Coffee Market Report July 31 2019

New weather forecasts emanating from Brazil disputed the earlier forecasts that indicated a threat of frost for the more southern arabica coffee districts in Brazil for the coming weekend, which influenced a reversal in fortunes for the coffee markets in yesterday’s trade.   Focus turning once again upon the longer-term prospects for the new spring and summer rain season for Brazil, which comes to the fore during the second half of September and would trigger the flowering for the next 2020 crop. 

In the meantime, and with the unseasonal early winter rains over most of south eastern Brazil and covering most of the main coffee districts, one would speculate that the ground water retention levels could be above normal for this time of the year.  A factor with moist trees being more resistant to the negative effects of a light frost, that would assist trees to be less vulnerable to the effects of the coming cold front. 

Despite some influence coming from a marginally weaker Brazil Real that assists to encourage internal market selling of new crop coffees on the part of the Brazil farmers, many with already good new crop sales in hand and the pending end to the new crop harvest and with it no need to further finance the harvest, it is influencing internal market price resistance.   This is likely and with many of the main consumer market industries taking their summer holidays, is likely to slow short term sales and export activity. 

Albeit that with a much larger new conilon robusta coffee crop having been completed and with the domestic market demand for these coffees due to result in between five to six million bags being available for export, that these coffees have already started to be tendered for the certified stocks of the London market.   While further volumes of these conilon robusta coffees are being exported to industries in North America and Eastern Europe, where these unique in cup and presently price competitive robusta coffees are considered to be an acceptable alternative to the African and Asian robusta coffees.  

The September to September contracts arbitrage between the London and New York markets narrowed yesterday; to register this at 38.08 usc/Lb.   This equates to 38.27% 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 2,996 bags yesterday; to register these stocks at 2,362,190 bags.  There was meanwhile a largerer in number 20,235 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 34,839 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 68,333 bags or 2.9% over the week of trade leading up to Monday 29th. July, to see these stocks registered at 2,420,667 bags, on the day. 

The commodity markets were mixed in trade yesterday, to see the overall macro commodity index taking a steady track for the day.   The Oil, Natural Gas, Sugar, Orange Juice, Gold and Silver markets ended the day on a positive note, while the Cocoa, Coffee, Cotton, Copper, Wheat, Corn and Soybean markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.1% lower; to see this index registered at 396.34.   The day starts with the U.S. Dollar steady and trading at 1.216 to Sterling, at 1.115 to the Euro and with the US Dollar buying 3.791 Brazilian Real. 

The London and New York markets shrugged off the influence of the previous days positive close and started the day trading on a softer note and with both markets maintaining this stance, into the early afternoon trade.   As the afternoon progressed and with the frost fear factor dissipating the New York market attracted further selling pressure, to trigger sell stops and to accentuate the losses and with the London market following suit.  Both markets did however manage to bounce back from the lows and to limit the losses, as the markets headed towards a soft close for the day. 

The London market ended the day on a negative note and with 56.7% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 70.2% of the earlier losses of the day intact. This close does little to inspire confidence and one might expect to see little better than a 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. 

SEP    1354 – 17                                             SEP      99.50 – 1.65

NOV   1382 – 15                                             DEC    103.10 – 1.65

JAN    1408 – 16                                             MAR   106.80 – 1.70

MAR   1435 – 16                                             MAY   109.15 – 1.70

MAY   1462 – 18                                              JUL    111.30 – 1.65

JUL    1489 – 20                                              SEP    113.40 – 1.65

SEP    1513 – 22                                              DEC   116.50 – 1.60

NOV   1537 – 23                                              MAR   119.50 – 1.55

JAN    1562 – 23                                              MAY   121.45 – 1.55

MAR   1581 – 24                                               JUL   123.25 – 1.55