Coffee Market Report March 20 2019

The coffee markets remain devoid of supportive fundamental news for the present, with fair rainfall reports emanating from most of Brazil’s main coffee districts and indicating a good new 2019 crop on the nearby horizon, assisting to fuel bearish sentiment.   Albeit that the new biennially bearing Brazil arabica crop, is expected to be smaller this year. 

The New York market is meanwhile trading at near to thirteen-year lows in value, but if one is to appropriate thirteen years of inflation in terms of costs of production, the income for arabica coffee farmers in general is much worse than the dip in value would indicate.   Even for the few countries that can take some advantage from weakening domestic currency, to counter the low reference prices of the terminal market. 

The low reference prices of the coffee terminal markets are though having an influence in terms of internal market price resistance and including the major producers Brazil, Vietnam and Colombia, to see the asking export price differentials from most producing countries hardening.  A factor in terms of the prevailing global surplus coffee supply, is retarding the potential growth of the certified coffee stocks that are held against the New York and London markets.  

Perhaps the most striking news coming to the fore yesterday was the opening of the latest Starbucks store in Shenzhen China, which is the store number 30,000 for this high-profile global brand.  

The arbitrage for the May to May contracts between the London and New York markets narrowed yesterday, to register this at 28.25 usc/Lb., while this equates to 29.23% 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 2,598 bags yesterday; to register these stocks at 2,500,105 bags.  There was meanwhile, a larger in number 8,704 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 34,399 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 17,167 bags or 0.87% over the week of trade leading up to Monday 18th. March, to see these stocks registered at 1,959,167 bags, on the day. 

The commodity markets were mixed in trade yesterday and with most markets trading within a narrow band, to see the overall macro commodity index taking a relatively steady track for the day.  The Brent Oil, Natural Gas, Cocoa, London robusta Coffee, Cotton, Copper, Orange Juice, Gold and Silver markets ended the day on a positive note and the New York arabica Coffee market on a near to steady note, while the U.S. Oil, Sugar, Wheat, Corn and Soybean markets ended the day on a marginally softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.29% higher; to see this index registered at 409.89.   The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.325 to Sterling, at 1.134 to the Euro and with the US Dollar buying 3.788 Brazilian Real. 

The London market started the day yesterday on a softer note and trading within negative territory, while the New York market started the day on a positive note and with the markets taking this mixed stance into the early afternoon trade.  As the afternoon progressed the London market recovered and moved back up to join the New York market within positive territory, but while the London market continued towards a relatively strong positive close, the New York market faltered and fell back to trade around par. 

The London market ended the day on a very positive note and with 88.5% of the earlier gains of the day intact, while the New York market ended the day marginally south of par and with 57.1% of the modest losses of the day intact.   This close provides little in the way of direction, but one might think to see some price fixation activity coming to the fore for early trade in the London market, but more likely another hesitant steady start due for the New York market against the prices set yesterday, as follows: 

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

MAR   1498 + 27                                            MAR     93.45 – 0.20

MAY   1508 + 23                                            MAY     96.65 – 0.20

JUL    1516 + 20                                             JUL      99.40 – 0.15

SEP    1530 + 19                                            SEP    102.15 – 0.10

NOV   1546 + 17                                            DEC    106.00 – 0.05

JAN    1564 + 17                                            MAR   109.85 unch

MAR   1583 + 16                                            MAY   112.25 – 0.05

MAY   1602 + 15                                             JUL    114.50 – 0.05

JUL    1622 + 15                                             SEP    116.65 – 0.05

SEP    1640 + 14                                             DEC   119.80 – 0.05