Coffee Market Report March 14 2019

The Coffee Exporters Association in Brazil Cecafé have reported that the countries green coffee exports for the month of February were 40.5% higher than the same month last year, at a total of 3,142,000 bags.   But they do note that due to the soft nature of the international coffee market prices that the value of these exports was only 10.6% higher than the value of the coffee exports during the same month last year, at a total of 449.4 million U.S. dollars. 

This lower U.S. dollar unit price value for the green coffees exported from Brazil in February this year has been compensated to a degree though by the volume of exports and more so, by the fact that in February last year the Brazil Real was trading at around 3.24 to the dollar, whereas the Real was trading at around 3.75 at the end of February this year.   Thus, in terms of domestic market prices for the farmers, the unit costs for coffees sales were not so dramatically lower and has assisted farmers, to more easily accept the prices being paid by the country’s exporters. 

This factor supporting continued high-volume coffee export sales out of Brazil and with Cecafé forecasting that the country shall experience continued high volumes of coffee exports over March to June this year, to record a record coffee export figure from their bumper 2018 crop. 

But one might speculate that with a significantly lower arabica coffee crop being forecast for the coming new crop that shall start being harvested in June, that many farmers might be inspired to hold back some stocks to supplement their smaller new crop and to perhaps take advantage of the possibility of improved international coffee market prices for the second half of the year.  If this scenario proves to be true, it might reduce the volumes of price fixation selling within the New York market that shall be emanating from Brazil in the coming months, albeit that it has been mostly speculative and fund selling pressure that has been driving the New York market lower. 

The May to May contracts arbitrage between the London and New York markets broadened yesterday, to register this at 28.79 usc/Lb., while this equates to 29.48% 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 3,850 bags yesterday; to register these stocks at 2,495,383 bags.  There was meanwhile, a smaller in number 113 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 33,598 bags. 

The commodity markets were mixed in trade yesterday, but with the overall macro commodity index showing a degree of buoyancy for the day.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.58% higher; to see this index registered at 404.66.   The day starts with the U.S. Dollar steady and trading at 1.325 to Sterling, at 1.132 to the Euro and with the US Dollar buying 3.814 Brazilian Real. 

The London market started the day yesterday trading within modest negative territory and the New York market trading within positive territory and with the London market moving further into negative territory and the New York market back to par, for the early afternoon trade.  As the afternoon progressed both markets drifted lower and with the New York market joining the London market within negative territory, but with the New York market soon bouncing off the lows and moving back up into positive territory.   The New York market continued to take a positive track towards the close of the day, while the London market bounced off the lows to lessen the losses of the day. 

The London market ended the day on a negative note and with 46.7% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 84.6% of the earlier gains of the day intact.  This close and with the recovery in New York seen to be more corrective than an indication of direction, does little to inspire confidence.  But one might think that the uncertainty that prevails shall perhaps assist towards a hesitant steady start for early trade today, against the prices set yesterday, as follows: 

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

MAR   1500 – 8                                              MAR     94.45 + 1.65

MAY   1518 – 7                                              MAY     97.65 + 1.65

JUL    1528 – 7                                              JUL     100.35 + 1.60

SEP    1544 – 6                                              SEP    103.05 + 1.50

NOV   1560 – 6                                              DEC    106.95 + 1.50

JAN    1576 – 6                                              MAR   110.75 + 1.45

MAR   1595 – 6                                              MAY   113.20 + 1.45

MAY   1615 – 6                                              JUL    115.40 + 1.35

JUL    1634 – 7                                              SEP    117.55 + 1.30

SEP    1653 – 7                                              DEC   120.70 + 1.20