Coffee Market Report August 27 2019

While most domestic and international coffee trade houses and analysts have been forecasting Brazil is due a biennially bearing large new coffee crop due for 2020, nineteen of Brazil’s coffee cooperatives have come to the fore to dispute this forecast. Reporting in a joint statement that due to spells of adverse weather conditions during this year and more particularly some early in the year hotter dry weather and followed by some incidences of frost in July, that it is unlikely that there shall be the possibility of a large coffee crop due for next year. One might comment though, that this joint statement might be somewhat market manipulative in nature, as a reaction to the prevailing soft prices of the coffee terminal markets. 

One would make such a comment as if damage to the potential of next year’s crop has come from excessive dry weather early in the year, it surely would have had a negative influence upon just completed 2019 arabica coffee crop, which was a smaller but fully up to biennially bearing expectations. While in terms of the reference to frost, most post cold weather reports, have already indicated minimal damage caused. 

A report by Adroit Market Research who operate out of the USA and India has estimated that the global speciality coffee market in 2018 was the equivalent of approximately 16.23 million bags of coffee, with the probability that this shall increase to the equivalent of 27.41 million bags over the next six years. This is positive news and somewhat encouraging for many producers already prominent within the specialty sector of the consumer markets, but one would speculate that with competition building within this sector of the consumer markets, that it could result in diminishing price premiums being paid for the related quality coffees. 

The November to December contracts arbitrage between the London and New York markets broadened yesterday; to register this at 37.9 usc/Lb.   This equates to 38.87% 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 250 bags yesterday; to register these stocks at 2,360,607 bags.  There was meanwhile a larger in number 7,458 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 8,528 bags. 

The commodity markets lacked the participation of the London markets yesterday, but with the overall macro commodity index taking an upside track for the day. The Oil and New York arabica Coffee markets ended the day on a positive note and the New York Cocoa market was steady for the day, while the New York Sugar market ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.88% higher; to see this index registered at 378.88.   The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.222 to Sterling, at 1.110 to the Euro and with the US Dollar buying 4.155 Brazilian Real. 

The New York market trading solo and with a late start while the London market was closed for the United Kingdom bank holiday, started the day on a marginally softer note. This was however short lived and despite the negative influences of soft Brazil Real the market soon recovered into positive territory and with buy stops coming into play, to accentuate the gains. The market did however soon hit a ceiling and with volume of trade relatively thin, slipped back from the highs and set a path towards a positive close for the day. 

The New York market ended the day on a positive note and with 59.2% of the earlier gains of the day intact.  This close was however related to relatively thin trade for the shortened day of trade and is with a weaker Brazil Real in play perhaps not any indication of a change in direction, which is unlikely to set the New York market for anything better than a steady start for the day. But perhaps there might be some catch up buoyancy due for the London market for early trade today, against the prices set in London on Friday and New York yesterday, as follows:  

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

SEP    1279 – 14                                                 SEP      94.15 + 1.55

NOV   1314 – 13                                                 DEC      97.50 + 1.45 

JAN    1339 – 14                                                 MAR   101.10 + 1.45 

MAR   1364 – 16                                                 MAY   103.50 + 1.45

MAY   1391 – 17                                                 JUL    105.70 + 1.40

JUL    1417 – 17                                                 SEP    107.75 + 1.40

SEP    1444 – 17                                                 DEC   110.65 + 1.35

NOV   1471 – 17                                                 MAR   113.60 + 1.40

JAN    1497 – 17                                                 MAY   115.55 + 1.35

MAR   1517 – 17                                                 JUL    117.45 + 1.35