Coffee Market Report
As the present July 2016 to June 2017 Brazil coffee crop completes harvest, the Brazil analysts Safras & Mercado who have forecast the new Brazil crop to be at 54.9 million bags, made up of an estimated 42.8 million bags arabica and 12.1 million bags robusta, have come forth with their projection that sales from this crop had reached 46% by 12th September. This versus an estimate of 44% sold at the same time last year, and against that of an average over the past five years of 40% of the crop sold by this date. Thus with coffee flowing to warehouses and a firmer Brazil Real that has registered steady gains against the U.S. Dollar over the past weeks to see this currency trading at 3.21 today, farmers are already relatively well sold against the prevailing favourable reference prices in New York, that is inspired to a degree by the uncertainty of the next Brazil crop to come and for the time being there is limited pressure from this largest producer to aggressively sell into the prevailing markets.
The Brazil Agriculture Ministry crop supply agency, CONAB, have meanwhile come forth with their third forecast for this crop year and released yesterday, is for a slightly lower overall estimate of the current crop. This for the current arabica crop is estimated to be 29% higher than 2015/2016 production and pegged by CONAB at 41.30 million bags, whereas their Robusta estimate stood at 8.4 million bags and an overall total at 49.60 million bags. This latest forecast by CONAB which is traditionally conservative, falls short of a vast majority of independent trade and industry forecasts for this Brazil 2016/2017 current crop, which in the latest round of estimates would indicate a general consensus of this crop to be closer to between 54 and 55 million bags.
While it is early days for the new crop July 2017 to June 2018 flowering season, much attention is being directed by the speculative sector of the coffee markets is toward the prospects of the success of the flowering that will set this next Brazil crop to come and the rains that are needed to set the flowering. The weather reports point toward soil moisture retention to be on the lower side of the five-year average at this time of year, a similar pattern to that of the same month in 2015, however with this year starting from much improved and near to normal moisture levels at the start of this calendar year, than that of the same time in 2015. There has been sporadic precipitation in the first two weeks of September and the forecasts are for more rain to come to the main south eastern Brazil arabica coffee growing areas in the next five days to steadily increase into the first week of October. The prospects of a La Nina weather phenomenon which might have had a negative impact on flowering and early coffee cherry development toward the end of this year, has subsequently been downgraded to a low 36% probability by the U.S. government forecasters, to seemingly indicate a more neutral weather pattern to come to the fore.
The November to December contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 66.46 usc/Lb., while this equates to a 42.46% 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 decrease by 310 bags yesterday; to register these stocks at 1,264,645 bags. The number of bags pending grading for this exchange were unchanged on the day; to register these pending grading stocks at 14,604 bags.
It was a mixed day on the commodity markets yesterday, as the U.S. Federal Reserve’s much anticipated announcement regarding monetary policy confirmed that U.S. interest rates would be left unchanged, received a relatively subdued reaction in the markets, while the U.S. Dollar lost ground against other major currencies on the day. It was a firmer day overall for Oil, robusta Coffee, Sugar, Cotton, Wheat, Gold, Silver, Platinum and Palladium markets, although a softer day posted for Copper, Orange Juice, Cocoa, Corn and Soybean markets. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.52% higher; to see this Index registered at 424.26. The day starts with the U.S. Dollar steady in early trade and trading at 1.305 to Sterling and 1.12 to the Euro, while North Sea Oil is steady in buoyant in early trade and selling at 46.51 per barrel.
The London market opened the day in positive territory with a degree of catch up from the relatively firm close in the New York, while this latter market opened the day on a steady to mildly positive note. The morning session supported by speculative buying activity and assisted by the weaker U.S. Dollar lead both markets in positive territory that gained momentum in London into then afternoon. The New York market met with a degree of seller pressure above the market as the day progressed, to see this market move briefly into negative territory before bouncing back to positive territory for a brief spell, but prior to losing its way again to below par. The London market in contracts remained on a steady track to the end of the session in this market, maintaining much of the gains in tact at the close. The markets set the close yesterday, after a buoyant and good volume day but in mildly negative territory at the days’ low in New York and in positive territory for the London robusta market, near to the high of the day in this market, as follows;
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
SEP 1982 + 31
NOV 1986 + 31 DEC 156.55 – 0.50
JAN 2007 + 31 MAR 159.75 – 0.15
MAR 2017 + 31 MAY 161.50 Unch
MAY 2024 + 30 JUL 163.05 Unch
JUL 2032 + 30 SEP 164.40 Unch
SEP 2040 + 30 DEC 166.25 Unch
NOV 2048 + 30 MAR 168.00 Unch
JAN 2057 + 30 MAY 169.05 Unch
MAR 2064 + 30 JUL 170.05 Unch
