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

Coffee Market Report

17 Apr 2019

The reports of fair rains over most of the main Brazil coffee districts in the recent weeks and the pending smaller but still nevertheless overall large new Brazil crop continues to weigh upon coffee market sentiment, to see the New York market hovering around thirteen-year lows. While despite some degree of assistance from a weak Brazil Real, there is some degree of internal market price resistance that is pressuring exporters and resulting in relatively firm asking export price differentials for new business.

The new conilon robusta coffee harvest in Brazil is starting and with volumes expected to start to build up by early next month, with the new arabica coffee harvest due to start coming into play by June this year. The new arabica coffee harvest that is expected to suffer from a biennially bearing lower crop, most likely to be supplemented by good volumes of carryover stocks from last year’s bumper harvest.

The annual coffee festival that is organised by the Cameroon National Coffee and Cocoa Interprofessional Council is presently taking place, but within an environment of concern over the dwindling national coffee production. The Council voicing its concern that the countries annual coffee production might well decline to a minimal 417,000 bags, which is only 21% of the targeted production levels that were voiced a decade ago. But it is difficult for the Council to encourage farmers to invest into coffee production, whilst farm gate income is suffering from the negative influences of the reference prices of the international coffee terminal markets.

The July to July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 28.04 usc/Lb., while this equates to 30.17% 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 13,477 bags yesterday; to register these stocks at 2,479,976 bags. There was meanwhile, a smaller in number 2,878 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 7,897 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 1,833 bags or 0.09% over the week of trade leading up to Monday 15th. April, to register these stocks at 1,937,167 bags, on the day.

The commodity markets were mostly softer in trade yesterday, to see the overall macro commodity index taking a softer track for the day. The Oil and Cotton markets ended the day on a positive note, while the Natural Gas, Sugar, Cocoa, Coffee, Copper, Orange Juice, Wheat, Corn, Soybean, 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 0.63% lower; to see this index registered at 407.11. The day starts with the U.S. Dollar near to steady and trading at 1.306 to Sterling, at 1.131 to the Euro and with the US Dollar buying 3.904 Brazilian Real.

The London and New York markets started the day yesterday trading close to par, but with both markets soon tending softer and taking a softer track, into the early afternoon trade. As the afternoon progressed and with the negative influences of the softer overall macro commodity index playing a part, both markets came under pressure and fell deeper in negative territory but to bounce off the lows and to reduce the losses for later in the day trade.

The London market ended the day on a negative note and with 50% of the earlier losses of the day intact, while the New York market likewise ended the day on a negative note and with 55.9% of the earlier losses of the day intact. This close and the inability of the markets to hold on to the previous day’s gains does little to inspire confidence, which is unlikely to set the markets for little better than a near to steady start for early trade today, against the prices set yesterday, as follows:

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

MAY 1402 – 8                                               MAY 90.50 – 0.90
JUL 1431 – 7                                                  JUL 92.95 – 0.95
SEP 1449 – 8                                                 SEP 95.55 – 0.85
NOV 1468 – 8                                               DEC 99.45 – 0.85
JAN 1487 – 8                                                 MAR 103.20 – 0.90
MAR 1506 – 9                                               MAY 105.65 – 0.85
MAY 1527 – 10                                              JUL 107.90 – 0.90
JUL 1547 – 11                                                SEP 110.05 – 0.90
SEP 1566 – 12                                                DEC 113.25 – 0.85
NOV 1580 – 16                                              MAR 116.40 – 0.80