Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
Coffee Market Report
January 11 2018
The Coffee Board of India and with the new crop presently being harvested, have so far not adjusted their forecast for an approximate 12% higher new coffee crop this year, of approximately 5.84 million bags. Albeit that farmers are indicating that this is an ambitious forecast and that the new crop is more than likely to remain close to the previous crop, at around 5.2 million bags.
The size of the new coffee crop due to fuel coffee supply for the countries domestic and export markets for the present October 2017 to September 2018 coffee year is not much of an issue for the Indian coffee farmers, who are more concerned over the ability of many farmers to be able to market their new crop coffees with and degree form profit. This new crop and with the arabica coffee harvest near to completion and the new robusta coffee harvest in full swing, is coming to the fore against significantly lower reference prices for the international coffee terminal markets as against the same time last year, which will negatively impact upon their new crop prices and income.
This is of course not only an issue for the Indian coffee farmers, but for coffee farmers globally and one must be concerned over longer term global coffee supply, if the prospects for a larger new Brazil coffee crop this year proves to be true and the markets continue within their present price trading range. It must in time have an impact upon individual farmers within many countries, who would be inspired to look to replace coffee trees with alternative and more financially sustainable crops and there are many such options, which are not related to the additional negative influences of speculative and fund dominated futures markets.
There is meanwhile no short-term relief for the global coffee farmers of whom a greater majority in terms of the just completed new crop harvest in Vietnam and the prevailing new crop harvests in India, Mexico, Central America and Colombia, as so far, the Brazil weather reports continue to point towards rising coffee supply for the second half of the year. A factor that presently dominates the speculative and fund sentiment within the terminal markets and likewise, new crop coffee prices. While with the unit prices for coffee lower for most famers at present and with costs to be recovered, it makes it that much more difficult for producers to finance stocks and to show a degree of price resistance towards the market.
This dismal situation for coffee farmers at present is of course except for such farmers who have the advantage of multi cropping farms and can thus hold back coffee stocks, on the back of their alternative crop sales and profits. Which is the case for many farmers within Vietnam, India and Brazil, who do have sufficient land and the commercial skills, to have long since taken the insurance of multi cropping their farms and are able to ride the bad years for coffee and look to the future, to take advantage of the boom years that shall surely in terms of supply and demand, come to the fore.
The March 2018 to March 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 45.66 usc/Lb., while this equates to 36.84% 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 1,450 bags yesterday; to register these stocks at 1,998,544 bags. There was meanwhile a larger in number 6,868 bags decline to the number of bags pending grading for this exchange; to register these pending grading stocks at 27,211 bags.
The commodity markets were mixed in trade yesterday, but with the overall macro commodity index managing to maintain some degree of modest buoyancy for the day. The Oil, Cocoa, Cotton, Copper, Wheat, Gold and Silver markets had a day of buoyancy and the London robusta Coffee market was steady for the day, while the Natural Gas, Sugar, New York arabica Coffee, Orange Juice, Corn and Soybean markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.23% higher; to register this index at 423.48. The day starts with the U.S. Dollar steady and trading at 1.350 to Sterling, at 1.195 to the Euro and 3.228 to the Brazilian Real, while North Sea Oil is steady and is selling at US$ 69.80 per barrel.
The London and New York markets started the day yesterday with a degree of modest buoyancy and with both markets trading mostly to the positive side of par, into the early afternoon trade. As the afternoon progressed though, the New York market started to falter and to come under increased selling pressure and to dip back into negative territory and followed to a lesser degree in terms of losses, by the London market. The London market did however soon bounce back from the lows and to head towards a steady end to the day, while the New York market could only manage a partial recovery for the day.
The London market ended the day on a steady note and with 28.6% of the earlier gains of the day intact, while the New York market ended the day on a negative note and with 55.8% of the earlier losses of the day intact. This close really provides little in the way of direction, but one might think that with the lack of supportive fundamental news for either of the markets for the present, one cannot expect much better than a near to steady start for early trade today against the prices set yesterday.