Coffee Market Report June 19 2019

The coffee markets remain under the cloud of the perception of oversupply, significant levels of both producer and consumer stocks and a total lack of supportive fundamental threatening weather news and along with the recent evidence of a much reduced speculative and fund net short sold position, within the New York market.  This all contributing towards a lack of underlying support, which sees the markets struggling to remain within the prevailing soft trading range.   

For the present the talk of the potential for frost damage within the main coffee districts in Brazil is off the table and likewise in terms of the threat always being a little higher at the time of the few days of clear nights around a full moon and should it be accompanied by a cold front, is over for the month of June.   The full moon was last Monday and is starting to wane, with the next full moon due on 16th. July. 

Of course, not all of the historic Brazil coffee frosts have been related to the few days around a full moon, but are related to severe cold fronts and one might think that forthcoming cold front forecasts for Brazil shall bring to the fore some hesitant speculative market support.   Which is perhaps one of the threat factors that is assisting to limit the speculative downside potential for the coffee markets for at least the short term, until Brazil starts to head towards the spring season in the August. 

Tomorrow is the catholic Corpus Christi public holiday for some catholic dominated countries and including Brazil, which shall likely encourage many within the country to take a bridge day follow on holiday on Friday and an extended long weekend.   This shall most probably slow Brazil price fixation hedge selling activity for the end of this week, which shall take some of the selling pressure off the markets for a couple of days.  But who knows what the relatively high volume and often unpredictable speculative sector of the markets might do and the potential for a long weekend holiday in Brazil, cannot guarantee a steady to buoyant market. 

The September to September contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 34.37 usc/Lb., while this equates to 35.58% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to remain unchanged yesterday; to register these stocks at 2,381,409 bags.  There was meanwhile also no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 20,877 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 12,167 bags or 0.58% over the week of trade leading up to Monday 17th. June, to see these stocks registered at 2,111,833 bags, on the day. 

The commodity markets were mixed in trade yesterday, to see the overall macro commodity index taking something of a sideways track for the day.   The Oil, Cocoa, Cotton, Copper, Soybean, Gold and Silver markets ended the day on a positive note, while the Natural Gas, Sugar, Coffee, Orange Juice, Wheat and Corn markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets, is 0.03% higher, to see this index registered at 393.63.   The day starts with the U.S. Dollar steady and trading at 1.255 to Sterling, at 1.119 to the Euro and with the US Dollar buying 3.861 Brazilian Real. 

The London and New York markets started the day yesterday trading around par, but with both markets soon coming under pressure and heading south into negative territory.   The markets retained this stance throughout the day, but while the London market did manage to attract support and to bounce back partially from sharp losses for the day, the New York market headed towards a relatively soft close. 

The London market ended the day on a negative note and with 51.9% of the earlier losses of the day intact, while the New York market ended the day on a negative note and with 86.8% of the earlier losses of the day intact.   This close and along with the lack of supportive fundamental news provides little to inspire confidence and one might expect to see only a hesitant and near to steady start due for early trade today, against the prices set yesterday, as follows: 

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

JUL    1340 – 16                                            JUL      94.30 – 1.75

SEP    1372 – 14                                           SEP      96.60 – 1.65

NOV   1398 – 12                                           DEC    100.25 – 1.65

JAN    1421 – 12                                           MAR   103.80 – 1.70

MAR   1445 – 10                                           MAY   105.95 – 1.60

MAY   1468 – 8                                              JUL    107.85 – 1.55

JUL    1487 – 9                                              SEP    109.70 – 1.50

SEP    1507 – 10                                            DEC   112.60 – 1.50

NOV   1523 – 12                                            MAR   115.50 – 1.50

JAN    1540 – 12                                            MAY   117.20 – 1.50