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

Coffee Market Report

08 Jul 2019

The concerns over the advancing cold front into South East Brazil started to wane later in the day on Friday, as many started to take note of the forecasts that questioned the possibility that the cold front would actually bring with it frost for the coffee districts of Brazil. The threat of frost having been foreseen to be most likely to only impact upon the most southern coffee state of Parana, which really only accounts for about 5% of Brazil coffee production.

Meanwhile the mainstream northern hemisphere coffee consumer markets are in their slower summer holiday season, which contributes to somewhat lacklustre physical coffee trade for the present. A scenario that is unlikely to change for the short term and to continue into the second half of August, by when speculative focus is likely to start to look to the pending spring and summer rain season for Brazil.

The September to September contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 45.60 usc/Lb., while this equates to 41.04% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange with the exchange were seen to decrease by 820 bags on Friday; to register these stocks at 2,372,841 bags. There was meanwhile a larger in number 4,344 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 0 bags.

These stocks remain dominated by Honduras, who contribute to 65.25% of the stocks, out of the 82.45% contribution to the stocks that are related to the producer bloc of Mexico and Central America. Followed by Peru, who account for 10.59% of the stocks and the African producers Burundi, Rwanda and Uganda, who account for 5.11% of the stocks and balance made up from minimal contributions from Brazil, Colombia, India and Papua New Guinea.

The commodity markets had a mixed day on Friday, post the previous days Independence Day holiday for the USA, to see the overall macro commodity index taking a marginally softer track for the day. The Oil, Natural Gas, Cocoa, Orange Juice, Wheat and Corn markets ended the day on a positive note, while the Sugar, Coffee, Cotton, Copper, Soybean, Gold and Silver markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.42% lower; to see this index registered at 398.01. The day starts with the U.S. Dollar steady and trading at 1.253 to Sterling, at 1.123 to the Euro and with the US Dollar buying 3.821 Brazilian Real.

The London and New York markets started the day on Friday on a positive note and with both markets soon attracting support and adding value, but with the markets starting to falter and to take a hesitant steady track, into the early afternoon trade. As the afternoon progressed both markets soon came under pressure and dipped back into negative territory and with sell stops being triggered, to accentuate the losses and to set the markets on track for a soft close for the day.

The London market ended the day on a negative note and with 83.3% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 77.3% of the earlier losses of the day intact. This reversal of fortunes for the markets is unlikely to inspire confidence and one might expect to see only a near to steady start due for the markets for early trade today, against the prices set on Friday, as follows:

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

JUL 1414 – 29                                              JUL 109.45 – 2.80
SEP 1444 – 30                                              SEP 111.10 – 2.55
NOV 1473 – 29                                            DEC 114.80 – 2.55
JAN 1496 – 29                                              MAR 118.30 – 2.55
MAR 1521 – 29                                            MAY 120.30 – 2.70
MAY 1544 – 30                                             JUL 122.00 – 2.80
JUL 1563 – 30                                               SEP 123.60 – 2.90
SEP 1580 – 31                                               DEC 126.15 – 3.05
NOV 1595 – 31                                             MAR 128.75 – 3.25
JAN 1611 – 32                                               MAY 130.45 – 3.45