Coffee Market Report

The Uganda Coffee Development Authority have reported that the countries coffee exports for the month of January were 2,743 bags or 0.68% lower than the same month last year, at a total of 401,930 bags. This following a good performance in October and November last year, results in the cumulative coffee exports for the first four months of the present October 2017 to September 2018 coffee year to still be 166,132 bags or 11.48% higher than the same period in the previous coffee year, at a total of 1,612,883 bags.

The month of February so far has been good for the main coffee districts in South East Brazil, with good rains having been reported from all the districts and above average for the main conilon robusta districts in the state of Espirito Santo. Which brings with it many new crop forecasts from the Brazil trade that vary between 58 million and 60 million bags and with it, the negative sentiment for the speculative sectors of the coffee terminal markets.

This does though bring with it increased price resistance on the part of the farmers within the internal market in Brazil, who struggle to cover costs for their declining 2017 crop coffee stocks and this is buoying the asking price differentials that the exporters are offering. Slowing the volumes of coffee exports of mostly arabica coffees at present, which is contributing to the declining levels of the nevertheless still good levels of main stream consumer market stocks.

The trade in Vietnam and following the harvest of a larger new crop, are estimating that so far between 40% and 50% of the new crop has been sold, but having just come out of the week-long Tet New Year celebrations the internal trade remains relatively slow. This one would think is more related to some degree of internal market price resistance to the relatively soft prices that the reference prices of the London market dictate than to the hangover post the holiday celebrations.

But with the new robusta crop in Indonesia due to start being harvested in the coming month and albeit many in the trade forecast that it is due to be a modest crop, the thought of the competition to come from Indonesia might be a factor that shall encourage Vietnam robusta coffee farmers to become more aggressive sellers in the coming weeks. Noting that this year that it is not only Indonesia, India and Uganda who shall compete with Vietnam in terms of global robusta coffee supply, but also Brazil where domestic market demand for conilon robusta coffees is approximately 12 million bags, whereas many forecast a new crop due to start coming to the market in late April at between 15 million and 16 million bags. Thus, the potential for 3 million to 4 million bags of Brazil conilon robusta coffees to come in to compete, within the presently very complacent consumer markets.

The May 2018 to May 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 41.11 usc/Lb., while this equates to 34% 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 5,975 bags yesterday; to register these stocks at 1,892,361 bags. There was meanwhile smaller in number 1,650 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 19,055 bags.

The commodity markets were mixed in trade yesterday, but with the U.S. dollar coming off the boil during the day, the overall macro commodity index took a marginally positive track for the day. The Oil, Sugar, New York arabica Coffee, Copper, Orange Juice, Wheat, and Corn markets had a day of buoyancy and the Gold market was steady, while the Natural Gas, Cocoa, London robusta Coffee, Cotton, Soybean and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.58% higher; to see this index registered at 427.47. The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.394 to Sterling, at 1.230 to the Euro and with the dollar buying 3.249 Brazilian Real, while North Sea Oil is steady and is selling at US$ 66,25 per barrel.

The London market started the day yesterday on a softer note, while the New York market started the day mostly to the positive side of par and with the markets maintaining this mixed stance, into the early afternoon trade. As the afternoon progressed the London market remained under pressure, while the New York market started to attract short covering support and with buy stops being triggered to move into positive territory.

The London market ended the day on a modestly negative note and with 53.8% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 76.9% of the earlier gains of the day intact. This close and despite the modest losses of the London market might prove to bring some degree of confidence to the fore, which could 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.

MAR 1801 – 6                                                MAR 119.60 + 2.65
MAY 1759 – 7                                                MAY 120.90 + 2.00
JUL 1786 – 7                                                  JUL 123.00 + 1.85
SEP 1789 – 8                                                  SEP 125.25 + 1.75
NOV 1794 – 7                                                 DEC 128.60 + 1.65
JAN 1801 – 6                                                  MAR 131.95 + 1.55
MAR 1809 – 6                                                MAY 134.00 + 1.50
MAY 1823 – 7                                                JUL 135.80 + 1.40
JUL 1844 – 8                                                  SEP 137.50 + 1.35
SEP 1847 – 8                                                  DEC 139.95 + 1.10