Coffee Traders' Forum - A Discussion about Coffee Futures Trading
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Coffee Market Report
March 09 2018
The Customs authorities in Vietnam have reported that the countries coffee exports for the month of February were 2,164,883 bags, which is lower than the earlier estimate of 2.25 million bags, but is not a bad performance for what was a shot month and one that had a week-long interruption, while the country celebrated the Tet New Year holidays. There are in the meantime forecasts coming from the trade in Vietnam forecasts that coffee exports for the month of March shall be between 2.5 million and 2.8 million bags and in terms March being an uninterrupted month and with some consumer market catch up demand to satisfy, one might think that the exports might actually be closer to the higher forecast number.
The European Coffee Federation ECF have reported that the port warehouse stocks held within warehouses in the ports of Antwerp, Hamburg, Genoa, Le Havre and Trieste increased 147,217 bags or 1.51% during the month of January, to register these stocks at the end of the month at 9,925,900 bags. These stocks do not however include the unreported stocks from the warehouses in the port of Bremen, who no longer contribute to the end month stock figures. Nor does this report consider the industry on site inventory stocks, the transit bulk container stocks and stocks being held within non-reporting private warehouses throughout Western and Eastern Europe.
This said and with the combination of West and East Europe consuming approximately 1.05 million bags of coffee a week, one might guess that the additional stocks that were not included in the report, might contribute to as much as 2.5 million bags to the reported stocks. Thus, indicating that as at the end of December, the European coffee stocks might have been close to the equivalent of close to a relatively safe, eleven and half weeks of Western and Eastern European roasting demand.
The rains keep falling over the main Brazil coffee districts and including the main conilon robusta districts in the north of Espirito Santo, which is forwarding speculation that there shall be some delay in the ripening of the coffee cherries, to see the new conilon robusta crop starting to be harvested in mid-May, rather than the end of April. But in the meantime, the northern coffee province of Rondônia is due to start harvesting the new conilon robusta coffee crop by the end of this month, which shall see new crop conilon robusta coffees starting to impact in volume by the end of next month.
These conilon robusta coffees are initially due to only target the Brazilian domestic roasting industry, but by July this year and with the new conilon robusta crop expected to exceed domestic market demand by close to 4 million bags, one can expect that they shall start to target the consumer markets. These coffees therefore and in terms of the resulting hedge selling activity and along with tendering to the certified stocks as an alternative market, a potential threat for the medium-term fortunes of the presently relatively steady London market.
The May 2018 to May 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 40.47 usc/Lb., while this equates to 33.64% 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 1,005 bags yesterday; to register these stocks at 1,903,383 bags. There was meanwhile a larger in number 3,135 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 39,957 bags.
The commodity markets were mixed in trade but with the U.S. dollar showing some degree of renewed muscle, most of the markets tended to be on the back foot for the day and to see the overall macro commodity index, taking a softer track for the day. The Sugar, Cocoa, Cotton and Corn markets had a day of buoyancy, while the Oil, Natural Gas, Coffee, Copper, Orange Juice, Wheat, Soybean, Gold and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.09% lower; to see this index registered at 430.05. The day starts with the U.S. Dollar steady and trading at 1.381 to Sterling, at 1.232 to the Euro and with the dollar buying 3.267 Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 63.65 per barrel.
The London market started the day yesterday trading marginally south of par, while the New York market started the day with some modest buoyancy and with the markets retaining this either side of par status, into the early afternoon trade. As the afternoon progressed the London market briefly started to attract support and to join the New York market in positive territory, but with both markets soon coming under pressure and to move back into negative territory and more significant losses, before bouncing back from the lows of the day.
The London market ended the day on a negative note and with 80.6% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note but having recovered 60.9% of the earlier losses of the day by the close. This close does little to inspire confidence, but one might once again expect some degree of caution to prevail and to see something of a hesitantly steady start due for early trade today, against the prices set yesterday.