Coffee Market Report May 09 2019

The Customs Authorities in Vietnam have reported that the countries coffee exports for the month of April were 16.7% lower than the previous month, at a total of 2,388,267 bags.  This volume which was marginally higher than the earlier state forecast has contributed to the country’s coffee exports for the first four months of this year to be 13.1% lower than the same period last year, at a total of 10,532,433 bags. 

The report does also highlight the fact that while volume of coffee exports for the first four months of this year was 13.1% lower, that the value of this exports was a more significant 22% lower than the same period last year, at a total of 1.1 billion U.S. dollars.   This factor is also manifesting itself in rising internal market price resistance, which is inflating asking price differentials for new business and likewise, retarding export volumes of mostly robusta coffees out of Vietnam. 

The Colombian coffee Federation have reported that as a result of the low internal market prices for coffee that have been dictated by the soft reference prices of the New York market, that as much as 40,000 hectares of coffee fields have been replaced over the past eighteen months, by alternative and more profitable crops.  This extrapolates to approximately 4.35% of Colombia’s coffee lands no longer in production, with farmers moving over to crops such as avocado pears and citrus.  

One might speculate that the negative effects of soft global coffee prices shall not only impact upon coffee production in Colombia, but shall become a factor within many other coffee producing countries.  Especially so for producers of fine washed arabica coffees, where the multiple picking harvest season contributes to relatively high costs of production.   A factor of some concern for the consumer markets, in terms of the steady increase in global coffee consumption, which might not be matched by the same increase in global production. 

The July to July contracts arbitrage between the London and New York markets broadened yesterday, to register this at 30.04 usc/Lb., while this equates to 33.92% 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 150 bags yesterday; to register these stocks at 2,438,842 bags.  There was meanwhile a larger in number 4,700 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 8,690 bags. 

The commodity markets had a mixed day yesterday, with the overall macro commodity index taking something of a sideways track for the day.   The Oil, Natural Gas, Cocoa, New York arabica Coffee and Orange Juice markets ended the day on a positive note, while the Sugar, London robusta Coffee, Cotton, Copper, Wheat, 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 0.03% higher; to see this index registered at 390.08.   The day starts with the U.S. Dollar steady and trading at 1.302 to Sterling, at 1.119 to the Euro and with the US Dollar buying 3.927 Brazilian Real. 

The London market started the day yesterday on a softer note and soon falling deeper into negative territory, while the New York market started the day trading mostly to the positive side of par.   The London market did though soon bounce off the lows and to join the New York market in trading around par, into the early afternoon trade.  As the afternoon progressed, both markets added some more value but to soon hit a ceiling and to fall back to see the New York market trading on a modestly positive note through to the close, while the London market dipped back into modest negative territory in late trade.  

The London market ended the day on a modestly negative note, but having recovered 82.1% of the earlier losses of the day, while the New York market ended the day on a modestly positive note and with 31.4% of the earlier gains of the day intact.   This close and with the ability of the markets to end the day on a steady note and with a marginally firmer Brazil Real in play, might assist to set the markets for a follow through steady start for early trade today, against the prices set yesterday, as follows: 

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

MAY   1267 – 4                                              MAY     87.20 + 0.55

JUL    1290 – 5                                              JUL       88.55 + 0.55

SEP    1307 – 6                                              SEP      90.85 + 0.45

NOV   1325 – 7                                              DEC      94.35 + 0.45

JAN    1343 – 8                                              MAR     97.85 + 0.35

MAR   1362 – 9                                              MAY   100.15 + 0.30

MAY   1380 – 13                                            JUL     102.30 + 0.25

JUL    1397 – 18                                            SEP     104.35 + 0.25

SEP    1417 – 19                                            DEC    107.45 + 0.25

NOV   1436 – 18                                             MAR   110.50 + 0.20