Coffee Market Report January 09 2020

The Brazilian National Statistics Agency IBGE have come to the fore with a forecast that the due to biennial bearing factors that the countries 2020 arabica coffee crop shall be 22% higher than last year but below the record of 44.9 million bags in 2018, at 42.2 million bags.  This they say shall contribute towards the overall 2020 Brazil coffee crop to be 12.9% higher than last year’s coffee crop but not a record high compared to the 2018 coffee crop production of 59.9 million bags, at a total of 56.4 million bags.   The IBGE is traditionally very conservative in terms of their figures and are usually considered to be between 5% and 10% below reality and therefore such a forecast, is unlikely to be very supportive for market sentiment. 

The international Coffee Organisation (ICO) widened its forecast for a global coffee deficit in the October 2019 to September 2020 coffee year to 626,000 bags, 24.7% higher than the previous forecast of 502,000 bags, while not large considering last season’s 3.7 million bag surplus. 

The March to March contracts arbitrage between the London and New York markets narrowed yesterday; to register this at 57.73 usc/Lb.  This equates to 48.45% 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 4,587 bags yesterday; to register these stocks at 2,046,075 bags, with 88.3% of these certified stocks being held in Europe at a total of 1,807,529 bags and the remaining 11.7% being held in the USA at a total of 238,546 bags.  There was meanwhile a larger in number increase by 40,146 bags to the number of bags pending grading for this exchange; to register these pending grading stocks at 178,113 bags. 

The commodity markets were mixed in trade yesterday, to see overall macro commodity index taking a soft sideways track for the day. The Cotton, Copper, Wheat and Soybean markets ended the day on a positive note, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Orange Juice, Corn, Gold and Silver markets ended the day on a softer note. Gold prices dropped nearly 1% after reaching the $1,600.00 level for the time in seven years after tension between the USA and Iran was eased yesterday and fears of a larger conflict deescalated.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.9302% lower; to see this index registered at 418.5659   The day starts with the U.S. Dollar steady, trading at 1.312 to Sterling, at 1.111 to the Euro and with the US Dollar buying 4.064 Brazilian Real. 

The London and New York markets started the day yesterday trading close to par on a modest negative note, both markets maintained this modest soft stance into the early afternoon trade. As the afternoon progressed both the London and the New York markets encountered selling pressure to set the markets on a soft track and accentuate the losses for the day. The London market hit a price floor and bounced back to limit the losses for the day and close near to par for the day, while the New York market continued on its soft track to close on a negative note. 

The London market ended the day on a negative note, and with 41.6% of the earlier losses of the day intact, while the New York market ended the day on likewise negative note, and with 78.3% of the earlier losses of the day intact. This soft and lacklustre close does little to inspire confidence and one might expect the markets are due for little better than a hesitant steady start for early trade today, against the prices set yesterday, as follows:   

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

MAR   1354 – 10                                                                MAR   119.15 – 3.25

MAY   1372 – 8                                                                  MAY   121.45 – 3.25

JUL    1390 – 9                                                                  JUL     123.70 – 3.25

SEP    1410 – 8                                                                 SEP     125.70 – 3.20

NOV   1428 – 8                                                                  DEC    128.30 – 3.20

JAN    1444 – 9                                                                  MAR   130.70 – 3.20

MAR   1465 – 10                                                                MAY   131.75 – 3.20

MAY   1488 – 9                                                                  JUL    132.60 – 3.20

JUL    1509 – 9                                                                  SEP    133.40 – 3.20