Coffee Market Report August 23 2019

Weather conditions over the main coffee districts in south east Brazil remain seasonally mostly dry, but there have been some scattered light showers experienced for some farms.    With the farmers not looking towards the start of the spring and summer rain season, which is due to start in approximately four to five weeks’ time, which is a matter that shall be closely watched by the speculative sector of the coffee markets.  Especially so, as the soft nature of the coffee terminal markets is presently dominated by the negative sentiment, that comes with the perspective for a large new crop being due for the coming year. 

In the meantime, the respected Brazilian analysts Safras & Mercado who have forecast the present new crop at 58.9 million bags, have reported that 98% of this new crop has been harvested.  Within the report, they have estimated that so far, as much as 43% of this new crop has been sold.   This relatively high volume of sales when compared to the 37% average for the same time over the past five years, they appropriate to the increased volumes that were necessary to counter the lower value and to assist to finance the harvesting costs.   But one must also keep in mind that it was an approximately 13% lower new crop this year and one would speculate that in terms of volume, that there was no much difference in the quantities of coffee that have been sold. 

Weather conditions over the main coffee districts in Vietnam are seemingly normal and with the new crop cherries developing, to encourage forecasts for the country to bring in a new crop that shall exceed 30 million bags.   While in the meantime and with farmers showing strong price resistance for their diminishing stocks ahead of the next harvest that is due to start in approximately eight weeks’ time, asking export price differentials for new short-term business out of Vietnam are firming and with the resulting consumer market price resistance, new business trade is low in volume.  

The Ugandan Coffee Development Authority UCDA have reported that their country’s coffee exports for the month of July were 70,707 bags or 17.99% higher than the same month last year, at a total of 463,709 bags. This has contributed to the country’s cumulative coffee exports for the first ten months of the present October 2018 to September 2019 coffee year to have been 59,481 bags or 1.62% lower than the same period in the previous coffee year, at a total of 3,600,827 bags. 

Well illustrating the negative effects upon coffee producers of the reference prices of the soft coffee terminal markets over the recent months is the fact that while the volume of Ugandan coffee exports were only 1.62% lower for the first ten months of the coffee year, the value of these exports for the period was 10.58% lower, at a total of US$ 355,497,459.00. A negative financial factor that is common to coffee producers in general. 

The November to December contracts arbitrage between the London and New York markets narrowed yesterday; to register this at 37.67 usc/Lb.   This equates to 38.13% 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 2,363,848 bags.  There was meanwhile a 1,070 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 2,947 bags. 

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 Sugar, Cocoa, New York arabica Coffee, Wheat and Corn markets ended the day on a positive note, while the Oil, Natural Gas, Cotton, Copper, Orange Juice, Soybean, 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 0.02% higher; to see this index registered at 378.34.   The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.223 to Sterling, at 1.107 to the Euro and with the US Dollar buying 4.069 Brazilian Real. 

The London market started the day trading around par and the New York market on a negative note and with the London market soon slipping back, to join the New York market in negative territory, into the early afternoon trade.  As the afternoon progressed the New York market started to attract support and moved back into positive territory and with the London market bouncing back off the lows, to head briefly back to par.  Setting the markets on track towards a mixed close for the day.  

The London market ended the day on a modestly negative note and with 10% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 54.2% 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    1293 – 4                                                SEP       93.50 + 0.65

NOV   1327 – 1                                                 DEC      97.30 + 0.65 

JAN    1353 – 2                                                 MAR   100.90 + 0.60 

MAR   1380 – 2                                                 MAY   103.25 + 0.60

MAY   1408 – 2                                                 JUL    105.50 + 0.60

JUL    1434 – 2                                                 SEP    107.50 + 0.55

SEP    1461 – 2                                                 DEC   110.45 + 0.50

NOV   1488 – 2                                                 MAR   113.35 + 0.35

JAN    1514 – 2                                                 MAY   115.30 + 0.25

MAR   1534 – 2                                                 JUL    117.20 + 0.15