Coffee Market Report September 06 2019

There were some light rains reported for some of the eastern arabica coffee districts in south east Brazil during the week, but nothing substantial. With more significant rains being forecast for the second half of the month, to start off the spring and summer rain season for the Brazil coffee districts. 

The European coffee federation have reported that coffee stocks held within reporting port warehouses in Western Europe increased by 400,183 bags or 3.33% during the month of July, to register these stocks at 12,426,683 bags. These stocks which service both the west and east European markets do not include all of the port warehouses in Western Europe nor do they include many other private warehouses, in transit container stocks and on-site roaster inventory stocks. 

If one calculates total European coffee consumption demand at approximately 1,1 million bags per week, one could speculate that unreported stocks could be as much as 2,5 million bags. This would extrapolate to total European coffee stocks to have been approximately 14,9 million bags as at the end of July and the equivalent of a very safe in excess of 13 weeks of coffee demand. A factor that contributes towards market perception of prevailing high coffee stock levels and underpins bearish sentiment, on the part of many within the speculative sector of the market. 

This evidence of substantial coffee stocks supports the prevailing bearish sentiment of the speculative sector of the coffee markets, which keeps the markets within the present soft trading range. With focus now upon the quality of the pending spring and summer rain season in Brazil. With many already speculating that so long as these rains are fair to good, that the country is due for a biennially bearing large coffee crop for the coming year and a factor that is further fuelling the bearish sentiment. 

Meanwhile with farmers and internal traders in Vietnam holding minimal coffee stocks of mainly robusta coffees from the past harvest, there remains strong internal market price resistance. This is contributing to the hardening of asking export price differentials, which is slowing new short-term business out of the country. The focus is now on when shall the summer rain season come to a close and allow for the new crop harvest to come into play, which should be in approximately six weeks’ time. Should this be the case, one would speculate that asking export differentials for new crop robusta coffee business should start to soften for the last six to seven weeks of the year. 

The November to December contracts arbitrage between the London and New York markets broadened yesterday; to register this at 37.70 usc/Lb.   This equates to 39.52% 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 5,573 bags yesterday; to register these stocks at 2,334,665 bags.  There was meanwhile a larger in number 7,458 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 9,775 bags. 

The commodity markets were mixed in trade yesterday, to see the overall macro commodity index near to steady for the day. The Brent Oil, Cotton, Copper, Orange Juice, Wheat and Corn markets ended the day on a positive note, while the US Oil, Natural Gas, Sugar, Cocoa, Coffee, 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 0.38% lower; to see this index registered at 388.53.   The day starts with the U.S. Dollar near to steady and trading at 1.232 to Sterling, at 1.104 to the Euro and with the US Dollar buying 4.108 Brazilian Real. 

The London and New York markets started the day yesterday trading to the positive side of par and with both markets taking a positive track into the early afternoon trade. As the afternoon progressed both markets started to come under pressure and to fall back to trade around par, before further pressure and sell stops started to come into play to see the London market experience sharp losses, while the New York market suffered from less severe losses for late trade. 

The London market ended the day on a very negative note and with 79.2% of the earlier losses of the day intact, while the New York market ended the day on a negative note and with 77.4% of the earlier losses of the day intact. This close does little to inspire confidence, but one might expect to see some degree of caution and a hesitant near to steady start due for early trade today, against the prices set yesterday, as follows:  

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

SEP    1249 – 39                                                         SEP      92.20 – 1.20

NOV   1272 – 38                                                         DEC      95.40 – 1.20 

JAN    1295 – 37                                                         MAR     98.80 – 1.25 

MAR   1318 – 37                                                         MAY   101.10 – 1.20

MAY   1344 – 34                                                         JUL    103.15 – 1.25

JUL    1371 – 32                                                         SEP    105.15 – 1.20

SEP    1398 – 32                                                         DEC   108.10 – 1.25

NOV   1425 – 32                                                         MAR   111.05 – 1.25

JAN    1452 – 32                                                         MAY   113.00 – 1.30

MAR   1476 – 32                                                         JUL    114.95 – 1.30