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Coffee Market Report
August 04 2017

The respected Brazil analyst Safras & Mercado who have estimated that the new Brazil crop shall be 51.1 million bags have estimated that so far 98% of the new conilon robusta coffee crop has been harvested, while 74% of the new arabica coffee crop has been harvested. The latter arabica coffee crop they report is ahead of the 67% harvested, at the same time last year.

Meanwhile as against the new crop forecast for 11.2 million bags of conilon robusta coffees and 40.7 million bags of arabica coffees, the coffee trade house ECOM have forecasted that the new Brazil crop shall be significantly higher, with 12 million bags of conilon robusta coffees and 43 million bags of arabica coffees, due from this new crop and therefore, a total of 55 million bags.

In terms of quality for the arabica coffees from this new Brazil crop, there are continued reports of higher percentages of borer beetle or Broca damaged beans being experienced with the deliveries from this crop, while there are also reports of lower percentages of bolder screen 17 plus beans. These quality concerns and despite the fact that the country’s domestic market roasters can easily absorb them, are assisting to buoy market sentiment for the related New York arabica coffee market.

Internal market trade for new crop coffees in Brazil remains somewhat price resistant and lacklustre for the present, but even with the lower volumes coming to exporters in the port of Santos, there are concerns over the truck drivers’ strike within Brazil. Truckers are complaining about the increase in the Federal tax on fuel, which is increasing their costs and some exporters fear that they might not be able to meet some of their forward sale export commitments, as a result of delayed new crop coffee deliveries.

The European Coffee Federation have reported that the port ware house stocks held within the warehouses in the ports of Antwerp, Bremen, Hamburg, Genoa, Le Havre and Trieste increased by 288,850 bags or 2.52% during the month of May, to see these stocks registered at 11,767,450 bags as at the end of the month.

These stocks do not however include the coffee stocks held within Europe in transit bulk containers, unreported private warehouses throughout Europe, as well as on site roaster industry inventory stocks and with the combination of Eastern and Western European consumption at approximately 1 million bags per week, it would more than likely add an additional 2.5 million bags to the coffee stocks within Europe. It would therefore appear that European coffee stocks for the end of March 2017, would have been sufficient to cater for a very safe number of in excess of 14 weeks of roasting activity.

These European stocks and the likewise relatively high stock levels being held within the U.S.A. are proving to be a factor that contributes towards consumer roaster complacency, in terms of forthcoming global coffee supply. However, with export volumes from Asia and Central America slowing and unseasonal lower export volumes out of Brazil at present, one might expect to see these stocks starting to decline and it is perhaps an indication of more active consumer market buying interest due post the present July and August holiday season. A factor that might assist to provide for some degree of terminal market support, with the resulting roaster fixation buying coming to the fore. Albeit that direction and particularly so for the volatile New York market, remains very much in the hands of the funds and the speculative sector of this leading coffee market.

The November to December contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 47.00 usc/Lb., while this equates to a 32.68% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 1,651 bags yesterday; to register these stocks at 1,558,543 bags. There were meanwhile a larger in number 2,454 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 24,063 bags.

The commodity markets were on a back foot yesterday, with all of the markets coming under pressure, to see the overall macro commodity index taking a softer track for the day. The Oil, Natural Gas, Sugar, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets had a soft day’s trade, while the Cocoa and Coffee markets were near to steady for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.53% lower, to see this Index registered at 407.86. The day starts with the U.S. Dollar tending softer and trading at 1.314 to Sterling and at 1.188 to the Euro, while North Sea Oil is steady and is selling at $ 51.95 per barrel.

The London market started the day yesterday on a steady note, while the New York market started the day marginally south of par and soon joined by a softening within the London market and to see both markets taking a hesitantly softer track into the early afternoon trade. As the afternoon progressed the New York market started to attract support and moved back up into positive territory and posting gains that peaked at 1.10 usc/Lb. for the day, while the London market moved back to trade around par. The New York market was however encountering the general bearish nature of the overall macro commodity index and shed its gains to return to join the London market trading either side of par and with both markets taking a sideways close to par track, for the rest of the day.

The London market ended the day on a near to steady note and having recovered 83.3% of the earlier losses of the day, while the New York market ended the day on a likewise near to steady note and having recovered 89.7% of the earlier losses of the day. The ability of the coffee markets to shrug off the negative influences of the softer overall macro commodity index might be seen to be constructive for sentiment and one might expect to see a follow through steady start due for early trade today, against the prices set yesterday.