Coffee Market Report

It was reported on Reuters yesterday that one of Brazil’s prominent and respected coffee exporters Comexim and with the evidence of deliveries from the previous year’s bumper 2018 Brazil crop, has revised upwards by 2.35 million bags or 3.87% their estimate for this crop, which they now estimate to have totalled 63.05 million bags. This latest estimate being related to 46.7 million bags of arabica coffees and 16.35 million bags of conilon robusta coffees, which is still in terms of the conilon robusta coffee numbers still a relatively conservative number, when compared to some other respected reports.

The report has also forecast in terms of the follow on 2019 crop that is due start being harvested during the second quarter of this year, that this crop shall see an approximate 8.3 million bags or 17.8% decline in arabica coffee production, to total 38.4 million bags. But conversely a 3.45 million bags or 21.1% increase in conilon robusta coffee production, to total 19.8 million bags and therefore only a relatively modest 4.85 million bags or 7.7% decline in overall coffee production due for 2019 crop, that they presently foresee to total 58.2 million bags.

This report also assess that even if Brazil coffee exports from the 2018 coffee crop were to get close to a record 40 million bags and along with an estimated domestic consumption of 21.5 million bags, the country shall have over 4 million bags of carry over coffee stocks into the next 2019 new crop. Thus, so long as there are no unforeseen climatic problems coming to the fore to damage the potential of this next 2019 coffee crop, a guarantee for steady Brazil coffee supply to the consumer markets into 2020 and in terms of market sentiment, it does little to buoy short to medium term speculative spirits.

One might speculate and in terms of this report being in agreement with many others that foresee that Brazil is due to see a sharply rising supply of conilon robusta coffees from their next crop and with a domestic market that accounts for only approximately 12 million bags, that Brazil is due to export significant volumes of conilon robusta coffees over the second half of this year. Much of this coffee is likely to come to the certified robusta coffee stocks of the London market, which is a factor that might well contribute to developing bearish sentiment and a softening price trading range for this market later in the year. A factor that would most likely contribute towards a widening of the arbitrage between the London and New York markets, for the second half of the year.

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 33.44 usc/Lb., while this equates to 32.54% 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 4,388 bags yesterday; to register these stocks at 2,474,534 bags. There was meanwhile a larger in number 4,820 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 30,555 bags.

The commodity markets had a mixed but overall lacklustre and flat day yesterday, to see the overall macro commodity index taking something of a sideways track for the day. The Cotton and Gold markets ended the day on a positive note and the Sugar market ended the day on a near to steady note, while the Oil, Cocoa, Coffee and Copper markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.13% lower; to see this index registered at 402.1. The day starts with the U.S. Dollar steady and trading at 1.291 to Sterling, at 1.148 to the Euro and with the dollar buying 3.698 Brazilian Real.

The London and New York markets started the day yesterday on a modestly softer note and with the markets maintaining this stance, into the early afternoon trade. As the afternoon progressed the New York market started to come under pressure and with sell stops being triggered, to accentuate the losses, while the London market moved south in a more modest manner. The New York market did however bounce back from the lows and to recover some of its losses of the day and with the London market remaining within its somewhat sideways negative track, through to the close.

The London market ended the day on a negative note and with 75% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note but having recovered 52.2% of the earlier losses of the day. This close and with the ability of the New York market to have bounced back from the lows of the day might inspire some degree of caution and set the markets for a hesitant and near to steady start for early trade today, against the prices set on Friday, as follows:

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

JAN 1507 – 15                                                MAR 102.75 – 1.10
MAR 1528 – 15                                              MAY 106.25 – 0.95
MAY 1552 – 14                                              JUL 109.15 – 0.95
JUL 1571 – 14                                                SEP 112.05 – 1.00
SEP 1589 – 14                                                DEC 115.95 – 0.95
NOV 1608 – 14                                               MAR 119.70 – 0.95
JAN 1626 – 14                                                MAY 122.05 – 0.90
MAR 1646 – 14                                               JUL 124.20 – 0.90
MAY 1666 – 14                                               SEP 126.20 – 0.95
JUL 1682 – 15                                                 DEC 129.20 – 0.95