Coffee Market Report May 03 2019

Reports out of Brazil indicate that there have only been some scattered showers over the main coffee districts in South East Brazil, with the mostly dry conditions conducive for the new crop harvest.  In this respect the new conilon robusta crop is accelerating in volume, with some arabica coffee farms in Zona da Mata and the lower lands within South Minas already starting to harvest.  But with the majority of arabica coffee districts only expected to start harvesting in any volume, in the coming month. 

The prospects of this overall smaller but still relatively large new crop from Brazil continues to weigh upon speculative sentiment within the coffee terminal markets, which continue to trade within a soft trading range. 

The Trade Ministry in Brazil has meanwhile reported that the countries coffee exports for the month of April were 735,355 bags or 37.73% higher than the same month last year, at a total of 2,684,380 bags.  

The low reference prices of the coffee terminal markets are having their effect, in terms of internal market price resistance within Brazil.  This has inspired the Brazil Ministry of Agriculture to say that they shall reassess the methodology used to set the governments minimum prices for coffee.  

The National Coffee Institute in Costa Rica has reported that the countries coffee exports for the month of April were 38,520 bags or 22.09% lower than the same month last year, at a total of 135,864 bags.   This they say has contributed to the country’s coffee exports for the first seven months of the present October 2018 to September 2019 coffee year to be 12% lower than the same period in the previous coffee year, at a total of 557,843 bags. 

There are reports out of both Vietnam and Indonesia, which indicate that with the low reference prices of the London terminal market, there remains internal market price resistance for sales of robusta coffee stocks within the former and new crop robusta coffees for the latter.  But one must question with a larger new conilon robusta coffee crop for Brazil this year and good volumes due to be tendered to the certified coffee stocks of the London market and potentially a negative factor for this market, if holding back from the reality of the reference prices of this market is a viable medium-term policy. 

The July to July contracts arbitrage between the London and New York markets broadened yesterday, to register this at 29.68 usc/Lb., while this equates to 32.42% 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 3,035 bags yesterday; to register these stocks at 2,443,473 bags.  There was meanwhile a smaller in number 1,710 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 3,420 bags.

The commodity markets were mixed in trade yesterday, but against renewed muscle for the U.S. dollar there were many markets taking a negative stance, the overall macro commodity index took a softer track for the day.   The Sugar, Cocoa, New York arabica Coffee, Wheat and Corn markets ended the day on a positive note, while the Oil, Natural Gas, London robusta Coffee, Cotton, Copper, Orange Juice, 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 0.58% lower; to see this index registered at 394.73.   The day starts with the U.S. Dollar steady and trading at 1.303 to Sterling, at 1.117 to the Euro and with the US Dollar buying 3.968 Brazilian Real. 

The London and New York markets started the day yesterday trading close to par, but with the London market soon coming under pressure and moving back into negative territory, but to bounce back and to see both markets trading around par into the early afternoon trade.   As the afternoon progressed the New York market maintained a mostly positive stance and with some short-lived mini rally’s taking place, while the London market remained under pressure and maintained a mostly negative stance and setting the markets on track for a mixed close for the day.  

The London market ended the day on a negative note and with 85.7% of the earlier losses of the day intact, while the New York market ended the day on a modestly positive note and with only 27.3% of the earlier gains of the day intact.   This mixed close and with the Brazil Real softer against the dollar, does not assist to inspire confidence and one might foresee little better than a 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   1336 – 16                                            MAY     90.25 + 0.45

JUL    1364 – 12                                            JUL       91.55 + 0.45

SEP    1379 – 10                                            SEP      93.95 + 0.45

NOV   1397 – 9                                              DEC      97.65 + 0.50

JAN    1416 – 8                                              MAR   101.30 + 0.55

MAR   1436 – 7                                              MAY   103.60 + 0.55

MAY   1456 – 7                                              JUL     105.80 + 0.60

JUL    1477 – 8                                              SEP     107.85 + 0.60

SEP    1497 – 8                                              DEC    110.85 + 0.55

NOV   1515 – 8                                               MAR   113.85 + 0.55