts with the U.S. Dollar steady and trading at 1.286 to Sterling, at 1.141 to the Euro and with the dollar buying 3.717 Brazilian Real. 

The London and New York markets started the day yesterday on a modestly softer note and with the markets maintaining this stance, into the early afternoon trade.   As the afternoon progressed the New York market started to come under pressure and with sell stops being triggered, to accentuate the losses, while the London market moved south in a more modest manner.   The London market did though soon bounce back from the lows and to trade close to par for most of the day, while the New York market remained under pressure, but did finally make a less significant recovery.  

The London market ended the day on an almost steady note and having recovered 90.9% of the earlier losses of the day, while the New York market ended the day on a negative note and with 61.7% of the earlier losses of the day intact.   This close does little to inspire any confidence and with a lack of supportive fundamental news coming to the markets, one would expect to see little better than a near to steady start for early trade today, against the prices set yesterday, as follows: 

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

JAN    1506 – 1                                               MAR   101.30 – 1.45

MAR   1527 – 1                                               MAY   104.55 – 1.70

MAY   1552 unch                                            JUL    107.35 – 1.80

JUL    1571 unch                                            SEP    110.25 – 1.80

SEP    1589 unch                                            DEC   114.15 – 1.80

NOV   1608 unch                                            MAR   117.95 – 1.75

JAN    1626 unch                                            MAY   120.40 – 1.65

MAR   1646 unch                                            JUL    122.55 – 1.65

MAY   1666 unch                                            SEP    124.60 – 1.60

JUL    1682 unch                                            DEC    127.60 – 1.60