Coffee Market Report December 16 2019

16th December 2019.

The respected Brazil analysts Safras & Mercado have come forth with their revised estimate for the current 2019 Brazil crop to be 3.14% lower than their initial estimate ahead of the harvest in April, 2019, to now estimate this crop to be 57.05 million bags, further estimating that farmers had sold 71% of this crop coffees, as opposed to 68% over a five year average at the same time in their seasonal coffee year.  This report further projects that internal Brazil coffee stocks when heading toward the next biennially larger bearing crop that is due to start harvest around May next year, could see internal stocks around 2.32 million bags at that time.  This would be around 26.8% lower than the same time in the previous record breaking 2018 crop year, put at 3.17 million bags at the time, supplementing the lower biennial bearing 2019 crop that is currently flowing to consumer markets. 

It has been reported meanwhile that internal market sales within Brazil has slowed of late, with the Brazil Real recovering in value against the U.S. Dollar and farmers already having sold and cashed in good volumes of coffee.  Thus, with sales in hand and the distractions of the approaching festive season within the context of the nearby Brazil summer holidays, one might anticipate that internal market selling activity might remain slow into the start of the new year.  

With the next 2020 Brazil crop developing on the trees meanwhile, weather reports indicate a wide dispersion of rains throughout the South East coffee growing areas and with good regular rain with spells of sunny weather in between, the weather within the main coffee growing regions remains beneficial for the development of the new 2020 crop cherries.  

The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector of this market turn their net short position within this market to a net long position over the week of trade leading up to Tuesday 10th December;  to register a new net long position of 14,492 Lots which is the equivalent of 543,458 bags.  This position has most likely been further increased, following the period of mixed but overall firmer trade that has since followed.  

The latest Commitment of Traders report from the London Robusta coffee market has seen the Speculative Managed Money Sector of this market trim their net short sold position within the market by 39% over the week of trade leading up to Tuesday 10th December; to register a short-sold position of 10,069 Lots.  This net short sold position is the equivalent of 1,678,167 bags and has most likely been further decreased, following the period of mixed though overall firmer trade that has since followed.  

The March to March contracts arbitrage between the London and New York markets narrowed on Friday; to register this at 66.62 usc/Lb.  This equates to 50.89% 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 5,291 bags on Friday; to register these stocks at 2,031,581 bags, with 88.34% of these certified stocks being held in Europe at a total 1,794,787 bags and the remaining 11.66 being held in USA certified warehouses, at a total 236,794 bags.  There was meanwhile 1,674 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 27,708 bags. 

The commodity markets were mixed in trade on Friday, as the news came forth that trade talks between leading consumer markets USA and China reached a progressive phase. The policitical news out of Britian subsequent to the election results on Friday, provided a boost to the Sterling, while the US Dollar lost ground against a basket of other major currencies.  It was a positive day for the Oil markets, Cocoa, Wheat, Corn, Soybean and Gold markets.  A softer finish for the day for Coffee, Sugar, Cotton, Copper, Orange Juice Silver, Platinum and Palladium markets.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.1156% higher; to see this index registered at 412.29.  The day starts with the U.S. Dollar steady, trading at 1.338 to Sterling, at 1.114 to the Euro and with the US Dollar buying 4.108 Brazilian Real. 

The London and New York markets started the day on Friday in narrowly positive territory, the upward trend in both markets tested emotive chart highs early on in the session, met by resting origin and speculative selling activity, to see both markets slip back toward par within the first few hours of trade. The speculative buying activity returned to the floor to seemingly outpace seller volumes with both markets moving back into positive territory through to midsession. As the afternoon progressed New York started to attract stronger selling pressure to break through par into negative territory, triggering stops along the way, a similar pattern developed in London to see both markets tracking lower, as the day progressed toward the close.  The markets finished the day in softer territory on Friday, , following a hefty volume day in New York and a fair volume day in London, to set the close narrowly above the lows of the day in both markets, as follows:   

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

JAN    1402 – 33                                                          MAR   130.90 – 6.35
MAR   1417 – 30                                                          MAY   133.00 – 6.35
MAY   1434 – 28                                                          JUL    134.75 – 6.40
JUL    1451 – 29                                                          SEP    136.35 – 6.45
SEP    1470 – 28                                                          DEC   138.20 – 6.45
NOV   1489 – 28                                                          MAR   140.15 – 6.50
JAN    1511 – 26                                                          MAY   141.50 – 6.25
MAR   1536 – 26                                                          JUL    142.80 – 6.10
MAY   1558 – 26                                                          SEP    144.15 – 5.90