Coffee Market Report December 18 2019

The respected U.S. Department of Agriculture USDA foreign Agriculture Service have released their forecast for the present October 2019 to September 2020 coffee year to be 3.04% or 5.3 million bags lower than the previous year at a total of 169.3 million bags, thus primarily attributed to Brazil’s Arabica trees entering the off year of the biennial production cycle, while the USDA have forecast that Global coffee exports are expected to be down 3.91% or 4.7 million bags at a total of 115.4 million bags, the difference between this USDA production estimates and export figures are related to retained producer stocks and local consumption, primarily in the leading coffee producer consumer nation, Brazil. Brazils consumption meanwhile is estimated by the USDA to see an increase to around 23.5 million bags. These production and export figures have already been factored into the prevailing markets and are not foreseen to have any influence on sentiment. 

Brazil’s government food supply and statistics agency CONAB have come forth with a revised higher forecast for the current 2019 Brazil coffee crop, to increase their estimate by 320,000 bags from a total 48.99 million bags projected in September, to 49.31 million bags in their review yesterday.  According to their report, the increased estimate is related to Robusta production which was revised up moderately by 490,000 bags to total 15.01 million bags, while arabica coffee production was reduced to 34.30 million bags from 34.47 million bags in September. 

One might comment though, that this forecast is significantly lower than a host of other respected trade and industry forecasts and is traditionally conservative.  Thus, one might think that most market players might adhere to these earlier forecasts that have foreseen the 2019 Brazil crop at between 55 million and 60 million bags.  This while market players have turned attention to the prospective development of the 2020 Brazil crop and the summer rain season that will assist to set the flowering and early development for this coffee crop that is, provided climatic conditions remain conducive, anticipated to be larger biennial bearing crop to come.  

The March to March contracts arbitrage between the London and New York markets narrowed yesterday; to register this at 69.47 usc/Lb.  This equates to 51.96% 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 5,465 bags yesterday; to register these stocks at 2,027,042 bags, with 88.4% of these certified stocks being held in Europe at a total 1,791,998 bags and the remaining 11.6% being held in USA certified warehouses, at a total 235,044 bags.  There was meanwhile 6,964 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 25,973 bags. 

The Certified Robusta coffee stocks held against the London exchange have been reported to decrease by 8,833 bags over the weeks of trade leading up to Monday 16th December, to see these stocks registered at 2,537,500 bags, on the day.

 The commodity markets were mixed in trade yesterday, to see the overall macro commodity index taking a soft sideways track for the day. The Oil, Natural Gas, Wheat, Corn and Soybean markets ended the day on a positive note, while the Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice, 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 0.1732% lower; to see this index registered at 417.1116.  The day starts with the U.S. Dollar steady, trading at 1.310 to Sterling, at 1.113 to the Euro and with the US Dollar buying 4.072 Brazilian Real. 

The London and New York markets started the day yesterday trading on a modest positive note. Both markets started to attract selling pressure to move into negative territory for the early afternoon trade. As the afternoon progressed both the London and the New York markets continued on this downward trend, to accentuate the losses for the day’s trade. Both the London and the New York markets hit a price floor and bounced back up to very marginally limit the losses for the day’s trade. 

The London market ended the day on a negative note, and with 91.9% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note, and with 73.9% of the earlier losses of the day intact. This soft and lacklustre close does little to inspire confidence and one might expect little better than a steady start due for early trade today, against the prices set yesterday, as follows:   

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

JAN    1406 – 20                                                           MAR   133.70 – 5.25

MAR   1416 – 34                                                           MAY   135.85 – 5.15

MAY   1433 – 33                                                           JUL    137.65 – 5.00

JUL    1450 – 33                                                           SEP    139.25 – 4.80

SEP    1468 – 33                                                           DEC   141.15 – 4.70

NOV   1487 – 33                                                           MAR   143.05 – 4.60

JAN    1507 – 33                                                           MAY   144.15 – 4.65

MAR   1532 – 33                                                           JUL    145.35 – 4.65

MAY   1554 – 33                                                           SEP    146.55 – 4.70