May 31 2019
Most of the main coffee districts with the exception of the southern state of Parana have encountered a dry week and with the new crop harvest for the conilon robusta coffees in full swing, while modest volumes of new crop arabica coffees are being harvested.
In this respect the analysts Safras & Mercado who have forecast the new crop to be 58.9 million bags, have estimated the already 22% of the new crop has been harvested, with this related to approximately 6.5 million bags each of conilon robusta and arabica coffees.
Meanwhile the talk of the Brazil frost season and accompanied by fears of overall lower quality for the new Brazil crop and some degree of recovery for the Brazil Real, is seemingly continuing to inspire speculative short covering buying activity. The effects of this to become clearer by the end of next week, when the 4th. June commitment of traderís data becomes available to the market.
While the markets have risen significantly by 10.60 usc/Lb. or 11.55% in value over five days of trade and likewise, the London market by $ 95.00 per Mt. or 6.98% in value, there remains internal market price resistance within many producer countries. The reality being that while the reference prices of the coffee terminal markets have improved in value, they still remain modest and continue to influence loss making internal market prices for many producer countries.
One would speculate though that with many producers still holding significant stocks that should the rally start to falter, that more aggressive selling and softening export differentials might start to come into play. But such a scenario might take a little time to start to impact.
The July to July contracts arbitrage between the London and New York markets broadened yesterday, to register this at 36.31 usc/Lb., while this equates to 35.48% price discount for the London Robusta coffee market.
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