Coffee Market Report
The Brazilian analysts Safras & Mercado who have estimated the new Brazil coffee crop at 54.9 million bags have assessed that by Tuesday this week, that 91% of the new crop had been harvested. This with the earlier in maturity conilon robusta coffee crop completed would indicate that already close to 38 million bags of the new arabica coffee crop has been harvested, albeit that many of these coffees are still too fresh in cup profile to suit the consumer market industry buyers.
Thus with the liquidation of most of the older arabica coffee stocks over the past two years of deficit arabica coffee harvests, exporters are struggling to blend sufficient quality arabica coffee volumes to cater for their short term forward contract commitments. However, this is a short term factor and by October one would think that there shall be a good volume of new crop Brazil arabica coffee coffees coming to the consumer markets.
There are however some concerns being voiced over the incidences of scattered rain showers that have been experienced over some of the coffee districts in South East Brazil, as the fear is that unless there are follow on rains and this is questionable ahead of the main October to March main spring and summer rain season, that the early flowerings might abort and not convert into developing cherry. This fear contributing to speculation for the prospects for a smaller new Brazil crop, for the coming year and a crop that with the rebuilding of much in the way of reserve stocks unlikely, threatening relatively tight Brazil coffee supply for the follow on 2017/2018 coffee year.
The Coffee Board of India have assessed that with the month of August near to the end that the countries green coffee exports for the first seven and three quarter months of this year are already 422,267 bags or 14.35% higher than the same period in the previous year, at a total of 3,364,300 bags. This improved performance one would think is more related to the improved international coffee prices in recent months that have contributed to more selling aggression within the internal market, than to the marginally 6% higher new crop that came to the fore earlier this year.
Meanwhile India is well into its new monsoon season and with weather forecasters in India who had initially been forecasting a more intense rain season for this year, now forecasting little better than a normal rain season but nothing really negative in terms of the prospects for the development of the new Indian coffee crop. Albeit that following something of a late start to the rain season, there are forecasts that the next Indian coffee crop might be marginally lower than the past crop.
There has been no further striking news on the speculation over the prospects for a new La Nina phenomenon developing within the Pacific Ocean and the chances are now seemingly only 50/50 for this to develop, with speculation that even should the La Nina come to the fore, that it would be only a modest and not really crop damaging occurrence. Thus for the present, there is little in the way of weather concerns for the speculative sector of the coffee markets.
The November to December contracts arbitrage between the London and New York markets broadened yesterday, to register this at 62.94 usc/Lb., while this equates to a 43.57% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, continues to inspire support for the robusta coffee sector of the industry.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 730 bags yesterday; to register these stocks at 1,284,864 bags. There was meanwhile a larger in volume 2,666 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 4,869 bags.
The commodity markets were mixed in trade yesterday against a relatively steady U.S. dollar and with the overall macro commodity index taking a steady track for the day. The Oil, Natural Gas, Sugar, Cocoa, New York arabica Coffee and Cotton markets had a day of buoyancy and the Copper market was steady, while the London robusta Coffee, Orange Juice, Wheat, Corn Soybean, Gold and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.22% lower; to see this Index registered at 418.69. The day starts with the U.S. dollar steady and trading at 1.321 to Sterling and 1.129 to the Euro, while North Sea Oil is steady in early trade and trading at 49.35 per barrel.
The London market and New York markets opened the day yesterday on a hesitantly near to steady note and while the New York market moved north of par into the early afternoon trade, the London market maintained a steady marginally softer track. As the afternoon progressed though and within and environment of thin trade the New York market started to add value and post some reasonable gains, while the London market recovered back to par. Both markets tended to falter as the afternoon progressed and with the New York market losing some of its new found weight while the London market headed back into negative territory, but while there was some late in the day buoyancy for both markets and with the New York market showing some modest muscle, the London market ended the day south of par. The London market continued to end the day on a soft note and with 76.5% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 73% of the earlier gains of the day intact. This mixed close provides little in the way of direction but might with the renewed muscle of the New York market contributing to some degree of confidence, assist towards a steady start for early trade today against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
SEP 1761 – 18 SEP 143.50 + 1.35
NOV 1797 – 13 DEC 144.45 + 1.35
JAN 1821 – 13 MAR 147.60 + 1.30
MAR 1837 – 11 MAY 149.50 + 1.30
MAY 1850 – 11 JUL 151.15 + 1.30
JUL 1861 – 12 SEP 152.65 + 1.30
SEP 1873 – 12 DEC 154.65 + 1.30
NOV 1886 – 12 MAR 156.65 + 1.35
JAN 1895 – 12 MAY 157.75 + 1.35
MAR 1902 – 12 JUL 158.75 + 1.35
