I. & M. Smith (Pty) Ltd. since 1915


I. & M. Smith (Pty) Ltd.

Coffee Market Report

08 Mar 2018

The coffee markets remain devoid of striking fundamental news and with the lack of news and repetitive forecasts for a bumper new Brazil crop on the horizon, remain under speculative selling pressure. While with more than sufficient new crop coffees foreseen for the rest of the year, that consumer industries are generally somewhat complacent in terms of their longer term buying strategies.

The drought threat factor in Brazil is now history and with most of the farms following the good rains over the recent months, now holding fair to good ground water retention levels and this leaves only the forthcoming climatic hurdle of the June and July Brazil frost season. It has though, been twenty-four years since there has been any really damaging frosts within the Brazil coffee districts and would appear by the net short status of the New York market, that most market players foresee that the threat of frost is unlikely.

But despite global warming there have been bouts of intense cold spells being encountered and one surely must assume that the there is always a threat of frost for many of the southern coffee districts in Brazil, albeit that the tradition on the part of consumer industries of taking on precautionary frost futures and forward coffee contract cover at this time of the year, has not been evident over the past few years. Thus it would seem to be unlikely that the pre-frost season cover is due to come to the fore in the coming weeks, to change the lacklustre and soft nature of the coffee markets at present.

The May 2018 to May 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 39.78 usc/Lb., while this equates to 32.94% 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 2,500 bags yesterday; to register these stocks at 1,904,388 bags. There was meanwhile a larger in number 8,690 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 43,092 bags.

The commodity markets were mixed in trade but mostly on the back foot yesterday, to see the overall macro commodity index taking a softer track for the day. The Natural Gas, London robusta Coffee, Cotton and Orange Juice markets nevertheless had a day of buoyancy and the Corn market had a steady day, while the Oil, Sugar, Cocoa, New York arabica Coffee, Copper, Wheat, Soybean, 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 0.97% lower; to see this index registered at 430.43. The day starts with the U.S. Dollar near to steady and trading at 1.390 to Sterling, at 1.241 to the Euro and with the dollar buying 3.244 Brazilian Real, while North Sea Oil is steady and is selling at US$ 64.25 per barrel.

The London and New York markets started the day yesterday trading on a softer note and with the markets taking a softer track, into the early afternoon trade. As the afternoon progressed the markets came under further pressure but with both markets bouncing back off the lows and moving back up into modest positive territory, but while the London market retained some support and to end the day within positive territory, the New York market very soon came under selling pressure and to move back into modest negative territory before taking a negative sideways track to the close.

The London market ended the day on a positive note and with 72.7% of the earlier gains of the day intact, while the New York market ended the day on a negative note but with 34.5% of the earlier losses of the day intact. This mixed close does little to inspire and with the Brazil Real looking softer and therefore more conducive for price fixation hedge selling from Brazil, it is likely that the markets are due for only a near to steady start for early trade today, against the prices set yesterday, as follows:


MAR 1835 + 9                                                MAR 119.30 – 0.65
MAY 1785 + 8                                                MAY 120.75 – 0.50
JUL 1804 + 4                                                    JUL 122.95 – 0.50
SEP 1800 + 1                                                   SEP 125.20 – 0.50
NOV 1797 – 3                                                 DEC 128.55 – 0.45
JAN 1798 – 6                                                  MAR 131.95 – 0.45
MAR 1808 – 7                                                MAY 134.10 – 0.40
MAY 1821 – 5                                                 JUL 135.95 – 0.35
JUL 1836 – 5                                                  SEP 137.60 – 0.40
SEP 1853 – 8                                                  DEC 140.20 – 0.40