Coffee Market Report August 22 2019

The coffee markets remain devoid of fundamental supportive news, with focus of the speculative sectors of the market looking to the prevailing good coffee supply and stocks, while anticipating that possible negative weather conditions aside, that Brazil shall be due to bring to the fore a large new crop next year.  Albeit that some are pointing towards the cold snap in July this year, which might have damaged the crop potential for the effected farms. 

Meanwhile the relatively higher cost fine washed arabica coffee producers continue to suffer from the negative influences of the soft nature of the reference prices of the New York market, with many producers experiencing financial difficulties for farmers.   This is influencing a reduction in farm inputs for many farmers and less precise harvesting procedures, which shall undoubtedly result in both lower yields and lower overall quality. 

This must in time, have a marked effect upon global coffee supply of fine washed arabica coffee, which against the steadily rising global coffee consumption, result in tightening supply and a market recovery.  But this might be too late for many farmers, with evidence of cash strapped farmers already turning in the direction of alternative and more sustainable crops. 

The November to December contracts arbitrage between the London and New York markets broadened yesterday; to register this at 37.67 usc/Lb.   This equates to 36.96% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 316 bags yesterday; to register these stocks at 2,363,848 bags.  There was meanwhile a larger in number 4,740 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 1,877 bags. 

The commodity markets were mixed in trade yesterday, to see the overall macro commodity index taking a steady to modestly buoyant track for the day. The Cocoa and Coffee markets ended the day on a positive note, while the Sugar market ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.27% higher; to see this index registered at 378.28.   The day starts with the U.S. Dollar steady and trading at 1.212 to Sterling, at 1.108 to the Euro and with the US Dollar buying 4.026 Brazilian Real. 

The London market started the day trading around par and the New York market on a positive note and with the London market soon moving up to join the New York market in positive territory, which was followed by further support and the triggering of buy stops, for the New York market.  As the afternoon progressed and with the Brazil Real firming, the New York market maintained its firmer stance, while the London market remained in more modest positive territory, but with both markets coming back of the highs for later in the day’s trade. 

The London market ended the day on a modestly positive note and with 33.3% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 58.3% of the earlier gains of the day intact.  This close provides little indication of direction and one would think to see another low volume hesitant steady start for early trade today, against the prices set yesterday, as follows:   

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

SEP    1297 + 4                                                SEP       92.85 + 1.40

NOV   1328 + 4                                                 DEC      96.65 + 1.40 

JAN    1355 + 5                                                 MAR   100.30 + 1.50 

MAR   1382 + 4                                                 MAY   102.65 + 1.45

MAY   1410 + 3                                                 JUL    104.90 + 1.45

JUL    1436 + 2                                                 SEP    106.95 + 1.40

SEP    1463 + 2                                                 DEC   109.95 + 1.30

NOV   1490 + 2                                                 MAR   113.00 + 1.25

JAN    1516 + 2                                                 MAY   115.05 + 1.25

MAR   1536 + 2                                                 JUL    117.05 + 1.25