Coffee Market Report April 25 2019

The coffee markets encountered a weakening Brazil Real yesterday, which with the perspective for increased price fixation selling from the world’s leading producer, had its impact upon confidence and put renewed pressure upon the New York market. 

There is meanwhile no relief for coffee producers globally, with the relatively high cost washed arabica coffee producers having to deal with steadily rising costs of production and the soft prices that are dictated by the soft nature of the reference prices of the New York market.   Most producers lacking the financial resources to provide significant financial subsides for their farmers, which with the inability of many farmers to finance the full range of inputs to maintain yields, is threatening longer term production volumes.   

This factor makes one question when it is that the potential declining production levels in the important Mexico and Central American producer bloc as against rising global consumption and an overall smaller Brazil crop this year, shall start to impact upon the bearish and short sold speculative sector of the market.   At a guess, one might think that this shall only really occur by the last quarter of the year, by when there shall start to be some more defining data coming to the fore in terms of the potential new crops from Mexico and Central America. 

However if the weather conditions in Brazil prove to be normal and with a good start to the countries October to April rain season, it shall bring with it forecasts for another bumper coffee crop for 2020, which will prove to be negative for longer term market sentiment and might counter the potential support that might come with shorter term tightening global coffee supply.   This said, it makes one speculate that coffee producers are due for at least another six months or so of soft and difficult low prices, while the speculative sector of the market awaits more in the way of supportive fundamental news, to perhaps see reason to change their bearish view towards the coffee market. 

The July to July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 29.26 usc/Lb., while this equates to 31.68% 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 13,595 bags yesterday; to register these stocks at 2,469,612 bags.  There were meanwhile a smaller in number 3,198 bags decrease to the number of bags ending grading for this exchange; to register these pending grading stocks at 5,130 bags. 

The commodity markets were once again mostly on the softer side in trade yesterday against some further muscle being shown by the U.S. dollar, to see the overall macro commodity index taking a softer track for the day.  The Natural Gas, Copper, Gold and Silver markets ended the day on a positive note and the Brent Oil and Sugar markets were steady for the day, while the U.S. Oil, Cocoa, Coffee, Cotton, Orange Juice, 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 0.57% lower; to see this index registered at 400.83.   The day starts with the U.S. Dollar steady and trading at 1.291 to Sterling, at 1.116 to the Euro and with the US Dollar buying 3.991 Brazilian Real. 

The London and New York markets started the day yesterday on a positive note, but with both markets falling back to trade close to and around par, for the early afternoon trade.  As the afternoon progressed the New York market started to falter and to move into negative territory and finally followed in a more subdued manner, by the London market.   Setting the markets on track on track for a soft close for the day. 

The London market ended the day on a negative note and with 80% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 64.3% of the earlier losses of the day intact.  This close does little to inspire confidence and is likely to inspire little better than a cautious and 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   1363 – 6                                              MAY     90.45 – 1.05

JUL    1391 – 8                                              JUL       92.35 – 0.90

SEP    1409 – 9                                              SEP      94.80 – 0.90

NOV   1430 – 8                                              DEC      98.55 – 0.90

JAN    1448 – 10                                            MAR   102.20 – 0.85

MAR   1469 – 9                                              MAY   104.55 – 0.85

MAY   1491 – 9                                              JUL     106.80 – 0.85

JUL    1512 – 9                                              SEP     108.90 – 0.90

SEP    1531 – 9                                              DEC    112.00 – 0.90

NOV   1550 – 4                                               MAR   115.15 – 0.85