Coffee Market Report January 29 2019

The General Statistics Office of the Vietnam have forecast that with the month of January coming to a close, that the countries coffee exports for the month shall be 19.1% lower than the same month last year, at a total of approximately 2.92 million bags.   This number is a little bit lower than some of the trade had recently forecast at 3.3 million bags, but is nevertheless higher than the trade forecasts at around 2.5 million bags, earlier in the month.   

The respected United States Department of Agriculture Foreign Agricultural Service USDA have forecast that the new Nicaragua coffee crop shall be 123,000 bags or 4.84% lower than the previous crop, at a total of 2,420,000 bags.   This made up from the combination of 2,380,000 bags of arabica coffees and 40,000 bags of robusta coffees. 

This estimated dip in coffee production in Nicaragua for the new crop that is presently in harvest, had already been forecast by many other trade and industry players and is therefore, not unexpected and should have no influence upon market sentiment.    

More positive rainfall forecasts for the coming month for most of the main coffee districts in South East Brazil came to the market yesterday, to dampen speculative spirits within the New York market and to counter the modestly positive technical picture that had developed late last week.   This accompanied by a general softening of commodities in general and the rising volumes of origin new crop price fixation selling coming in to play over any positive price correction, resulting in the market making a somewhat unexpected by many, sharp negative correction yesterday.  

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 34.25 usc/Lb., while this equates to 33.37% 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 2,050 bags yesterday; to register these stocks at 2,482,854 bags.  There was meanwhile a larger in number 16,405 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 24,642 bags. 

The commodity markets were mostly on the back foot yesterday, to see the overall macro commodity index taking a softer track yesterday.  The Sugar, Cocoa, Gold and Silver markets nevertheless ended the day on a positive note, while the Oil, Natural Gas, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn and Soybean markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.83% lower; to see this index registered at 400.49.   The day starts with the U.S. Dollar steady and trading at 1.315 to Sterling, at 1.143 to the Euro and with the dollar buying 3.761 Brazilian Real. 

The London and New York markets started the day yesterday trading within modest negative territory, but with the New York market soon coming under pressure and losing more value, to see the markets taking a softer track, into the early afternoon trade.   As the afternoon progressed the New York market experienced increased selling pressure and with sell stops being triggered, to fall deeper into negative territory and with the London market following the negative track of the New York market, but in a less aggressive manner.  The New York market did however manage to bounce back partially from the lows, but with both markets remaining on track for a soft close for the day. 

The London market ended the day on a very negative note and with 96.3% of the earlier losses of the day intact, while the New York market ended the day on a likewise very negative note and with 79% of the earlier losses of the day intact.    This close does little to inspire confidence but one might expect that following the sharp negative correction to the markets, that there might be some degree of hesitation and caution rather than follow through selling, to set the markets for 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. 

MAR   1508 – 26                                            MAR   102.65 – 4.15

MAY   1533 – 24                                            MAY   105.80 – 4.10

JUL    1552 – 23                                             JUL    108.55 – 4.10

SEP    1570 – 22                                            SEP    111.35 – 4.05

NOV   1589 – 21                                             DEC   115.20 – 4.00

JAN    1606 – 22                                            MAR   118.95 – 3.95

MAR   1626 – 21                                            MAY   121.25 – 3.90

MAY   1645 – 21                                             JUL   123.45 – 3.85

JUL    1661 – 21                                             SEP   125.50 – 3.80

SEP    1679 – open                                        DEC   128.60 – 3.70