Coffee Market Report February 01 2019

The Indonesian government trade data from Sumatra which is the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month of January were 46,530 bags or 83.52% higher than the same month last year, at a total of 102,243 bags.   This does however, follow some low volume export months and contributed to the islands cumulative robusta coffee exports for the first four months of the present October 2018 to September 2019 coffee year to be 369,570 bags or 35.36% lower than the same period in the previous coffee year, at a total of 675,498 bags. 

Meanwhile ahead of the start of the new robusta crop harvest in Indonesia in near to two months’ time, there is very little in the way of robusta coffee coming to the countries exporters and trade is almost stalled for the present.  While with Vietnam on holiday next week for the pending Tet New Year holidays that start with the New Year’s Eve on Monday and to bring in the Year of the Pig, there is little in the way of coffee trade activity from this leading robusta coffee producer.   

Many of the main coffee districts in Brazil have reported erratic rains for the month of January, with many districts having experienced below average rainfall for the month.  However, following good rains for last couple of months of last year, the ground water retention levels were good and with forecasts for good rains to come in the coming week, there remain no serious concerns over the cherry development for the forthcoming new 2019 Brazil coffee crop.  Albeit that over the past couple of weeks, there have been some concerns voiced. 

Internal market trade in Brazil has been lacklustre in recent days, as with the Brazil Real relatively firm and prices being dictated by the soft nature of the reference prices of the international coffee terminal markets, there is a degree of farmer price resistance.  Farmers following good volumes of sales over the previous months of good percentage of their coffees that came with the bumper 2018 crop, presumably easily able to finance the carry of their remaining stocks for at least the short term.   But one might speculate that the closer one gets to the need to finance the harvest of the new crop, that farmers might show some degree of selling aggression.   This by April in terms of the conilon robusta coffee farmers and by June, in terms of the arabica coffee farmers. 

The May to May contracts arbitrage between the London and New York markets broadened yesterday, to register this at 37.70 usc/Lb., while this equates to 34.59% 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 2,260 bags yesterday; to register these stocks at 2,484,142 bags.  There was meanwhile a larger in number 3,530 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 19,941 bags. 

The commodity markets were mixed in trade yesterday and with some degree of buoyancy for the U.S. dollar in play, to see the overall macro commodity index taking something of a sideways track for the day.  The Sugar, Coffee, Cotton, Copper, Orange Juice, gold and Silver markets ended the day on a positive note, while the Oil, Natural Gas, Cocoa, 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 0.14% higher; to see this index registered at 402.23.   The day starts with the U.S. Dollar steady and trading at 1.310 to Sterling, at 1.143 to the Euro and with the dollar buying 3.645 Brazilian Real. 

The London market started the day yesterday on a modestly positive note and the New York market with some early gains, to see the London market trading around par and the New York market in positive territory, into the early afternoon trade.  As the afternoon progressed the New York market and with the firmer Brazil Real providing some emotive support, started to add to its gains and soon triggering short covering and price fixation buy stops, moved sharply higher in value.    This was accompanied by renewed support within the London market which likewise, moved up into positive territory.    Setting both markets on track for a strong close for the day. 

The London market ended the day on a very positive note and with and with 96% of the earlier gains of the day intact, while the New York market ended the day on a likewise very positive note and with 94.9% of the earlier gains of the day intact.   The ability of the markets to both close near to the highs of the day might well inspire a degree of confidence, which could assist towards 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. 

MAR   1551 + 24                                            MAR   105.90 + 3.80

MAY   1572 + 24                                            MAY   109.00 + 3.70

JUL    1589 + 24                                             JUL    111.75 + 3.65

SEP    1606 + 24                                            SEP    114.50 + 3.65

NOV   1624 + 24                                             DEC   118.40 + 3.60

JAN    1641 + 24                                            MAR   122.15 + 3.55

MAR   1660 + 23                                            MAY   124.60 + 3.60

MAY   1679 + 23                                             JUL   126.85 + 3.65

JUL    1695 + 23                                             SEP   128.95 + 3.65

SEP    1713 + 23                                            DEC   131.95 + 3.60