Coffee Market Report

A senior official of the National Coffee Institute of Honduras is reported to have assessed that due to the low prices that have encouraged increased volumes of cross border coffee smuggling to avoid taxes and to in some cases to abandon and not incur the costs of harvesting coffee trees, that there could be an approximate 11.5% dip in the forecasted exports for the present October 2018 to September 2019 coffee year. In this respect and following the earlier forecasts for exports to rise to as much as 8.1 million bags, the now foresee that the exports would only be between 7.2 million and 7.6 million bags.

This is though a somewhat dramatic statement in terms of the figures that have internationally been calculated in terms of global coffee supply forecasts, as most reports and forecasts had only calculated in Honduras coffee exports for the October 2018 to September 2019 coffee year in terms of between 7.4 million and 7.6 million bags. Thus, in terms of the forecasts for surplus global coffee supply for the present coffee year, the report does little to change the negative picture that has been influencing the negative sentiment within the coffee markets.

The Ivory Coast as West Africa’s leading robusta coffee producer and based on provisional port data, has reported that the countries coffee exports for 2018 were 92.3% higher than the previous year, at a total of 1,275,650 bags. This figure is very much in line with the expectations of most private trade and industry forecasts, but one would suggest that it is not really related to a much-improved crop last year. Keeping in mind that the has been active cross border smuggling of coffee out of the Ivory Coast in recent year and that it is perhaps that this activity has declined and has therefore, assisted to buoy the official export figures.

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 34.25 usc/Lb., while this equates to 33.37% 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 2,643 bags yesterday; to register these stocks at 2,480,211 bags. There was meanwhile a smaller in number 2,060 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 22,582 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 56,167 bags or 2.8% over the week of trade leading up to Monday 28th. January, to see these stocks registered at 2,061,833 bags.

The commodity markets were mixed in trade yesterday, but and assisted by buoyancy for the energy markets, the overall macro commodity index took a positive track for the day. The Oil, Natural Gas, London robusta Coffee, Cotton, Copper, Gold and Silver markets ended the day on a positive note and the New York arabica Coffee market was steady for the day, while the Sugar, Cocoa, Orange Juice, Wheat, Corn and Soybean markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.25% higher; to see this index registered at 401.51. The day starts with the U.S. Dollar steady and trading at 1.309 to Sterling, at 1.144 to the Euro and with the dollar buying 3.720 Brazilian Real.

The London and New York markets started the day yesterday trading with modest buoyancy and maintained this stance, into the early afternoon trade. As the afternoon progressed both markets slipped back to par, but for the London market this was short lived as the market soon attracted renewed support to bounce back into positive territory, but the New York market continued to remain within a relatively thin trading range either side of par. Setting the London market on a positive track through to the close, while the New York market maintained a steady track for the day.

The London market ended the day on a very positive note and with 96.7% of the earlier gains of the day intact, while the New York market ended the day on a near to steady note and having recovered 90% of the earlier modest losses of the day. This close tends to indicate that there is some degree of underlying support for the New York market and thus limiting the downside, until there is more clarity in terms of the rainfall reports out of Brazil. Thus, one might expect that with Vietnamese selling pressure on the wane post next weeks Tet holidays, that the markets might be due for something of a steady start for early trade today. Against the prices set yesterday, as follows:

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

MAR 1537 + 29                                           MAR 102.60 – 0.05
MAY 1558 + 25                                           MAY 105.75 – 0.05
JUL 1575 + 23                                              JUL 108.55 unch
SEP 1593 + 23                                              SEP 111.30 – 0.05
NOV 1612 + 23                                            DEC 115.25 + 0.05
JAN 1629 + 23                                             MAR 119.05 + 0.10
MAR 1649 + 23                                           MAY 121.40 + 0.15
MAY 1688 + 23                                            JUL 123.60 + 0.15
JUL 1684 + 23                                              SEP 125.65 + 0.15
SEP 1702 + 23                                              DEC 128.70 + 0.10