Coffee Traders' Forum - A Discussion about Coffee Futures Trading

Coffee Traders Discussion Forum

Coffee Traders' Forum


Coffee Market Report
March 07 2018

The Central American Bank for Economic Integration has approved the application for an 80 million U.S. Dollar loan for the El Salvador Governments a Ministry of Agriculture, for a new coffee farm renovation program that the government hopes shall assist their countries coffee farming industry to recover. This program shall seemingly follow the examples of Colombia and Honduras who have very successfully over the recent years of assisting farmers to replace aged trees with new higher yielding and disease resistant varieties of coffee, to target a doubling of coffee production over the next five to eight years.

Meanwhile and following a somewhat high-profile coffee trade visit to Vietnam, there are reports of active participation on the part of members of the Indonesian coffee industry in looking to form relationships with Vietnamese coffee industry players, to gain guidance into improving the performance of the presently relatively low yielding on average, Indonesian coffee farming community. This on the longer term must have some influence upon the yields and performance of the Indonesian coffee industry, which with weather influenced annual crops of between 10 million and 12 million bags of coffee has the potential with good agricultural practices, inputs and replacement of aged trees to double yields from even the existing coffee farms within the country.

One might question in terms of the prevailing soft international coffee prices and prices that make many producers struggle to break even with their new crop prices the merits of the programs to improve coffee yields for existing producers, but the reality is that it is only good yields that can by volume return on investment, that can secure longer term profitability for coffee farmers. While with global coffee consumption potentially due to increase by approximately 3 million bags per annum and perhaps even more in coming years with the changing lifestyle within most Asian countries, there shall be a market that will demand significantly increased volumes of coffee supply over the coming years.

Making one suggest that while coffee prices at present are painful for coffee farmers globally and are likely to remain so for the rest of this year, that rising demand and the probability for weather related hiccups to come to disrupt production in the coming years, shall provide for much improved coffee price levels in the nearby future and possibly even for the coming year. Especially so as the programs to significantly improve yields within presently low yielding traditional coffee producers and keeping in mind that this year’s soft prices are after all related to the two largest coffee producers Brazil and Vietnam having bumper crops, will take time to have significant impact on raising global coffee supply.

The May 2018 to May 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 40.65 usc/Lb., while this equates to 33.53% 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 9,115 bags yesterday; to register these stocks at 1,901,888 bags. There was meanwhile a larger in number 17,200 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 34,402 bags.

The Certified Robusta coffee stocks held against the London exchange have been seen to decrease by 39,667 bags or 2.68% over the week of trade leading up to Monday 5th. March, to register these stocks at 1,443,000 bags, on the day.

The commodity markets were mixed in trade but with some assistance from an unsteady U.S. dollar many markets showing buoyancy for the day, to see the overall macro commodity index taking a steady track for the day. The Oil, Natural Gas, Coffee, Copper, Orange Juice, Corn, Gold and Silver markets had a day of buoyancy, while the Sugar, Cocoa, Cotton, Wheat and Soybean markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.19% higher; to see this index registered at 434.65. The day starts with the U.S. Dollar near to steady and trading at 1.389 to Sterling, at 1.243 to the Euro and with the dollar buying 3.209 Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 65.50 per barrel.

The London and New York markets started the day yesterday trading mostly marginally north of par and taking a steady marginally positive track, into the early afternoon trade. As the afternoon progressed both markets started to add value and move higher into positive territory, but while the London market managed to attract support and to add more value, the New York market came under pressure and slipped back towards par.

The London market ended the day on a very positive note and with 88% of the earlier gains of the day intact, while the New York market ended the day on a positive note but with only 12.5% of the earlier gains of the day intact. This close with both markets tending to show a degree of stability, might assist to buoy confidence and with a firmer Brazil Real in play to indicate the probability of slow price fixation selling volumes out of Brazil, is likely to inspire a follow through steady start for early trade today against the prices set yesterday.