Coffee Market Report August 09 2019

The Brazilian analysts Safras & Mercado who have forecast that the new Brazil crop shall be 58.9 million bags, have estimated that 93% of this new crop has been harvested.   Thus, indicating that with the conilon robusta coffee crop is complete that there are now only approximately 3.9 million bags of arabica coffees to be harvested, with this crop due to be complete a few weeks earlier than usual. 

Meanwhile the frost season for Brazil is near to over and the factor of frost is no longer proving to be an issue and Brazil weather is not an issue until late in the coming month, when market players shall be looking towards the pending rainfall reports from the country.   With so far many and presuming a normal spring and summer rainfall season for south east Brazil, already forecasting a biennially bearing larger new crop for the coming year.   Which is a factor that for the present, is underpinning the prevailing bearish sentiment within the coffee markets. 

The US governments National Weather Forecaster have reported that the conditions within the Pacific Ocean remain neutral but with a 30% chance for a new El Niño phenomenon to develop by the end of the year, which they say is much more likely than a new La Niña to develop.   A La Niña would usually influence higher than average rainfall for south east Brazil and this report would further support, those that foresee the chances for a larger new 2020 coffee crop for Brazil. 

The late summer rains continue as usual over the main central highland’s coffee districts in Vietnam and the prospects for another large new crop that is due to start being harvested in October is on the cards, which adds to the speculative bearish sentiment.   While with farmers and internal traders having sold most of the past crop coffee stocks and the post summer holidays coffee demand due to pick up in volume, there remains strong internal market price resistance for sales of the remaining stocks and asking export differential prices are hardening. 

The November to December contracts arbitrage between the London and New York markets broadened yesterday; to register this at 40.16 usc/Lb.   This equates to 39.82% 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 125 bags yesterday; to register these stocks at 2,357,338 bags.  There was meanwhile a larger in number 6,268 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 20,816 bags. 

The commodity markets were mixed in trade yesterday, but with most markets tending to experience buoyancy, to see the overall macro commodity index taking a firmer track for the day.  The Oil, Natural Gas, Sugar, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn and Soybean markets ended the day of a firmer note, while the Cocoa, Gold and Silver markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.80% higher; to see this index registered at 385.57.   The day starts with the U.S. Dollar steady and trading at 1.212 to Sterling, at 1.119 to the Euro and with the US Dollar buying 3.919 Brazilian Real. 

The London and New York markets started the day yesterday trading on a positive note, with both markets holding onto this positive track, into the early afternoon trade.   As the afternoon progressed the markets briefly dipped back to trade around par, but to recover and to take a positive track towards the close. 

The London market ended the day on a positive note and with 66.7% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 27.5% of the earlier gains of the day intact. This steady close for the markets is likely to inspire confidence and one would expect to see a follow through steady start due for early trade today, against the prices set yesterday, as follows: 

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

SEP    1312 + 10                                           SEP      97.40 + 0.50

NOV   1338 + 10                                           DEC    100.85 + 0.55 

JAN    1363 + 8                                             MAR   104.35 + 0.50 

MAR   1390 + 8                                             MAY   106.70 + 0.55

MAY   1418 + 8                                             JUL    108.80 + 0.55

JUL    1446 + 9                                             SEP    110.85 + 0.55

SEP    1474 + 9                                             DEC   113.85 + 0.50

NOV   1502 + 8                                             MAR   116.80 + 0.50

JAN    1529 + 8                                             MAY   118.80 + 0.50

MAR   1556 + 8                                             JUL    120.65 + 0.50