Coffee Market Report August 07 2019

The International Coffee Organisation ICO have reported that as against a global coffee supply of 168.77 million bags for the present October 2018 to September 2019 coffee year, that they estimate global coffee consumption to be approximately 164.84 million bags. This surplus supply estimate of 3.93 million bags for the present coffee year they add to the surplus coming from the previous coffee year, to estimate an overall 8 million bags surplus ahead of the forthcoming October 2019 to September 2020 coffee year. 

One would speculate though that with global coffee supply for the coming October 2019 to September 2020 coffee year likely to be a deficit supply of approximately 2 to 3 million bags and global coffee consumption to rise by approximately 3 million bags during this coming coffee year, that the surplus supply indicated within the latest ICO report is not really that massive. It is nevertheless an indication of surplus supply and continues to support the prevailing bearish sentiment within the markets, which are presently further suffering from the negative nature of commodity markets in general. 

The big question remains over the prospects for the forthcoming 2020 Brazil crop, which is very much a weather-related issue and while one would consider the frost season to be over, the focus has to be towards the prospects for the forthcoming spring and summer Brazil rain season for south east Brazil. Presently the conditions within the Pacific Ocean is seen to be neutral and with neither a El Niño or a La Niña in play and one cannot foresee either of these having any influence, but global weather is uncertain and any delay or extended interruptions during this rain season, would bring aggressive volatility to the markets. 

In the meantime, there are many trade and industry players who presuming that there shall not be any weather issues due for Brazil, who have been forecasting a biennially bearing larger new crop for Brazil and in this respect, something in the order of the size of the previous 2018 crop. These forecasts for the present and with their indication for a surplus coffee supply for the 2020/2021 coffee year, adding to the prevailing bearish sentiment within the market. 

The November to December contracts arbitrage between the London and New York markets broadened yesterday; to register this at 40.09 usc/Lb.   This equates to 39.85% 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 1,000 bags yesterday; to register these stocks at 2,352,833 bags.  There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 40,796 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 37,333 bags or 1.54% over the week of trade leading up to Monday the 5th of August, to see these stocks registered at 2,458,000 bags, on the day. 

The commodity markets were mixed in trade yesterday, with the overall macro commodity index steady to marginally lower for much of the day. The Natural Gas, Coffee, Cotton, Copper, Orange Juice, Gold and Silver markets ended the day on a positive note, while the Oil, Sugar, Cocoa, 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 0.19% lower; to see this index registered at 382.96.   The day starts with the U.S. Dollar steady and trading at 1.216 to Sterling, at 1.120 to the Euro and with the US Dollar buying 3.960 Brazilian Real. 

The London and New York markets started the day yesterday trading with modest buoyancy, but with the New York market soon falling marginally south of par, prior to both markets moving into positive territory for the early afternoon trade. As the afternoon progressed the New York market and with marginally firmer Brazil Real in play started to attract support and moved higher into positive territory, with the London market following suit in a more sedate manner, but with both markets soon hitting a ceiling and limiting the gains for the day. 

The London market ended the day on a positive note and with 61.1% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 69% of the earlier gains of the day intact. This positive close might assist towards some degree of confidence and to set the markets for a follow through steady start for early trade today, against the prices set yesterday, as follows: 

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

SEP    1307 + 10                                            SEP      97.05 + 1.40

NOV   1334 + 11                                            DEC    100.60 + 1.45

JAN    1361 + 10                                            MAR   104.15 + 1.40

MAR   1389 + 11                                            MAY   106.50 + 1.45

MAY   1418 + 10                                            JUL    108.65 + 1.45

JUL    1446 + 9                                              SEP    110.70 + 1.40

SEP    1475 + 9                                              DEC   113.70 + 1.35

NOV   1504 + 9                                              MAR   116.70 + 1.35

JAN    1531 + 9                                              MAY   118.70 + 1.35

MAR   1558 + 9                                              JUL    120.55 + 1.35