Coffee Market Report May 10 2019

There are reports of scattered showers over some of the main arabica coffee districts in Brazil, with more to come over the next few days.  But it is still a little ahead of the start of the new arabica coffee harvest for most farmers and these rains would not be seen to be disruptive to the harvest and rather, assist to retain the dry winter ground water retention levels. 

The new Brazil conilon robusta coffee harvest is now in full swing, with reports indicating that despite some dry spells earlier in the year, the yield levels are mostly up to standard.   With forecasts having indicated a larger new conilon harvest for this year, which is likely to see significant volumes heading towards the certified robusta coffee stocks of the London market in the coming months.   

The National Weather Service’s Climate Prediction Centre in the U.S.A. have forecast a 70% change that the mild El Niño phenomenon shall continue over the next four months, but only a 55% to 60% chance that it would continue thereon.   But in the meantime, there is no indication that there shall be any severity to this El Niño and for the present, it offers little in the way of threat for the Pacific Rim coffee producing countries. 

Physical coffee trade remains lacklustre and slow, with internal market price resistance within most coffee producing countries resulting in the hardening of asking price export differentials and by nature, impacting upon consumer market demand.   This scenario unless some unforeseen damaging weather related factor is to come to the fore, is likely to carry on until the start of the new autumn and winter roasting season for the main northern hemisphere consumer markets. 

The July to July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 29.84 usc/Lb., while this equates to 32.84% 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 3,075 bags yesterday; to register these stocks at 2,435,767 bags.  There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 8,690 bags. 

The commodity markets and despite a modest softening of the U.S. dollar were conscious of the questionable U.S. and China trade talks and were mostly softer yesterday, to see the overall macro commodity index taking a softer track for the day.  The Sugar, Cocoa, Coffee and Gold markets nevertheless ended the day on a positive note, while the Oil, Natural Gas, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean 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 0.54% lower; to see this index registered at 387.99.   The day starts with the U.S. Dollar steady and trading at 1.300 to Sterling, at 1.122 to the Euro and with the US Dollar buying 3.946 Brazilian Real. 

The London and New York markets started the day yesterday trading around par and with both markets lacking active producer and speculative selling pressure, taking a modest positive track into the early afternoon trade.  As the afternoon progressed the relatively soft London market started to attract buying interest and with buy stops being triggered, to accentuate the gains.  This rally within the London market seemingly inspired some degree of confidence within the New York market, which with short covering buying activity coming into play, added value and likewise, started to trigger buy stops and to post gains in a more subdued manner.  

The London market ended the day on a very positive note and with 90.2% of the earlier gains of the day intact, while the New York market likewise ended the day on a positive note and with 83.6% of the earlier gains of the day intact.   This close might assist to inspire some confidence in the ability of markets to resist further declines and one would expect to see a follow through steady start for the markets for early trade today, against the prices set yesterday, as follows: 

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

MAY   1322 + 55                                            MAY     89.50 + 2.30

JUL    1345 + 55                                            JUL       90.85 + 2.30

SEP    1364 + 57                                            SEP      93.10 + 2.25

NOV   1384 + 59                                            DEC      96.55 + 2.20

JAN    1403 + 60                                            MAR   100.10 + 2.25

MAR   1422 + 60                                            MAY   102.35 + 2.20

MAY   1441 + 61                                            JUL     104.50 + 2.20

JUL    1460 + 63                                            SEP     106.50 + 2.15

SEP    1481 + 64                                            DEC    109.50 + 2.05

NOV   1500 + 64                                             MAR   112.55 + 2.05