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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

26 Oct 2018

The weather reports from Brazil continue to come to fore with good rainfall reports for all of the major coffee districts in the country, which has with the generally good rains through the month, assisted to set the flowerings for the next 2019 coffee crop. This albeit still early days in terms of the October to March rain season, is making many speculate that the country and despite biennial bearing factors, due for a good and possibly surplus follow on coffee crop for next year.

There is some degree of focus upon this coming weekend run off Presidential Elections in Brazil and with the polls continuing to indicate that what is foreseen to be the economically friendly Jair Bolsonaro is the favourite to win, the Brazil real continues to hold on to its firmer stance. But with the advantage of a 30% increase in the reference prices of the New York arabica coffee market, this has seemingly not slowed internal market selling activity for new crop Brazil arabica coffees. Reports do indicate though, that the internal market sales of new crop conilon robusta coffees are reflecting some degree of price resistance, which is resulting in only modest volumes of trade.

The Coffee Board of India and the various coffee farmers associations in India have continue to report that due to the overly severe monsoon rains earlier this year, that there shall be a significant reduction in the new coffee crop potential for the country. But one of the major players within the Indian Coffee Industry Tata Coffee Limited has been reported on Reuters, to say that they do not expect a significant impact from these rains.

It is nevertheless in terms of market sentiment an irrelevant factor as even if the Indian coffee crop is lower and exports likewise lower, the potential dip in coffee supply from India is dwarfed by the evidence of a significant global coffee supply for this new October 2018 to September 2019 coffee year. But it shall of course prove to be a matter of concern for the select consumer industry players, who provide dedicated support for some of the unique speciality Indian coffee grades.

The new crop in Vietnam has started and is reported to be presently modest in volume, but is expected to start to peak by the second half of next month. Meanwhile, with the internal market in Vietnam is reported to remain active, despite the softer nature of the reference prices of the London market. Thus and with the added contribution of increased conilon robusta coffee supply post the significantly larger new Brazil crop this year, there is a steady flow of robusta coffees foreseen for the consumer market industries.

The January 2019 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 43.72 usc/Lb., while this equates to 36.09% 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 2,630 bags yesterday; to register these stocks at 2,438,078 bags. There were meanwhile a larger in number 7,896 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 51,608 bags.

The commodity markets had a mixed day yesterday, to see the overall macro commodity index taking something of a sideways track for the day. The Oil, Natural Gas, Cocoa, New York arabica Coffee, Cotton and Gold markets ended the day on a positive note and the Copper market on a close to steady note, while the Sugar, London robusta Coffee, Orange Juice, Wheat, Corn, Soybean and Silver markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.04% lower; to see this index registered at 414.69. The day starts with the U.S. Dollar steady and trading at 1.281 to Sterling, at 1.137 to the Euro and with the dollar buying 3.706 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 76.45 per barrel.

The London and New York markets both started the day yesterday on a softer note, but with both markets soon attracting support and moving up into positive territory. It was however something of a roller coaster day for the markets and with the London market in particular coming under producer price fixation selling pressure, to see both markets experiencing an erratic day’s trade. This with the London market mostly trading on the negative side of par, while the New York market and with speculative short covering support in play, trading mostly to the north of par.

The London market ended the day on a negative note and with 52.6% of the earlier losses of the day intact, while the New York market ended the day on a positive note and 31.6% of the earlier gains of the day intact. This close and with a softer London and along with the New York market only able to hold on to a modest percentage of the gains of the day, does not provide a strong signal. Making one think that the markets shall be due for only a hesitant near to steady start for early trade today, against the prices set yesterday, as follows:


NOV 1674 – 14                                              DEC 121,15 + 0.90
JAN 1707 – 10                                               MAR 125.05 + 1.00
MAR 1725 – 9                                                MAY 127.60 + 0.95
MAY 1740 – 10                                               JUL 130.00 + 1.00
JUL 1755 – 9                                                  SEP 132.30 + 1.00
SEP 1769 – 9                                                  DEC 135.60 + 1.05
NOV 1784 – 8                                                 MAR 138.80 + 1.00
JAN 1799 – 6                                                  MAY 140.75 + 1.00
MAR 1813 – 6                                                 JUL 142.45 + 1.00
MAY 1825 – 6                                                 SEP 144.05 + 1.00