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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

25 Sep 2019
The weather conditions within the two largest coffee producer countries are in focus at this time of year, as the onset of spring and summer rains will assist to set the flowering for the next 2020 Brazil crop to come. The weather forecasters are presenting models for dry and warm weather across the vast Brazil coffee belt for the next four weeks, which would be considered relatively normal for the time of year. In Vietnam meanwhile, the cessation of the rains will be soon be required to assist this largest robusta producer to begin their October 2019 to September 2020 coffee year for the coming harvest to take place with minimal disruption. The weather forecasters predict seasonal rainfall to continue over the next few days, seasonally normal conditions at this time of year.

Mexico, Colombia and Central America meanwhile, the largest washed arabica producer bloc are cumulatively countries that in combination, are shortly due to start their October 2019 to September 2020 coffee harvest. These harvests which traditionally start in the lower lying areas, will pick up pace toward peak harvest through November into January each year. The relatively low value offered against the futures markets is a continual concern meanwhile and ahead of the new harvests, one might anticipate that the high costs that are often incurred in these countries through the need to revisit the same fields throughout the season, could lead to reduced harvesting rounds out of necessity with a potentially detrimental effect on both quality and overall yield.

The prevailing coffee prices are a highlighted concern for the coffee industry at large and in London, the International Coffee Organisation has set the focus of the 125th Session of the International Coffee Council on the sustainability of the coffee sector. The coffee sector, members and industry meet throughout this week with forums scheduled to address the prospects of measurable solutions to the real and severe impact of the prevailing coffee markets.

The November to December contracts arbitrage between the London and New York markets widened yesterday; to register this at 39.41 usc/Lb. This equates to 39.75% 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 3,606 bags yesterday; to register these stocks at 2,311,905 bags. There was an increase in the number of bags pending grade to this exchange, by 2,071 bags; to register these pending grading stocks at 17,127 bags.

It was a mixed day on the commodity markets yesterday, to see overall macro commodity index taking a softer track for the day. The Sugar, Coffee, Corn, Soybean and Gold markets ended the day on a positive note, while the Oil, Natural Gas, Cocoa, Cotton, Copper, Orange Juice, Wheat and Silver markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.241% lower; to see this index registered at 396.33. The day starts with the U.S. Dollar steady and trading at 1.246 to Sterling, at 1.100 to the Euro and with the US Dollar buying 4.163 Brazilian Real.

The London and New York Coffee markets started the day on a mildly softer note yesterday, to see both markets retain this soft stance into the early afternoon trade. As the afternoon progressed both the New York and the London markets attracted a degree of late in the day support to move towards par and end the day on the positive side of par, with a lack of volume in selling activity this set both markets up for a near to unchanged close to trade yesterday.

The London market ended the day on a soft positive note and with 25% of the earlier gains of the day intact, while the New York market ended the day on a likewise soft positive note and with 10.3% of the earlier gains of the day intact. This close and with forecasts for continued weakness in the Brazil Real and with speculative sentiment in the markets remaining low, one might not expect 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.

SEP 1301 Unch
NOV 1317 + 1                                                       DEC 99.15 + 0.15
JAN 1335 – 4                                                         MAR 102.60 + 0.10
MAR 1359 – 3                                                       MAY 104.90 + 0.10
MAY 1382 – 4                                                       JUL 107.00 + 0.10
JUL 1407 – 4                                                         SEP 108.95 + 0.10
SEP 1433 – 4                                                         DEC 111.80 + 0.05
NOV 1459 – 4                                                       MAR 114.70 + 0.05
JAN 1486 – 4                                                         MAY 116.60 Unch
MAR 1510 – 4                                                       JUL 118.45 Unch