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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

26 Jul 2019
Weather conditions over south east Brazil in the main coffee districts are presently dry and warm and the forecasts for these conditions to remain for the coming two weeks, which eliminates the threat of frost through to the historical mid-October end to the frost season. Focus now moving towards the start of the spring and summer rain season at the end of September, which will trigger the flowering for the next 2020 Brazil crop.

The Brazil analysts Safras & Mercados who have forecast the new Brazil crop at 58,9 million bags have estimated that so far 83% of the new crop has been harvested, with the conilon robusta crop almost complete and approximately 9 million bags of arabica coffees still to be harvested.

With much of the past crop stocks within Vietnam sold and internal market price resistance slowing sales of the remaining stocks in hand, trade remains lacklustre within Vietnam for the present. Farmers now starting to look towards the start of the new crop that shall come at the end of the rain season, which traditionally comes to a close during October.

The European coffee federation have reported that coffee stocks held within reporting port warehouses in Western Europe increased by 90,433 bags or 0.77% during the month of May, to register these stocks at 11,770,383 bags. These stocks which service both the west and east European markets do not include all of the port warehouses in Western Europe nor do they include many other private warehouses, in transit container stocks and on-site roaster inventory stocks.

If one calculates total European coffee consumption demand at approximately 1,1 million bags per week, one could speculate that unreported stocks could be as much as 2,5 million bags. This would extrapolate to total European coffee stocks to have been approximately 14,3 million bags as at the end of May and the equivalent of a very safe 13 weeks of coffee demand. A factor that contributes towards market perception of prevailing high coffee stock levels and underpins bearish sentiment, on the part of the speculative sector of the market.

The September to September contracts arbitrage between the London and New York markets broadened yesterday, to register this at 39.05 usc/Lb., while this equates to 38.80% 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 261 bags yesterday; to register these stocks at 2,365,733 bags. There was meanwhile a larger in number 9,439 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 13,709 bags.

The commodity markets were mixed in trade yesterday but with many markets tending softer, to see the overall macro commodity index tending negative for the day. The Oil, Natural Gas, Orange Juice and Wheat markets ended the day on a positive note and the London robusta Coffee market was near to steady for the day, while the Sugar, Cocoa, New York arabica Coffee, Cotton, Copper, Corn, 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 0.4% lower; to see this index registered at 398.38. The day starts with the U.S. Dollar steady and trading at 1.244 to Sterling, at 1.114 to the Euro and with the US Dollar buying 3.778 Brazilian Real.

The London and New York markets started the day yesterday trading close to par and with both markets remaining around par, into the early afternoon trade. As the afternoon progressed both markets attracted support and moved into modest positive territory but this was short lived and with some influence from a marginally weaker Brazil Real the markets moved back to trade around and modestly below par and to take the markets through to a softer end to the day.

The London market ended the day on a near to steady note and with 40% of the earlier very modest loses of the day intact, while the New York market ended the day on a negative note and with 50% of the earlier loses of the day intact. This marginally softer close provides little in the way of direction and one would think that the markets are due for a steady start for early trade today, against the prices set yesterday, as follows:


JUL 1326 unch
SEP 1358 – 2                                                 SEP 100.65 – 0.35
NOV 1387 – 2                                                DEC 104.35 – 0.35
JAN 1414 – 2                                                 MAR 108.05 – 0.35
MAR 1442 – 2                                                MAY 110.40 – 0.30
MAY 1470 – 2                                                JUL 112.50 – 0.30
JUL 1497 – 1                                                  SEP 114.50 – 0.30
SEP 1522 – 1                                                  DEC 117.45 – 0.25
NOV 1546 – 1                                                 MAR 120.35 – 0.25
JAN 1565 – 1                                                  MAY 122.25 – 0.25