Coffee Market Report March 28 2019

The Uganda Coffee Development authority have reported that the countries coffee exports for the month of February were 64,816 bags or 16.68% lower than the same month last year, at a total of 323,828 bags.   This has contributed to the country’s cumulative coffee exports for the first five months of the present October 2018 to September 2019 coffee year to be 207,480 bags or 10.37% lower than the same period in the previous coffee year, at a total of 1,794,047 bags. 

More notable though and reflecting the soft global coffee prices is the fact that the value of the Ugandan coffee exports for the first five months of the present October 2018 to September 2019 coffee year is US$ 39,470,197.00 or 17.86% lower than the value of coffee exports for the same period in the previous coffee year.   A factor that remains a concern for all coffee producers, albeit that some like Brazil, do have some relief coming from the softer nature of their domestic currency. 

It was reported on Reuters that the latest report emanating from the respected Rabobank sees the bank having increased their forecast for a deficit global coffee supply for the next October 2019 to September 2020 coffee year by 91.67%, to now foresee a deficit coffee supply for the coming coffee year of 2.3 million bags.  This the report indicates that there shall be a 1.8 million bags deficit arabica coffee supply, along with a 0.5 million bags deficit robusta coffee supply. 

But with the report indicating a surplus global coffee supply for the present October 2018 to September 2019 coffee year and a perception for fair carryover stocks into the next coffee year, the report is unlikely to impact upon the prevailing bearish sentiment of the speculative and fund sectors of the coffee markets.  

There was meanwhile a general consensus on the part of all the producers attending the World Coffee Producers Forum in Nairobi this week and organised by the International Coffee Organisation, that the prevailing low prices are resulting in loss making prices for many coffee farmers globally.  Noting that not only is becoming a humanitarian crisis, but that with farmers struggling to finance the maintenance of their farms and to finance good harvesting practices, that this shall ultimately impact upon both yields and quality. 

The World Coffee Producers Forum will plan to hold a follow-on meeting from the 10th. to the 11th. July 2019, at the Royal Palm Plaza Resort, in São Paulo, Brazil.  The forum has invited the entire coffee production chain to participate in this forthcoming meeting, in a bid to act jointly to consider what actions can be taken to solve the present problem, which threatens the future supply of coffee.   But how to counter the negative impact that the short selling speculative and fund sectors have upon coffee prices, is really difficult to imagine. 

The July to July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 28.28 usc/Lb., while this equates to 29.32% 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 4,348 bags yesterday; to register these stocks at 2,493,479 bags.  There was meanwhile, a larger in number 8,252 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 10,055 bags. 

The commodity markets and with the U.S. dollar showing some degree of muscle, were mostly softer in trade yesterday, to see the overall macro commodity index taking a softer track for the day.  The Cocoa, Copper and Wheat markets ended the day on a positive note, while the Oil, Natural Gas, Sugar, Coffee, Cotton, Orange Juice, Corn, Soybean, Gold 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 0.77% lower; to see this index registered at 408.74.   The day starts with the U.S. Dollar near to steady and trading at 1.319 to Sterling, at 1.125 to the Euro and with the US Dollar buying 3.992 Brazilian Real. 

The London and New York markets started the day yesterday trading close to par and with the markets remaining steady, into the early afternoon trade.   As the afternoon progressed the New York market briefly moved up into positive territory, but with the Brazil real becoming weaker it impacted upon confidence and the New York market dropped back into negative territory and follows in a more muted manner, by the less volatile London market. 

The London market ended the day on a negative note and with 60% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 76.9% of the earlier losses of the day intact.  This soft close and with the weak Brazil in play, is unlikely to assist with confidence and one would think that the market are due for little better than a hesitant near to steady start for early trade today, against the prices set yesterday, as follows: 

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

MAY   1504 – 6                                              MAY     93.85 – 1.50

JUL    1503 – 9                                              JUL       96.45 – 1.50

SEP    1514 – 11                                            SEP      99.20 – 1.45

NOV   1529 – 12                                            DEC    103.10 – 1.45

JAN    1546 – 12                                            MAR   106.95 – 1.40

MAR   1564 – 12                                            MAY   109.40 – 1.40

MAY   1583 – 13                                            JUL     111.65 – 1.40

JUL    1601 – 14                                            SEP     113.80 – 1.40

SEP    1619 – 14                                            DEC    116.90 – 1.45

NOV   1637 – 14                                             MAR   120.00 – 1.50