Coffee Market Report May 16 2019

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 235,239 bags or 3.85% during the month of April, to register these stocks at 6,345,350 bags at the end of the month.   The overall Green Coffee stocks reported, do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 570,000 bags per week, would conservatively have been at least 1.1 million bags. 

Suggesting that if one is to consider the additional unreported stocks the end month stocks, this would equate to approximately thirteen weeks of roasting activity, which most would consider to be a very safe reserve.    Especially so ahead of the further deliveries due from large new Mexican and Central American crop and the new Peru crop, which are coming in over and above the steady deliveries from Colombia, Brazil and Vietnam.  Albeit that with price resistance prevalent within many producer countries, there is presently lacklustre export activity from many producers. 

Meanwhile the coffee markets remain devoid of any form of supportive news, with focus remaining upon the prospects of an overall smaller but still nevertheless large new Brazil coffee crop, which is joined by some volumes of carryover stocks from last year’s bumper coffee crop.   There is however rising speculation that the dismal prices that are being dictated by the reference prices of the soft coffee terminal markets shall result in declining levels of inputs into coffee farms and the resulting dip in yields, which shall along with rising global coffee consumption, result in a deficit global coffee supply for the coming October 2019 to September 2020 coffee year. 

This is a factor and as it is likely to impact more noticeably upon the relatively high cost Mexican and Central American fine washed arabica coffee producer bloc, that might well assist to restrain the speculative sector of the New York market from selling this market much lower.  But there remains a question in terms of the London robusta coffee market, where the surplus conilon robusta coffee crop this year, is likely to bring some good volume of conilon robusta coffees to the certified coffee stocks of the London market and with the resulting negative pressure upon this market, to see the arbitrage between the London and New York markets broaden. 

The July to July contracts arbitrage between the London and New York markets broadened yesterday, to register this at 28.93 usc/Lb., while this equates to 31.69% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to be unchanged yesterday; to register these stocks at 2,435,682 bags.  There was meanwhile also no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 4,700 bags. 

The commodity markets were mixed in trade yesterday, but with many markets retaining some degree of buoyancy, to see the overall macro commodity index likewise retaining a degree of buoyancy for the day.   The Oil, Cocoa, New York arabica Coffee, Copper, Orange Juice, Wheat, Corn, Soybean and Gold markets ended the day on a positive note, while the Natural Gas, Sugar, London robusta Coffee, Cotton and Silver markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets, is 0.43% higher, to see this index registered at 392.63.   The day starts with the U.S. Dollar steady and trading at 1.285 to Sterling, at 1.121 to the Euro and with the US Dollar buying 4.001 Brazilian Real. 

The London and New York markets started the day yesterday trading around par and taking this track, into the early afternoon trade.   As the afternoon progressed the New York market and despite a marginally softer Brazil Real, managed to remain close to and mostly to the positive side of par, while the London market started to come under pressure and moved down into negative territory.   Setting the markets on track for a mixed close for the day.   

The London market ended the day on a negative note and with 89.5% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 43.7% of the earlier gains of the day intact.  This mixed close provides little in the way of indication for direction, but with perhaps the ability of the New York market to shrug off the negative influence of a weaker Brazil currency, it shall assist towards some degree of confidence and for a steady start for early trade today.   Against the prices set yesterday, as follows: 

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

MAY   1351 – 16                                            MAY     89.90 + 0.35

JUL    1375 – 17                                            JUL       91.30 + 0.35

SEP    1391 – 17                                            SEP      93.55 + 0.25

NOV   1410 – 17                                            DEC      97.00 + 0.15

JAN    1429 – 17                                            MAR   100.50 + 0.10

MAR   1447 – 18                                            MAY   102.70 + 0.10

MAY   1467 – 19                                            JUL     104.70 + 0.05

JUL    1487 – 18                                            SEP     106.60 + 0.05

SEP    1507 – 19                                            DEC    109.40 unch

NOV   1526 – 19                                             MAR   112.20 - 0.10