Coffee Market Report January 29 2020

The General Statistics Office of the Vietnam have forecast that with the month of January coming to a close, that the countries coffee exports for the month shall be 30.6% lower than the same month last year, at a total of approximately 2.33 million bags. this comparatively lower export performance month on month from Vietnam can be attributed to the low period of activity within the interior over the festive Tet Lunar New Year, observed in January this year. One might anticipate an increase in coffee exports to flow to the consumer markets in the coming month as commercial activity gains momentum, subsequent to the January weeks’ celebrations.  The General Statics office in Vietnam have meanwhile, estimated that the countries revenue from coffee exports for the month of January shall be 30.3% lower than the same period last year at a total of $245 million. 

One of Brazil’s prominent and respected coffee exporters Comexim and with the evidence of deliveries from the previous year’s 2019 Brazil crop, has revised down by 1.2 million bags or 2.07% their estimate for this crop, which they now estimate to have totalled 56.8 million bags.  This latest estimate being related to 38 million bags of arabica coffees and 18.8 million bags of conilon robusta coffees. 

The report has also forecast in terms of the follow on 2020 crop that is due start being harvested during the second quarter of this year, that this crop shall see an approximate 10.25 million bags or 26.97% increase in arabica coffee production, to total 48.25 million bags and also a 650,000 bags or 3.46% increase in conilon robusta coffee production, to total 19.45 million bags and therefore a 10.9 million bags or 19.19% increase in overall coffee production due for 2020 crop, that they presently foresee to total 67.7 million bags, this due to the coming biennial higher bearing crop. 

This report forecasts that even if Brazil coffee exports from the 2019 coffee crop were to get close to a record 40 million bags and along with an estimated domestic consumption of 21 million bags, the country shall have over 6 million bags of carry over coffee stocks into the next 2020 new crop.  Thus, so long as there are no unforeseen climatic problems coming to the fore to damage the potential of this next 2020 coffee crop, a guarantee for steady Brazil coffee supply to the consumer markets into 2021 and in terms of market sentiment, it does little to buoy short to medium term speculative spirits.   

The climatic conditions within Brazil remain overall conducive across the widely spread coffee growing areas, as the new July 2020 to June 2021 crop develops towards maturity.  There have however been reports over the past weekend of torrential downpours and resultant flooding that has affected the southeastern areas.  A national state of emergency has been declared in areas affected by the ensuing humanitarian disaster.  These reports inform that the heavy downpours have since subsided, though landslides and flooding within the regional southeastern coffee growing areas have indicated that there is likely to be a degree of new crop coffee losses within severely affected areas. The likelihood of new coffee crop damages would be specific to the affected areas and is too early to quantify, while the southeastern coffee growing areas in Minas Gerais state are expansive and traditionally account for an average of around 12% of the annual arabica production per annum. 

The March to March contracts arbitrage between the London and New York markets narrowed yesterday; to register this at 44.70 usc/Lb.  This equates to 42.70 % 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 5,450 bags yesterday; to register these stocks at 2,166,296 bags, with 89.1% of these certified stocks being held in Europe at a total of 1,929,447 bags and the remaining 10.9% being held in the USA at a total of 236,849 bags.  There was meanwhile a larger in number decrease by 12,776 bags to the number of bags pending grading for this exchange; to register these pending grading stocks at 49,107 bags. 

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, Cotton, Orange Juice and Corn markets ended the day on a positive note, while the Cocoa, Coffee, Copper, Wheat, 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 0.1313% higher; to see this index registered at 405.5614   The day starts with the U.S. Dollar steady, trading at 1.302 to Sterling, at 1.102 to the Euro and with the US Dollar buying 4.195 Brazilian Real. 

The London and New York markets started the day yesterday trading close to par on a modest soft note. Both markets maintained this soft track into the early afternoon trade. As the afternoon progressed both the London and the New York markets gained buying support to move into modest positive territory only to encounter pressure and drop back into negative territory for the remainder of the day’s trade. 

The London market ended the day on a modest negative note and with 9.1% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 91.8% of the earlier losses of the day intact.  This soft close does little to inspire confidence and with a marginally softer Brazil Real in play one would 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   1327 – 1                                                                      MAR   105.05 – 1.55

MAY   1337 – 2                                                                      MAY    107.30 – 1.55

JUL    1354 – 4                                                                      JUL     109.55 – 1.60

SEP    1372 – 5                                                                     SEP     111.65 – 1.55

NOV   1390 – 5                                                                      DEC    114.40 – 1.45

JAN    1407 – 6                                                                      MAR   117.15 – 1.30

MAR   1426 – 6                                                                      MAY   118.75 – 1.10

MAY   1449 – 6                                                                      JUL    120.10 – 0.95

JUL    1474 – 6                                                                      SEP    121.30 – 0.85