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Coffee Market Report
December 21 2017

The Coffee Growers Federation in Colombia have come to the fore that they foresee that due to unfavourable weather conditions over the past months that there is the possibility that coffee production for the first half of 2018, might be as much as 20% lower than the same period this year. This they say, might result in coffee production for 2018 falling to below 14 million bags.

There is no question that with the new main Colombian crop presently in harvest that production over October and November was 671,000 bags or 22.01% lower than the same period last year and totalling only 2,377,000 bags and by nature, indicating a dip in production volumes for the first couple of months of the new main crop harvest. But the question might be asked if this might be partially related to a delay in cherry ripening and the harvest in general for some coffee districts, rather than being completely related to a relatively sharp dip in crop volumes. A question that only time shall tell, once the production volumes for the next two to three months come to the fore. But it would seem so far, that the recently rising coffee production volumes out of Colombia have been somewhat stalled.

Nevertheless, and with Colombian fine washed arabica coffee supply seemingly tightening for the coming months, it shall be countered by the forecast for a rising volumes from the overall new Mexican and Central American coffee crop, which has already started to be harvested. Thus, with these coffees now starting to come to the fore and on top of good volumes of consumer market stocks of arabica coffees in hand, it is unlikely that the Colombian dip in production is of concern to the consumer market industries.

The negative Colombian coffee production numbers might though, if lower numbers continue to come out of Colombia in the coming weeks, assist to modestly buoy sentiment with the New York market, which is presently and due to speculative and fund short selling pressure, trading within a relatively price range. While the possibility of this becoming a small problem and still uncertainty over the prospects for good rains for the first quarter of 2018 for Brazil, might also bring to the fore some degree of caution on the part of the speculative bears within the New York market and bring with it a degree of buoyancy for the market.

The March 2018 to March 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 45.45 usc/Lb., while this equates to 36.91% 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 3,070 bags yesterday; to register these stocks at 1,959,251 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 22,647 bags.

The commodity markets and with the U.S. dollar tending marginally softer, were mostly stable yesterday and with the overall macro commodity index taking a positive track for the day. The Oil, Sugar, Cocoa, New York arabica Coffee, Copper and Gold markets had a day of buoyancy, while the London robusta Coffee market was steady for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.42% higher; to register this index at 409.63. The day starts with the U.S. Dollar steady and trading at 1.336 to Sterling, at 1.186 to the Euro and 3.298 to the Brazilian Real, while North Sea Oil is steady and is selling at US$ 64.55 per barrel.

The London market started the day yesterday on a steady note and with the New York market starting the day with a degree of buoyancy, to see the markets retain this steady to positive track into the early afternoon trade. As the afternoon progressed the markets added more value and took on a positive stance, with the London market posting gains of $ 9.00 per Mt. and the New York market posting gains of 2.30 usc/Lb., but to see both markets hitting something of a ceiling and bouncing back to see the London market head towards par and the New York market to post more modest gains for the day.

The London market ended the day on a steady note and on par, while the New York market ended the day on a positive note and with 60.9% of the earlier gains of the day intact. This close is perhaps constructive for sentiment ahead of the holidays and one might think that it may inspire producers to step back from the market and to assist towards a steady to modestly buoyant start for early trade today, against the prices set yesterday.