Coffee Market Report

The Brazilian Exporters Association Cecafé have confirmed that the country exported 13% less coffee during the month of November than the same month last year, with exports of approximately 2.56 million bags. This they say has contributed to the cumulative coffee exports for the first eleven months of this year to being 10.4% lower than the same period last year, at a total of approximately 24.58 million bags.

One would think that based on these figures so far, that Brazil is not likely to export more than 27.5 million bags of coffee during this calendar year, but there would in terms of consumer market demand and so far, little stress noted on the part of the consumer market industries lower Brazil arabica coffee inputs, be no concerns over the lower volumes from Brazil. Noting that many industry players are presently supplementing some of their traditional Brazil natural arabica coffee demands within their blends, with discounted aged and plain cupping washed arabica coffee stocks that are available within the consumer markets.

While with little in the way of scare stories coming to the fore from Brazil in terms of both short to medium term coffee supply and weather conditions as related to the prospects of the next 2018 Brazil crop, the perception that this shall be a significantly larger new crop, has a negative effect upon speculative sentiment within the New York market. The speculative and fund sectors of this volatile market, no doubt having significantly extended their net short sole position over the past few days, but the question is if this market might be oversold and shortly due for a positive correction.

The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 42.25 usc/Lb., while this equates to 35.67% 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 5,271 bags yesterday; to register these stocks at 1,943,717 bags. There were meanwhile a smaller in number 3,532 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 30,055 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 12,500 bags or 0.59% over the week of trade leading up to Monday 11th. December, to register these stocks at 2,122,000 bags, on the day.

The commodity markets were mixed in trade yesterday but with the US dollar showing a degree of muscle, many markets were under pressure and to see the overall macro commodity index taking a softer track for the day. The Copper, Wheat and Corn markets had a day of buoyancy and the Cotton and Soybean markets had a steady day’s trade, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Orange Juice, 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 1% lower; to register this index at 402.41. The day starts with the U.S. Dollar near to steady and trading at 1.333 to Sterling and at 1.176 to the Euro, while North Sea Oil is showing a degree early buoyancy and is selling at US$ 64.85 per barrel.

The London market started the day yesterday marginally south of par, while the New York market started the day on a positive note and with good corrective buoyancy through to the early afternoon trade, while the London market struggled to remain close to par. As the afternoon progressed and with the negative nature of the overall macro commodity index having an influence, both markets started to come under speculative and fund selling pressure and to see both markets head south into negative territory and towards a soft end to the day’s trade.

The London market ended the day on a very negative note and with 90.9% of the earlier losses of the day intact, while the New York market ended the day on a likewise very negative note and with 91.2% of the earlier losses of the day intact. This close assists to paint a negative picture for the charts, as does the Brazil Real now trading at 3.3 to the U.S. dollar contribute to negative sentiment, but in terms of the extensive net short positions that the funds must now have within the New York market, there is a possibility that the market shall be seen to be oversold and therefore, one might expect to see some degree of caution on the part of the bears within the market. Making one think that the markets might be due for some degree of hesitant corrective buoyancy for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT                   NEW YORK ARABICA USc/Lb.

JAN 1688 – 40                                               DEC 117.05 – 1.95
MAR 1680 – 40                                             MAR 118.45 – 1.55
MAY 1690 – 38                                             MAY 120.65 – 1.55
JUL 1737 – 31                                               JUL 122.95 – 1.55
SEP 1746 – 31                                               SEP 125.30 – 1.55
NOV 1754 – 31                                              DEC 128.85 – 1.50
JAN 1764 – 27                                               MAR 132.20 – 1.45
MAR 1774 – 27                                             MAY 134.35 – 1.45
MAY 1799 – 27                                             JUL 136.45 – 1.45
JUL 1831 – 27                                               SEP 138.50 – 1.50