Coffee Market Report
The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 18,021 bags or 0.27% during the month of January, to register these stocks at 6,613,480 bags at the end of the month. It must be noted though that this is only the sixth month that these stocks have fallen and despite this further dip in stocks for the month of January, they remain relatively substantial.
These stocks do not 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 Brazilian Association for the Instant Coffee Industry have voiced confidence that with the forecasts for a significantly larger new conilon robusta crop this year which shall contribute towards a significantly larger new overall Brazil coffee crop this year, that it shall fuel more competitive instant coffee prices. This they foresee shall assist their industry to win back market share within the global instant coffee market, which the country had lost to mostly the Asian producers over the past couple of years of tighter and relatively expensive internal market coffee supply.
The prevailing soft nature of the reference prices of the coffee terminal markets and with the new crop coffee harvest having peaked, has proved to be problem for the Indian coffee farmers who say that they are now selling their new crop robusta coffees in local currency terms, at approximately 19% below the prices at the same time last year and an even more troublesome approximately 26% below last years prices for the arabica coffees. In this respect some farmers are suggesting that their government should step in with some form or minimum price support and a price compensation program, but without any suggestions as to how this could work.
While one would think that it is unlikely that the Indian government is going to step in to support the farmers within an individual crop and one that is in terms of overall Indian agriculture a crop that is not critical to the countries economy, it is a reflection of how coffee farmers globally are presently suffering from international coffee prices that are at the low end of the price trading range of the prices thirty five years ago and when costs of production were significantly lower. Prices that one would suggest will not support sustainable production on the longer term, but with the somewhat artificial fund and speculative driven negative pressure on prices related mostly to a larger new Brazil crop to come to the fore for the second half of the year, it is difficult to foresee any short-term recovery and relief for the global coffee farmers.
The May 2018 to May 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 43.27 usc/Lb., while this equates to 34.85% 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 519 bags yesterday; to register these stocks at 1,902,602 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 20,191 bags.
The commodity markets saw many markets gaining support from a softer U.S. dollar yesterday, to see the overall macro commodity index taking a positive track for the day. The U.S. Oil, Sugar, Cocoa, Copper, Orange Juice, Wheat, Corn and Soybean markets had a day of buoyancy and the Brent Oil and London robusta Coffee markets were steady, while the Natural Gas, New York arabica Coffee, Cotton, 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 0.46% higher; to register this index at 426.08. The day starts with the U.S. Dollar tending softer and trading at 1.413 to Sterling, at 1.254 to the Euro and the dollar is buying 3.227 Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 63.90 per barrel.
The London and New York markets started trading with some degree of buoyancy yesterday and with both markets remaining close to and either side of par, into the early afternoon trade. As the afternoon progressed the markets maintained this pattern of trading close to par, but while the London market managed to stay steady of the close, the New York market and dipped south into negative territory.
The London market ended the day on a steady note and with 11.1% of the earlier gains of the day intact, while the New York market ended the day on a soft note and with 73.1% of the earlier losses of the day intact. This close does not provide much indication for direction, but with the Vietnamese off the field of play today for their Tet New Year holiday and many in America likely to be distracted by the pending long weekend that comes with the President Day holiday on Monday and with a soft U.S. dollar, one might expect to see relatively lacklustre trade due for most of the day. This we would think, shall inspire another hesitantly steady start for early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
MAR 1818 + 7 MAR 121.75 – 1.05
MAY 1783 + 1 MAY 124.15 – 0.95
JUL 1807 + 1 JUL 126.35 – 0.85
SEP 1808 + 3 SEP 128.60 – 0.85
NOV 1810 + 3 DEC 132.10 – 0.80
JAN 1813 + 3 MAR 135.40 – 0.75
MAR 1817 – 3 MAY 137.45 – 0.70
MAY 1831 – 3 JUL 139.30 – 0.60
JUL 1859 – 3 SEP 140.90 – 0.60
SEP 1862 – 3 DEC 143.35 – 0.60
