Coffee Market Report February 15 2019

There are mixed rainfall reports for this week out of Brazil, with many of the main coffee districts having reported good rains, but some of the more northern main districts having had a relatively dry week.  But with more rains being forecast for the coming days, there are presently no concerns being voiced in terms of the development of the forthcoming new crop.   With the new and forecast to be larger new conilon robusta coffee crop due to start being harvested in April and the new and forecast to be smaller new arabica coffee crop, due to start being harvested in June. 

Reports meanwhile indicate that there remain good levels of unsold coffee stocks within the internal market, while with farmers and cooperatives still showing some degree of price resistance, the internal market sales are relatively lacklustre at present.   But one would imagine that in terms of the arabica coffee farmers and with a smaller new crop this year, there is some degree of incentive to hold on to some stocks and to use these later in the year, to supplement their smaller new crop. 

The reports from Vietnam indicate that with the financial pressures of the week-long Tet New Year holidays over, that farmers are likewise showing some degree of internal market price resistance, which is impacting upon the volumes of internal trade of mostly robusta coffees at present.    But the indications are that exporters are already reasonably well covered with sufficient stocks to cover their short-term forward contract export commitments and with these in hand, there is a steady flow of new crop robusta coffees being shipped into the consumer markets. 

The Climate Prediction Centre of the U.S.A. National Weather Service has reported that they identify a weak El Niño phenomenon being in play within the Pacific Ocean, but they foresee only a 55% chance that this shall continue for the coming few months.   While with this only being weak in nature, one would suspect that it shall not be seen to be threatening to the Pacific Rim coffee producing countries.    Thus, bring little in the way of any threatening weather conditions, which leaves the coffee markets for the present, very much in the hands of the speculative bears of the market. 

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 31.73 usc/Lb., while this equates to 31.28% 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 1,235 bags yesterday; to register these stocks at 2,480,090 bags.  There was meanwhile a larger in number 1,320 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 39,594 bags. 

The commodity markets were mixed in trade yesterday, but with many markets taking on a softer stance for the day, the overall macro commodity index took a sideways to softer stance for the day.   The Oil and Cotton markets ended the day on a positive note and the Natural Gas, London robusta Coffee, Copper and Gold markets ended the day on a steady note, while the Sugar, Cocoa, New York arabica Coffee, Orange Juice, Wheat, Corn, Soybean 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 0.44% lower; to see this index registered at 396.81.   The day starts with the U.S. Dollar steady and trading at 1.280 to Sterling, at 1.129 to the Euro and with the US Dollar buying 3.723 Brazilian Real. 

The London and New York markets started the day yesterday trading close to par and with both markets maintaining this hesitant stance, into the early afternoon trade.   As the afternoon progressed, both markets started to attract some selling pressure, to see the markets moving down into negative territory.   The London market did however manage to bounce back from the lows in late trade and to move back up to once again trade around par, but with the New York market only making a partial recovery and heading towards a relatively soft close for the day. 

The London market ended the day on a steady note and having recovered from the earlier $ 15.00 per Mt. earlier losses of the day and to end the day with 60% of the earlier modest gains of the day intact, while the New York market ended the day on a soft note and with 50% of the earlier losses of the day intact.  This close and the erratic nature of the markets provides little indication of direction, but one might suspect that with the speculative and fund sectors of the market and particularly the New York market already significantly sold short and perhaps even over sold, that there is little encouragement to take the markets further south.   Thus, and with the Brazil Real tending to steady, one might expect to see another hesitant and relatively steady start due for the markets for early trade today, against the prices set yesterday, as follows: 

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

MAR   1512 + 1                                              MAR     97.85 – 1.05

MAY   1537 + 3                                              MAY   101.45 – 0.85

JUL    1550 + 1                                               JUL   104.05 – 0.90

SEP    1568 + 1                                              SEP   106.75 – 0.90

NOV   1587 + 1                                               DEC   110.50 – 0.95

JAN    1605 + 1                                              MAR   114.30 – 0.95

MAR   1625 + 1                                              MAY   116.70 – 1.00

MAY   1645 + 1                                               JUL    119.00 – 1.00

JUL    1661 + 1                                               SEP    121.20 – 1.10

SEP    1678 + 1                                               DEC   124.35 – 1.20