Coffee Market Report December 13 2019

The Brazilian Green Coffee Association (CECAFE) have come forth to report that coffee exports for the October 2018 to September 2019 coffee year reached the highest export volume, this a record export year for Brazil coffee exports, to see their figures revised upward from 39.72 to 41.42 million bags. Of these stated figures, green bean Arabica and Robusta exports are estimated at a total 37.38 million bags, whereas soluble coffee exports are estimated at the equivalent of 4.02 million bags. This leading coffee producer remains cost competitive within the overall coffee producer sector, to maintain a consistent flow of coffee to the consumer markets.  The Brazil Real currency has assisted to some degree over the course of the twelve months indicated, at the outset of October 2018 trading around 3.70 to the US Dollar and in September 2019 trading around 4.18 to the US Dollar, although volatile throughout the time, the Brazil Real has never fully recovered over the time, to stronger than 3.70 to the US Dollar.  

The Brazil crop year spans from April to March each year for Conilon robusta coffees and from July to June each year for the greater percentage of production that is natural arabica coffee, around 8% semi washed coffees within the overall total of arabica production. The ratios of these two very different qualities of coffee, Conilon robusta and arabica have proportionally been pegged at a ratio of around 25:75 in production terms annually.  The ratio within this current 2019 to 2020 crop year is though closer to 35:65 for reasons of gradual year on year recovery in production within the Conilon robusta sector, together with a biennial bearing smaller arabica crop that is in recovery from a record bumper arabica crop produced in the July 2018 to June 2018 crop year.  This current biennial lower arabica crop is estimated to be around 500,000 bags lower than that of the previous comparative biennially low crop cycle in the July 2017 to June 2018 crop year, around 38 million bags.  The supplemental bumper harvest that spanned crop year July 2018 to June 2019 meanwhile, a record-breaking production and export crop year, with year on year and export figures perhaps seeming skewed within the context of the current biennial lower bearing crop that is currently flowing to consumer markets. 

The focus of attention meanwhile, has moved away from the current Brazil crop year and focus within the speculative sector of the markets has turned to the new crop and the next harvest to come from Brazil in 2020.  The coming coffee crop is set to be an upward biennial bearing cycle while it is early days and the prospects of weather and sufficient rains to sustain the development toward harvesting will be closely monitored by all sectors, while for the moment the weather forecasts are all positive with sufficient rains reported throughout the main coffee growing areas, to supplement ground moisture which according to analysis charts is slightly below the five year average in November but with good rains reported through first half December and forecasts indicating more rains to come the weather conditions to set the next 2020 biennially larger crop to come, are conducive. 

The United States Department of Agriculture (USDA) has revised its coffee production figures for Colombia for the October 2019 to September 2020 coffee year to be 14.3 million bags as the flowering period in the main coffee areas have benefited from good weather and this indicates a good harvest. The USDA also revised its forecast to 13.7 million bags for export from Colombia in the October 2019 to September 2020 coffee year. 

The USDA reported that Coffee production in Colombia for the October 2018 to September 2019 coffee year was lower than expected at 13.9 million bags, unfavourable weather conditions due to extended drought attributed to this slight decrease in production for the 2018/2019 coffee year. Colombia exported 13.5 million bags of coffee in the October 2018 to September 2019 coffee year. 

The March to March contracts arbitrage between the London and New York markets broadened yesterday; to register this at 71.62 usc/Lb.  This equates to 52.18% 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 4,458 bags yesterday; to register these stocks at 2,036,872 bags, with 88.4% of these certified stocks being held in Europe at a total of 1,800,078 bags and the remaining 11.6% being held in the USA at a total of 236,794 bags.  There was meanwhile a larger in number 5,018 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 29,382 bags. 

The Certified Robusta coffee stocks held against the London exchange have been reported to decrease by 4,000 bags over the weeks of trade leading up to Monday 9th December, to see these stocks registered at 2,546,333 bags, on the day. 

The commodity markets were mixed in trade yesterday, to see overall macro commodity index taking a sideways track for the day. The Oil, Natural Gas, Sugar, Coffee, Cotton, Copper, Wheat, Corn, Soybean and Silver markets ended the day on a positive note, while the Cocoa, Orange Juice and Gold markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.7162 higher; to see this index registered at 411.8158.   The day starts with the U.S. Dollar showing some degree of buoyancy and steady, trading at 1.347 to Sterling, at 1.117 to the Euro and with the US Dollar buying 4.091 Brazilian Real. 

The London and New York markets started the day yesterday trading in positive territory, both markets maintained this positive stance into the early afternoon trade. As the afternoon progressed the London and New York markets started to attract buying support to move deeper into positive territory and accentuate the gains for the day, Both the London and the New York markets did hit a ceiling for the day and drop back slightly to close near to the highs of the day. 

The London market ended the day on a positive note, and with 71.43% of the earlier gains of the day intact, while the New York market ended the day on likewise positive note, and with 53.95% of the earlier gains of the day intact. This close albeit that both the London and the New York markets did hit a ceiling and come off their respective highs for the day, and with the Brazil Real showing some degree of buoyancy might inspire some degree of confidence, to possibly set the markets for another hesitant follow-through steady start for early trade today, against the prices set yesterday, as follows:   

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

JAN    1435 + 22                                                             MAR   137.25 + 2.05

MAR   1447 + 20                                                             MAY   139.40 + 2.05

MAY   1462 + 22                                                             JUL    141.15 + 2.00

JUL    1480 + 23                                                             SEP    142.80 + 1.95

SEP    1498 + 22                                                             DEC   144.65 + 1.80

NOV   1517 + 21                                                             MAR   146.65+ 1.75

JAN    1537 + 21                                                             MAY   147.75 + 1.70

MAR   1562 + 22                                                             JUL    148.90 + 1.65

MAY   1584 + 22                                                             SEP    150.05 + 1.65