Coffee Market Report May 31 2019

Most of the main coffee districts with the exception of the southern state of Parana have encountered a dry week and with the new crop harvest for the conilon robusta coffees in full swing, while modest volumes of new crop arabica coffees are being harvested.  

In this respect the analysts Safras & Mercado who have forecast the new crop to be 58.9 million bags, have estimated the already 22% of the new crop has been harvested, with this related to approximately 6.5 million bags each of conilon robusta and arabica coffees.   

Meanwhile the talk of the Brazil frost season and accompanied by fears of overall lower quality for the new Brazil crop and some degree of recovery for the Brazil Real, is seemingly continuing to inspire speculative short covering buying activity.   The effects of this to become clearer by the end of next week, when the 4th. June commitment of trader’s data becomes available to the market.  

While the markets have risen significantly by 10.60 usc/Lb. or 11.55% in value over five days of trade and likewise, the London market by $ 95.00 per Mt. or 6.98% in value, there remains internal market price resistance within many producer countries.   The reality being that while the reference prices of the coffee terminal markets have improved in value, they still remain modest and continue to influence loss making internal market prices for many producer countries. 

One would speculate though that with many producers still holding significant stocks that should the rally start to falter, that more aggressive selling and softening export differentials might start to come into play.   But such a scenario might take a little time to start to impact. 

The July to July contracts arbitrage between the London and New York markets broadened yesterday, to register this at 36.31 usc/Lb., while this equates to 35.48% 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 4,475 bags yesterday; to register these stocks at 2,399,659 bags.  There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 1,593 bags. 

The commodity markets were mixed in trade yesterday, to see the overall macro commodity index on something of a sideways track for the day.  The Coffee, Cotton, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Oil, Natural Gas, Sugar, Cocoa and Copper markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets, is 0.23% higher, to see this index registered at 395.94.   The day starts with the U.S. Dollar steady and trading at 1.261 to Sterling, at 1.113 to the Euro and with the US Dollar buying 3.982 Brazilian Real. 

The London market started the day yesterday trading on a positive note and the New York market around par, but with the New York market soon adding value and joining the London market in positive territory and to see the markets taking a positive track, into the early afternoon trade.   As the afternoon progressed both markets started to add value and with buy stops coming into play, to accentuate the gains and set both markets on track for another strong close for the day. 

The London market ended the day on a very positive note and with 93.6% of the gains of the day intact, while the New York market ended the day on a likewise very positive note and with 87.7% of the earlier gains of the day intact.  This positive close is likely to inspire some degree of confidence but one might expect that lacking any supportive fundamental news, that there shall be some degree of caution as to how far this week’s rally might go.  To see the markets set for another hesitant steady start for early trade today, against the prices set yesterday, as follows: 

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

JUL    1456 + 44                                            JUL     102.35 + 2.85

SEP    1474 + 44                                            SEP    104.70 + 2.95

NOV   1496 + 42                                            DEC    108.15 + 2.85

JAN    1517 + 42                                            MAR   111.50 + 2.80

MAR   1437 + 42                                            MAY   113.45 + 2.70

MAY   1558 + 43                                            JUL    115.15 + 2.70

JUL    1578 + 43                                            SEP    116.80 + 2.70

SEP    1599 + 43                                            DEC   119.20 + 2.50

NOV   1618 + 42                                            MAR   121.55 + 2.25

JAN    1637 + 42                                            MAY   123.10 + 2.10