The Brazil Real continued the prevailing downward trend that has seen this largest coffee producer’s currency slid by 34% against the US Dollar this year. It was another dismal day yesterday for the currency which fell by 1.90% on the day, against the US Dollar, to touch upon a new record low at 4,067 yesterday.

Weather conditions over the main south east Brazil coffee districts is anticipated to see a new round of rainfall next week. Thus far all indications are for a good start to the flowering season that is due to set the 2016 Brazil coffee crop. The short term outlook is for a forecast of widespread rains into the first week of October and so long as these rains continue to support the flowering and later pinhead to cherry development, many are forecasting this will be a large crop. Thus with rainfall reports good thus far in this very early phase of new crop development, so long as the rains are sustained and with any other unforeseen climatic conditions aside, indications are that this new coffee crop to come in 2016, may bring about a recovery in the declining coffee stock levels for the 2016/2017 coffee year.

The arbitrage between the markets narrowed yesterday, to register this at 46.91 usc/Lb., while this equates to a 40.63% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, but is perhaps due to widen further in time and when Vietnam stocks start to impact upon the fortunes of the London market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,833 bags yesterday; to register these stocks at 2,038,358 bags. There was a larger in volume 2,756 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 36,027 bags.

It was an overall softer day on the commodity markets yesterday and many markets falling to two week lows on the back of a firming U.S. Dollar and concerns over the latest round of economic data from China which were negatively received by the markets. It was a softer day overall and for the Oil markets, Coffee, Corn, Cotton, Orange Juice, Sugar, Soybean and Wheat, Copper, Gold, Silver, Platinum, Palladium were all lower on the day, Cocoa held steady. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.29% lower to see this Index registered at 389.36. The day starts with the U.S. Dollar trading at 1.533 to Sterling and 1.112 to the Euro, the Brazil Real is trading at 4.048, while North Sea Oil is steady in early trade and is selling at 47.64 per barrel.

It was a similarly softer day in the coffee markets, both London and New York markets opened the day on a softer note in limited volume on London and initially a softer and fairly active opening in New York. The initial drive lower in New York fizzled out almost as quickly, with underlying buyer support returning to the floor to send New York back through opening levels. This upturn in value in New York was short lived however, as the day wore on and macroeconomic stress bearing down on the entire commodity basket yesterday, assisted by a strengthening U.S. Dollar and in collaboration a rapidly depreciating Brazil Real on the day. The markets remained in negative territory for the rest of the session, although both London and New York managed to post some degree of modest recovery toward the latter half of the day. This was however, met again with increased selling activity and the lower track was reinforced with a further push lower as the day drew to a close and both markets settled at the lows of the session yesterday. Thus, after a moderate in volume trading day and a relatively narrow trading range in New York, the close was set on softer note in both markets, as follows:

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

NOV 1511 – 22                          DEC   115.45 – 1.80
JAN 1526 – 21                            MAR 118.75 – 1.85
MAR 1540 – 24                          MAY 121.00 – 1.85
MAY 1561 – 25                          JUL   123.00 – 1.75
JUL 1580 – 26                            SEP   124.95 – 1.60
SEP 1598 – 28                            DEC  127.80 – 1.50
NOV 1617 – 29                          MAR 130.55 – 1.40
JAN 1636 – 30                           MAY 132.40 – 1.35
MAR 1656 – 30                         JUL    134.30 – 1.25