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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

06 Dec 2018

The National Coffee Growers Federation in Colombia have forecast that they foresee that the countries coffee production shall remain at close to 14 million bags, for the coming year. Noting that so long as the possible new El Niño phenomenon is to develop is modest in intensity and bring with it slightly dryer weather, that it would be a positive factor for coffee production yields.

The Ivory Coast have reported that the country exported 63,084 bags or 210.05% more coffee during the month of October than the same month last year, at a total of 93,117 bags. This has contributed to the country’s cumulative exports for the first ten months of this year, to be 328,650 bags or 53.29% higher than the same period last year, at a total of 945,383 bags.

This report confirms that the Ivory Coast as West Africa’s largest coffee producer and the second largest African robusta coffee producer, is well on track to exceed the forecast 1.1 million bags of coffee exports for 2018. While it would confirm that despite the soft nature of the refence prices of the international coffee market, that there has not been much internal market price resistance.

There remains nothing in the way of supportive fundamental news for the coffee markets, with weather conditions over the majority of coffee producers remaining neat to perfect. While with a surplus coffee supply forecast for the present October 2018 to September 2019 coffee year, it is only the prospects for an approximately 3.2 million to 3.5 million bags of global coffee consumption growth per annum, that can be seen to be a longer-term positive factor for the coffee markets.

But with the perspective that the present surplus supply coffee year due to add in excess of 6 million bags of coffee to the global coffee stocks, the prospects for increasing consumption to be market supportive is a factor that might only be something to consider in 2020. Leaving the short to medium term fortunes of the coffee farmers globally, very much in the hands of the forthcoming weather conditions with the tropics which so far, show no signs of threat.

The March 2019 to March 2019 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 34.28 usc/Lb., while this equates to 32.35% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen decrease by 275 bags yesterday; to register these stocks at 2,454,856 bags. There was meanwhile a larger in number 33,533 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 71,050 bags.

The commodity markets and with many U.S. players side-lined for a national day of mourning yesterday, had a quiet and generally lacklustre day of trade, to see the overall macro commodity index taking a modestly softer track for the day. The Cotton, Copper and Soybean markets ended the day on a positive note and the London robusta Coffee market ended the day on a near to steady note, while the Oil, Natural Gas, Sugar, Cocoa, New York arabica Coffee, Orange Juice, Wheat, Corn, Gold 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 0.18% lower; to see this index registered at 409.05. The day starts with the U.S. Dollar steady and trading at 1.270 to Sterling, at 1.134 to the Euro and with the dollar buying 3.868 Brazilian Real.

The London and New York markets started the day yesterday trading quietly close to par, but while the New York market remained mostly close to par, the London market attracted selling pressure and slipped back into negative territory and into the early afternoon trade. As the afternoon progressed both markets attracted support and moved up into positive territory, but this was short lived and both markets slipped back to once again trade around par and while the London market managed to take something of a sideways close to par track, the New York market came under pressure and moved down into negative territory.

The London market ended the day on a near to steady note and with only 16.6% of the very modest losses of the day intact, while the New York market ended the day on a negative note and with 70.4% of the earlier losses of the day intact. This close assists to paint something of a negative picture for the charts and one might expect little better than a near to steady start for early trade today. Against the price set yesterday, as follows:

                                                                        DEC 100.95 – 0.95
JAN 1556 unch                                               MAR 105.95 – 0.95
MAR 1580 – 1                                                MAY 108.85 – 0.95
MAY 1593 – 2                                                 JUL 111.50 – 0.95
JUL 1609 – 2                                                  SEP 114.10 – 1.00
SEP 1624 – 1                                                   DEC 117.75 – 1.05
NOV 1638 – 2                                                 MAR 121.35 – 1.05
JAN 1652 – 2                                                  MAY 123.80 – 1.05
MAR 1663 – 3                                                 JUL 126.15 – 1.05
MAY 1681 – 3                                                 SEP 128.30 – 1.05
JUL 1693 – 3                                                   DEC 131.20 – 1.05