I. & M. Smith (Pty) Ltd. since 1915


I. & M. Smith (Pty) Ltd.

Coffee Market Report

16 May 2018

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 165,248 bags or 2.52% during the month of April, to register these stocks at 6,732,564 bags at the end of the month. These stocks do not though include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 570,000 bags per week, would conservatively have been at least 1.1 million bags. If one is to consider the additional unreported stocks the end month stocks, this would equate to more than 13 weeks of roasting activity, which most would consider to be more than a safe reserve.

The Indian Coffee Board have announced that they have lowered their forecast for coffee supply for the present October 2017 to September 2018 coffee year by 573,334 bags or 9.82%, to now forecast the crop to be 5,266,666 bags. This crop that they expect to be made up by 3,683,333 bags of robusta coffees and 1,583,333 bags arabica coffees, has been negatively affected by the combination of lower rainfall and higher temperatures during the development of the crop.

This report and the indication for 573,334 bags decline in new crop expectations is however dwarfed by the expectations for an approximate 10 million to 13 million bags larger new Brazil crop that is soon to start coming to the market. Thus, the report from India is unlikely to have any affect upon the prevailing bearish sentiment, which is dominating the coffee markets at present.

The respected United States Department of Agriculture USDA Global Agricultural Information Network have reported that the presently being marketed October 2017 to March 2018 Guatemalan new crop of mostly fine washed arabica coffees (approximately 5% of the crop is robusta coffees) is 55,000 bags or 1.62% lower than their previous estimate. While they also forecast that the forthcoming new October 2018 to March 2019 new crop, shall be of a similar number as this new estimate, at a total of 3,345,000 bags.

The USDA have also reported that the presently being marketed October 2017 to March 2018 El Salvadoran new crop of fine washed arabica coffees is 65,000 bags or 11.3% higher than their previous estimate, at total of 640,000 bags. While they also forecast that the countries forthcoming new October 2018 to March 2019 new crop, shall be 52,000 bags or 8.12% higher than, at a total of 692,000 bags.

The reports do not however speculate on what might be the negative effects of the prevailing soft prices at which the recently completed new crops in Central America have sold against, as while the farmers in El Salvador have the benefit of their Government providing loan guarantees, many of their neighbouring and larger in volume coffee producers, do not benefit from the same degree of financial support. A factor that has already brought to the fore speculation and forecasts of the possibility of a up to as much as an overall 10% decline in production for the next crop out of the Central American producer bloc, as a result of reduced levels of farm inputs that are necessary to support the development of this next crop.

The July 2018 to July 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 38.57 usc/Lb., while this equates to 32.98% 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 3,372 bags on yesterday; to register these stocks at 1,995,518 bags. There was meanwhile a smaller in number 550 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 63,689 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 37,833 bags or 2.94% over the week of trade leading up to Monday 14th. May, to see these stocks registered at 1,323,500 bags, on the day.

The commodity markets encountered the renewed muscle of the U.S. dollar yesterday, to see many markets on the back foot and the overall macro commodity index taking a softer track for the day. The Brent Oil, Natural Gas, Sugar, Cotton and Corn markets nevertheless ended the day with some degree of buoyancy, while the U.S. Oil, Cocoa, Coffee Copper, Orange Juice, Wheat, Soybean, Gold and Silver markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.66% lower; to see this index registered at 432.78. The day starts with the U.S. Dollar steady and trading at 1.351 to Sterling, at 1.183 to the Euro and with the dollar buying 3.653 Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 78.35 per barrel.

The London market started the day yesterday on a near to steady note and trading mostly close to par, while the New York market started the day with modest buoyancy but to soon slip back and to see both markets trading around par into the early afternoon trade. As the afternoon progressed the markets started to come under pressure and with both markets slipping back into negative territory and influenced by the combination of both the negative nature of the overall macro commodity index and the threat of Brazil selling, which comes with the softening value of the Brazil Real.

The London market ended the day on a negative note and with 77.8% of earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 52% of the earlier losses of the day intact. This close contributes to a negative picture for the charts and does little to inspire confidence, but one might nevertheless expect that with the prevailing soft prices that there might be some degree of caution and hesitancy coming into play, to once again contribute towards a near to steady start for early trade today, against the prices set yesterday, as follows;


MAY 1718 – 17                                              MAY 112.90 – 0.75
JUL 1728 – 14                                                 JUL 116.95 – 0.65
SEP 1719 – 16                                                SEP 119.25 – 0.65
NOV 1722 – 18                                              DEC 122.80 – 0.65
JAN 1726 – 19                                                MAR 126.30 – 0.70
MAR 1736 – 18                                              MAY 128.60 – 0.70
MAY 1749 – 16                                               JUL 130.80 – 0.70
JUL 1762 – 15                                                 SEP 132.80 – 0.70
SEP 1775 – 15                                                 DEC 135.50 – 0.75
NOV 1789 – 15                                               MAR 138.15 – 0.75