Coffee Market Report January 22 2019

The commodity markets in the U.S.A. were closed yesterday for the Martin Luther King public holiday, which left trade for the London markets thin and lacklustre in nature and including the London coffee market. 

There is meanwhile no striking fundamental news forthcoming for the coffee markets which suffer from the evidence of global surplus coffee supply, which has long since encouraged speculative short selling and driven the markets to what is considered to be unsustainable low prices for many producers.   Particularly so for the producers of relatively high cost of production washed arabica coffees, with many of these producers likely to suffer from declining yields by the end of the year, as a result of reduced inputs into their farms. 

This factor might make one speculate that the markets following what is widely forecast to be a reasonable but nevertheless smaller Brazil arabica coffee crop due this year, that it could contribute towards fund and speculative short covering and some degree of buoyancy for the volatile New York market for the second half of the year.   While in the meantime and with some of the leading coffee districts in Brazil having experienced only modest rains for the first few weeks of this year, there is a close watch upon the weather reports out of this leading producer. 

The March to March contracts arbitrage between the London and New York markets broadened yesterday, to register this at 35.19 usc/Lb., while this equates to 33.53% 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 2,918 bags on Friday; to register these stocks at 2,476,755 bags.  There was meanwhile a larger in number 12,827 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 51,541 bags. 

With the U.S.A. commodity markets off the field of play yesterday, the remaining markets had a quiet day yesterday, but with the overall commodity index for these markets showing a degree of buoyancy.  The Oil and Sugar markets ended the day on a positive note, while the Cocoa, London robusta Coffee, Copper and Gold markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets was 0.6% higher on Friday; to see this index registered at 405.62.   The day starts with the U.S. Dollar steady and trading at 1.287 to Sterling, at 1.136 to the Euro and with the dollar buying 3.753 Brazilian Real. 

The London market started the day yesterday trading close to par and remaining so for most of the day’s trade, before coming under pressure in late in the day trade and falling back into what would be considered to be modest negative territory. 

The London market ended the day on a negative note and with 85.7% of the earlier losses of the day intact, while the New York market was close for the day.   This close does little to indicate direction for the day today, which is likely to see the markets due for a hesitant near to steady start for early trade today, against the prices set in London yesterday and New York on Friday, as follows: 

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

JAN    1519 – 6                                               MAR   104.95 + 2.55

MAR   1538 – 6                                               MAY   108.05 + 2.50

MAY   1558 – 7                                               JUL    110.75 + 2.50

JUL    1576 – 6                                               SEP    113.45 + 2.40

SEP    1593 – 6                                               DEC   117.30 + 2.35

NOV   1613 – 5                                               MAR   121.05 + 2.30

JAN    1631 – 4                                               MAY   123.35 + 2.20

MAR   1651 – 4                                               JUL    125.50 + 2.20

MAY   1671 – 4                                               SEP    127.60 + 2.20

JUL    1687 – 4                                               DEC    130.65 + 2.25