Coffee Market Report May 17 2019

Most of the main arabica coffee districts in Brazil have been experiencing scattered rain showers and this is likely to carry on for a few days more, which is assisting to maintain ground water retention levels ahead of the stress of the new crop harvest.  Meanwhile the new conilon robusta coffee harvest is already in progress, with new crop conilon robusta coffees soon due to impact upon both the domestic and consumer markets.  The pending availability of these conilon coffees foreseen to be something of a negative factor, for the London market. 

Brazil’s food supply and statistics agency CONAB have who had in January forecast the new 2019 Brazil crop at between 50.5 million and 54.5 million bags, have come to the fore with their forecast for this crop to be approximately 17% lower than the last crop, at 50.9 million bags.   This related to their forecast for the new arabica coffee crop to be sharply 22% lower at 36.9 million bags and to the new conilon robusta coffee crop to be 2% lower, at 13.9 million bags. 

One might comment though, that this forecast is significantly lower than a host of other respected trade and industry forecasts and is particularly questionable, in that the perception has been for a dip in arabica coffee production, but a significant increase in conilon robusta coffee production.  Thus, one might think that while the CONAB report might a face value be seen to be mildly bullish in nature, that most market players might rather go with the earlier forecasts that have foreseen the new crop at between 55 million and 60 million bags. 

The summer rain season has started in the main central highland coffee districts in Vietnam, to bring to the fore the flowerings for the next crop that is due to be harvested from later in October this year, as and when the rains ease and allow for good harvest conditions.   So far there are no reports that indicate any threat to the size of the next Vietnam crop of mostly robusta coffees and for the present, the country brings nothing in the way of supportive news for the markets. 

The exporters in Vietnam have however, been experiencing price resistance within the internal market and the resulting hardening of the asking price export differentials, which has been slowing sales.   With traders presently forecasting export volumes for the month of May to be between 1.34 million and 1.67 million bags, which would be down on the usual export volumes that might have been expected if the reference prices of the coffee terminal markets were more supportive. 

The July to July contracts arbitrage between the London and New York markets broadened yesterday, to register this at 31.10 usc/Lb., while this equates to 33.93% 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 25 bags yesterday; to register these stocks at 2,435,657 bags.  There was meanwhile 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 and against some renewed muscle for the U.S dollar, but with many markets retaining some degree of buoyancy, to see the overall macro commodity index taking a positive track for the day.  The Oil, Natural Gas, Cocoa, New York arabica Coffee, Cotton, Copper, Wheat, Corn, Soybean and Silver markets ended the day on a positive note, while the Sugar, London robusta Coffee, Orange Juice and Gold markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets, is 0.44% higher, to see this index registered at 394.35.   The day starts with the U.S. Dollar steady and trading at 1.279 to Sterling, at 1.117 to the Euro and with the US Dollar buying 4.048 Brazilian Real. 

The London market started the day yesterday on a softer note and with the New York market starting the day trading marginally south of par, to see the markets taking this track into the early afternoon trade.  As the afternoon progressed the London market remained under pressure and with sell stops coming into play to accentuate the losses, while the New York market shrugged off the negative influences of a weaker Brazil currency and experienced some degree of buoyancy and with the London market carrying on towards a very soft close, while the New York market which started to follow the London market into negative territory bounced back from its lows in late trade. 

The London market ended the day on a very negative note and with 83.3% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 28% of the earlier gains of the day intact.  This mixed close provides little in the way of indication for direction, but with the weaker Brazil Real in play and the New York market only able to retain a minor percentage of its gains, it is unlikely to inspire much in the way of confidence.  This is likely to set the markets for little better than some corrective buoyancy for the London market and a near to steady start for the New York market for early trade today, against the prices set yesterday, as follows: 

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

MAY   1315 – 36                                            MAY     90.00 + 0.10

JUL    1335 – 40                                            JUL       91.65 + 0.35

SEP    1353 – 38                                            SEP      93.90 + 0.35

NOV   1373 – 37                                            DEC      97.40 + 0.40

JAN    1392 – 37                                            MAR   100.85 + 0.35

MAR   1411 – 36                                            MAY   103.15 + 0.45

MAY   1432 – 35                                            JUL     105.20 + 0.50

JUL    1453 – 34                                            SEP     107.15 + 0.55

SEP    1474 – 33                                            DEC    110.00 + 0.60

NOV   1493 – 33                                             MAR   112.90 + 0.70