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I. & M. Smith (Pty) Ltd.

Coffee Market Report

05 Dec 2013

Coffee Market Report

December 05 2013

One of Brazil’s smaller but nevertheless well respected coffee export companies Guaxupe has publically followed the many exporters and international trade houses operating within the country who have recently been forecasting the forthcoming new 2014 crop at between 57 and 60 million bags, with their assessment that this next crop shall potentially be 58 million bags. The report did however make mention that with the options for farmers to deliver 3 million bags of arabica coffee stocks to the Federal Coffee stocks in March, would tighten supply from March onwards and until the new crop coffees start impacting in July, which might cause a tightening of internal market supply of arabica coffees for the short term.

One might comment however that with Brazil forecasted to enter the larger new crop with a carryover stock of in excess of 7 million bags, that the sideling of 3 million bags is unlikely to stress the consumer markets and for the present, it would seem that there is little in the way of supportive news for the markets coming out of Brazil. Particularly so as with an export demand of approximately 32 million bags and a domestic market that is at the very most 22 million bags, that the new crop shall potentially add a further 4 million bags to the carryover stocks for the follow on 2015 crop. Thus indicating an 11 million bags carry over stock into the 2015 biennially bearing lower crop, which would secure steady Brazil coffee supply for the foreseeable future.

The question is however in the meantime, what shall be the longer term effects of the prevailing soft prices within the New York arabica coffee market, which dictate loss making prices for new crop coffees. As while this is not as much an issue for Colombia where the state provides subsidies to take the bite out of the negative effects of the lower prices that the New York market dictates, the majority of the arabica coffee producing nations cannot afford to supplement their farmers income to counter the prices. This is a particularly severe problem for the Central American farmers who are now incurring increased input costs to counter the Roya or Leaf Rust disease and while in receipt of some assistance, it is generally modest in nature and does little bring profitability out of their new coffee crop.

In this respect one might comment that if approximately 35% of the arabica coffee farmers worldwide do not have multi cropping farm alternatives for the more profitable crops to assist to finance the coffee inputs and are financially obliged to cut inputs, that it can result in the combination of yields falling by up to 50% of potential for many farmers and some instances of farmers replacing coffee with alternative crops. Thus with an average arabica coffee production of 86 million bags and with Colombia aside 75 million bags, one would look to the longer term potential for a dip in arabica coffee production in the order of 10 million bags by 2015. This might be countered by the forecasted steady increase in production from Colombia over the next two years but even with this, one might foresee the strong possibility for a dip in arabica coffee production of approximately 8 million bags which would turn focus upon the arabica stocks in Brazil, to significantly reduce the surplus stocks by 2016.

If one is to extrapolate upon this possible scenario above and likewise take into account that while no longer dramatic that there is nevertheless a steady growth in world consumption and even with unforeseen negative climatic conditions aside, that even by the second half of 2014 and ahead of the delivery of the new October 2014 to March 2015 Mexican and Central American crops, that there might be fundamental reasons for the speculative sector of the New York market to start turning more positive towards the market. Perhaps not is a significantly bullish manner but with fund shorts liquidation, sufficient to add value for the arabica coffee market for the October 2014 to September 2015 coffee year.

The Certified washed Arabica coffee stocks held against the New York market were seen to decrease by 1,000 bags yesterday, to register these stocks at 2,672,444 bags. There was meanwhile a slightly smaller 260 bags increase to the number of bags that were pending grading for the exchange; to register these pending grading stocks at 7,553 bags.

The commodity markets were generally buoyed by the positive influences of a weaker U.S. dollar yesterday, albeit that some markets nevertheless came under pressure from fundamentals of good supply. The U.S. Oil, Cotton, Copper, Corn, Soybean, Gold, Silver, Platinum and Palladium market had a day of buoyancy, while the Brent Oil, Natural Gas, Coffee, Sugar, Cocoa, Orange Juice and Wheat markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.45% higher, to see Index registered at 508.82. The day starts with a steady U.S. dollar trading at 1.638 to Sterling and 1.360 to the Euro, while Brent Crude is showing buoyancy in early trade and is selling at $ 112.65 per barrel.

The New York market started the day on a steady track yesterday and started to show some buoyancy as the morning progressed, while the London market came under some selling pressure and tended softer for the morning’s trade. The New York market however and with a weaker Brazil Real that is now trading at close to 2.39 to the U.S. dollar started to come under pressure during the afternoons trade and slipped back into negative territory, while the London market that did experience a brief recovery into positive territory, was likewise under producer selling pressure for most of the day’s trade. The London market continued to end the day on a softer track and with 55.8% of the losses of the day intact, while the New York market end the day on a likewise softer track and with a more substantial 87.8% of the earlier losses of the day intact. This overall soft close and with the London robusta coffee market still only offering a relatively modest 32.7 usc/Lb. or 30.16% price discount to the New York arabica coffee market, while the Brazil Real is trading at 2.39 to the U.S. dollar is likely to encourage follow through producer selling, which would indicate a steady to softer start for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

JAN 1697 – 36 DEC 107.80 – 1.75

MAR 1669 – 29 MAR 108.40 – 1.80

MAY 1635 – 17 MAY 110.70 – 1.75

JUL 1621 – 11 JUL 112.95 – 1.75

SEP 1622 – 7 SEP 115.20 – 1.70

NOV 1622 – 7 DEC 118.25 – 1.70

JAN 1621 – 6 MAR 121.25 – 1.70

MAR 1621 + 4 MAY 123.35 – 1.65

MAY 1630 + 13 JUL 125.35 – 1.65

JUL 1630 + 13 SEP 127.20 – 1.65

 


Coffee Market Report

December 04 2013

Following the November coffee export reports from Costa Rica and Honduras the National Coffee Association in Guatemala have reported that their coffee exports for the month were 65,961 bags or 46.94% lower than the same month last year, at a total of 74,560 bags. This figure contributes to the countries cumulative exports for the first two months of this new October 2013 to September 2014 coffee year being 114,661 bags or 42.47% lower than the same period in the previous coffee year, at a total of 155,331 bags.

This dip in exports from Guatemala for the month were of course more related to the lower volumes of carryover past crop stocks that were at hand for the first two months of this new coffee year, rather than a reflection of the size of the new crop harvest that is now in progress. Albeit that the coffee authorities in Guatemala have already forecasted that following a 15% dip in production for the past crop due to Roya or Leaf Rust, that they foresee a further 3% drop in production, for this new crop.

This forecasted 3% dip in production by the coffee authorities in Guatemala is however quite a modest figure, as there are many other forecasts emanating from the Central American region, which vary between 5% to 36%, but one has to see many of these higher figures to be market manipulative in nature. As with the new crop harvest that depending on the altitude of the farms within these countries, the harvest takes place over October to March and with this new crop harvest still a few months away from completion, the estimates are often very questionable and only time shall tell the reality of the situation.

Nevertheless and with the Central American producers most likely due for an overall dip in production of between 1 million to 1.5 million bags for this new crop, the tightening supply of these coffees are being very adequately compensated for, but the surging new crop from Colombia. While with a significant surplus in supply of natural process Brazil arabica coffees, the consumer roasters are easily able to tweak blends and not show panic over the potential for tighter supply of fine washed arabica coffees.

The Asia International Coffee Conference is in progress in Ho Chi Minh City and shall carry on to Friday, with most of the international trade houses represented. This might with the relative surge in the value of the reference prices of the London robusta coffee market, be inspirational for good volumes of short to medium term new crop coffee contracts to be concluded. Especially so as it is estimated that in excess of 14 million bags of new crop coffees have already been harvested and the farm gate new crop coffee stocks are starting to build up, so as to increase selling aggression within the internal market.

Meanwhile the trade in Vietnam have been forecasting exports for the month of December of mostly robusta coffees at between 1.67 million to 2.5 million bags as against 2.7 million bags for the same month last year, but with the inverted nature of the London market and the premium price for the prompt December contract, it is likely to restrain to a degree the interest in December shipment activity. The market is however at a level now, that it could inspire a surge in export volumes for January and March shipments, which are sold against the London March contract. While with the London March contract having rallied yesterday and now offering a much thinner 33.18 usc/Lb. or 30.11% price discount to the New York arabica coffee market, it might indicate that this market is getting close to a ceiling and assist to inspire opportunist selling activity.

The Certified washed Arabica coffee stocks held against the New York market were seen to decrease by 2,522 bags yesterday, to register these stocks at 2,673,444 bags. There was meanwhile a slightly smaller 925 bags increase to the number of bags that were pending grading for the exchange; to register these pending grading stocks at 7,293 bags.

The commodity markets were once again focused upon the issues of the potential for the U.S.A. Federal Reserve looking to their market stimulus early in the New Year, but a softer U.S. dollar did assist to limit the losses within many markets, while the influential Oil markets reacted positively to the fundamentals of tightening supply. The Oil and London robusta Coffee markets experienced sharp rally’s for the day and the New York arabica Coffee, Cotton, Wheat and Corn market showed buoyancy, while the Sugar, Cocoa, Copper, Orange Juice, Soybean, Gold, Silver, Platinum and Palladium markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.02 lower, to see Index registered at 506.55. The day starts with a steady U.S. dollar trading at 1.640 to Sterling and 1.358 to the Euro, while Brent Crude is showing buoyancy in early trade and is selling at $ 114.40 per barrel.

The New York market started the day on a steady track yesterday, but was soon under pressure in thin trade and tended easier for the morning, while the London market started the day on a positive note and conversely with only thin volumes of producer selling over this market, maintained its buoyancy into the afternoon’s trade. This assisted to buoy sentiment within the London market and to see the market steadily adding to its value, while the New York market recovered as the afternoon progressed, to move back into positive territory. The London market continued on its upside track and ended the day near to its highs of the day and with 96% of the gains of the day intact, to be followed by a steady to buoyant close for the New York market that ended the day on a positive note, but with only 25% of the earlier and relatively modest gains of the day intact. The positive nature of the London market might be seen to be somewhat supportive for sentiment, but with the Brazil Real now trading at 2.37 to the dollar and inspirational for Brazilian selling and with the much improved value of the London market likely to attract increased volumes of selling from Vietnam, one might think that the markets are due for a steady to cautiously softer start for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

JAN 1733 + 75 DEC 109.55 + 0.15

MAR 1698 + 70 MAR 110.20 + 0.30

MAY 1652 + 51 MAY 112.45 + 0.35

JUL 1632 + 46 JUL 114.70 + 0.40

SEP 1629 + 43 SEP 116.90 + 0.40

NOV 1629 + 46 DEC 119.95 + 0.45

JAN 1627 + 48 MAR 122.95 + 0.40

MAR 1617 + 48 MAY 125.00 + 0.45

MAY 1617 + 48 JUL 127.00 + 0.40

JUL 1617 + 48 SEP 128.85 + 0.40

 


Coffee Market Report

December 03 2013

The latest Commitment of Traders report from the washed arabica coffee New York market has seen the shorter term in nature Managed Money Fund sector of the market decrease their net short sold position within this market by 5.75% in the week of trade leading up to Tuesday 26th. November, to see this short sold position registered at 24,018 Lots, on the day. Over the same period the longer term in nature and steadier Index Fund sector of this market decreased their net long position within the market by 0.014%, to register a net long on the day of 56,310 Lots.

During this same week of trade the Non Commercial Speculative sector of the market decreased their net short sold position within the market by 6.91%, to register a net short sold position of 31,061 Lots on the day. This speculative net short position within the New York market which is the equivalent of a still substantial 8,805,656 bags has most likely been marginally eroded by the overall modestly positive trade that has since followed, during the last holiday shortened week.

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market decrease their net short sold position within this market by 23.53% in the week of trade leading up to Tuesday 26th. November, to see this short sold position registered at 6,492 Lots, on the day. This net short sold position which is the equivalent of a relatively modest 1,082,000 bags, has likely to have been further reduced over the period of overall positive trade that has since followed.

With the month of November passed, the usual monthly export figures are starting to come forth from Central America with The National Coffee Institute of Costa Rica reporting that their coffee exports for the month were 4,797 bags or 10.41% lower than the same month last year, at a total of 41,275 bags. This figure contributes to the countries cumulative exports for the first two months of this new October 2013 to September 2014 coffee year being 8,369 bags or 10.25% lower than the same period in the previous coffee year, at a total of 73,247 bags.

The National Coffee Institute of Honduras have followed suit and have reported that their coffee exports for the month were 42,373 bags or 42.92% lower than the same month last year, at a total of 56,349 bags. This figure contributes to the countries cumulative exports for the first two months of this new October 2013 to September 2014 coffee year being 54,085 bags or 36.96% lower than the same period in the previous coffee year, at a total of 92,232 bags.

One might comment that while these two lower export performance reports have been accompanied by references to the damage to the regional crops from Roya or Leaf Rust, that they are also very much related to the fact that for the first two months of the new coffee year, the volumes are more related to the carryover stocks from the past crop, than to new crop coffees. However there is of course some reality to the influence of Roya, as this disease did impact upon the past crop and likewise, to lower volumes of carryover stocks into the new harvest that is now starting to build up in volume.

The preliminary coffee export figures from Brazil have seen exports for the month of November to be 7.19% lower than the previous month of October, but nevertheless 8.4% higher than the same month last year, with the coffee exports for last month indicated at 2.71 million bags. There was however a period of a firmer Brazil Real to the U.S. dollar in play during the month, which could well have contributed to the slowing of sales, comparative to the previous month. While the Real has once again weakened to the dollar and is now trading at over 2.35 to the dollar, which is likely to encourage increased selling activity of new crop arabica coffee stocks within the internal market and prove to be factor that shall with the resulting price fixation hedge selling, to create a ceiling for the value of the New York market.

The Certified washed Arabica coffee stocks held against the New York market were seen to decrease by 5,163 bags yesterday, to register these stocks at 2,675,966 bags. There was meanwhile a slightly smaller 2,799 bags decrease to the number of bags that were pending grading for the exchange; to register these pending grading stocks at 6,368 bags.

The commodity markets were in receipt of better than expected manufacturing data from the U.S.A. yesterday, which tended to buoy the U.S. dollar and took the lustre out of selected markets. This news accompanied by some positive news for the economy in the United Kingdom, but with the news from the Euro zone remaining relatively flat. The Oil, Natural Gas, Cocoa, London robusta Coffee and Corn markets had a day of buoyancy, while the Sugar, New York arabica Coffee, Cotton, Copper, Orange Juice, Wheat, Soybean, Gold, Silver, Platinum and Palladium markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.5% lower, to see Index registered at 506.65. The day starts with a steady U.S. dollar trading at 1.636 to Sterling and 1.354 to the Euro, while Brent Crude is showing buoyancy in early trade and is selling at $ 112.25 per barrel.

The New York market started the day on a steady track yesterday and followed by buoyancy for the London market, but with the New York market soon starting to come under pressure and heading into the afternoons trade with relatively sharp losses, while the London market maintained its buoyancy. The New York market did however post a recovery during the afternoon but this was short lived and the combination of producer hedge selling and the negative influences of the macro commodity index soon pushed the market back into negative territory, where it remained for the rest of the day’s trade. The London market continued to end the day on a positive note and with 57% of the gains of the day intact, while the New York market conversely ended the day on a negative note, but having recovered 53.7% of the earlier losses of the day by the close. This close provides little in the way of direction, but one might expect that with producer selling hanging over the market and the dollar showing some degree of muscle, that it is more likely to inspire a softer rather than stronger start for the market for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

JAN 1658 + 16 DEC 109.40 – 0.85

MAR 1628 + 3 MAR 109.90 – 0.95

MAY 1601 – 3 MAY 112.10 – 1.00

JUL 1586 – 6 JUL 114.30 – 1.05

SEP 1586 – 1 SEP 116.50 – 1.10

NOV 1583 – 1 DEC 119.50 – 1.20

JAN 1579 – 1 MAR 122.55 – 1.20

MAR 1569 – 1 MAY 124.55 – 1.20

MAY 1569 – 1 JUL 126.60 – 1.15

JUL 1569 – 1 SEP 128.45 – 1.15

 


Coffee Market Report

December 02 2013

Despite new export sales slowing from Indonesia the forward contract commitments still result in much improved volumes coming to the consumer markets for the present, as is illustrated by the robusta coffee exports that are emanating from the country’s main robusta coffee producing island of Sumatra. In this respect the island reports that their November robusta coffee exports were 362,708 bags or 72.9% higher than the same month last year, at a total of 860,221 bags. This has resulted in the islands cumulative robusta coffee exports for the first two months of the new October 2013 to September 2014 coffee year being 532,387 bags or 49.96% higher than the same period in the previous coffee year, at a total of 1,597,923 bags.

The leading West African robusta coffee producer the Ivory Coast has reported that the country’s coffee exports for the month of October were 91,900 bags or 190.66% higher than the same month last year, at a total of 140,100 bags. This is a good start to the countries new October 2013 to September 2014 coffee year, following the relatively modest 1,323,750 bags that were exported during the just completed 2012 to 2013 coffee year.

There has been a bit of a furore in Colombia last week, following proposals by the head of a commission studying how to make Colombian coffee more competitive, to develop mechanised robusta coffee production in the presently underdeveloped agriculturally Eastern plains of the country. This proposal was greeted during the meeting last week by an aggressive response from industry players, who foresee the production of robusta coffees within the country as being demeaning to the country’s reputation as a leading producer of fine washed arabica coffees.

One might comment however that with Colombia already having a relatively active value added soluble coffee industry and one that exports to many markets, that having a domestic source of robusta coffees that are friendly to the production of economically prices soluble coffees, that there might be some merit in developing a domestic robusta coffee base. Especially so as the districts related to these proposals are geographically and climatically unsuitable for arabica coffee production and do not really impact upon the traditional arabica coffee districts, from where the fine washed arabica coffees are produced.

This week shall see the annual get together in Ho Chi Minh City, with most of the world’s leading robusta coffee traders and buyers represented and one can expect that there shall be many voices of concern being voiced by the local trade, over the prevailing soft prices of the reference prices of the London market. Albeit that trade over the past three and half weeks, has seen this market post a US$ 188.00 per Mt. or 12.93% recovery in value and to new six weeks highs. The concerns shall be one would think, mostly related to the influences of the forthcoming end of January Tet New Year holidays in Vietnam, which will pressure farmers to try to sell coffees in large volumes and to raise cash for the holidays, which is likely to threaten the present modest recovery within the robusta coffee market.

Following a reasonable rainfall month for the month of November for most of the main coffee districts in Brazil, the month of December is starting off with wide spread rain showers and eliminating any fears over negative climatic conditions for the next and biennially bearing larger new crop. This lack of threat to longer term supply and with the Brazil real trading today at a relatively weak 2.33 to the U.S. dollar, might be encouraging for arabica coffee farmers to become more aggressive sellers for the start of this week, which with the price fixation hedge selling against the New York market might well come in to cap the improved prices seen within the thinly traded post-Thanksgiving Holiday New York market, on Friday.

The Certified washed Arabica coffee stocks held against the New York market were seen to decrease by 3,969 bags on Friday, to register these stocks at 2,681,129 bags. There was meanwhile a slightly larger 4,528 bags increase to the number of bags that were pending grading for the exchange; to register these pending grading stocks at 9,167 bags.

The commodity markets came back to work on Friday following the Thanksgiving holiday on Thursday, but with most markets tending to lack volumes, as many players had taken an extended long weekend holiday and thus, with volumes modest so too were many of the moves exaggerated. The U.S. Oil, Cocoa, Coffee, Cotton, Copper, Wheat, Soybean, Gold, Silver, Platinum and Palladium markets had a day of buoyancy, while the Brent Oil, Natural Gas, Sugar, Orange Juice and Corn markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.8% higher, to see Index registered at 509.20. The day starts with a marginally softer U.S. dollar trading at 1.641 to Sterling and 1.360 to the Euro, while Brent Crude is showing buoyancy in early trade and is selling at $ 111.55 per barrel.

The New York market started the day on a hesitantly positive note on Friday, following the positive influences that had been set by the London market trading solo the previous day. This was followed by a corrective softer stance being taken within the London market but with the New York market building on its earlier gains into the afternoon’s trade the London market recovered and with buy stops being triggered, returned to a positive trading range. The markets maintained their new found muscle through the rest of the days overall slow and thin trade with the London market ending the day on a positive note and with 58.3% of the earlier gains of the day intact, while the New York market likewise ended the day on a positive note and with an impressive 80.9% of the earlier in the day’s gains intact. This positive close is constructive for sentiment but might likewise attract opportunist producer selling and thus one might expect to see some degree of pressure coming into play for early trade today within the markets against the prices set on Friday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

JAN 1642 + 14 DEC 110.25 + 2.65

MAR 1625 + 11 MAR 110.85 + 2.75

MAY 1604 + 11 MAY 113.10 + 2.75

JUL 1592 + 12 JUL 115.35 + 2.75

SEP 1587 + 11 SEP 117.60 + 2.70

NOV 1584 + 8 DEC 120.70 + 2.70

JAN 1580 + 9 MAR 123.75 + 2.65

MAR 1570 + 1 MAY 125.75 + 2.50

MAY 1570 + 1 JUL 127.75 + 2.40

JUL 1570 + 1 SEP 129.60 + 2.35

 

 


Coffee Market Report

November 29 2013

Roberio Oliveira Silva the head of the International Coffee Organisation has announced at a coffee conference in Colombia that his personal opinion is that due to the issue of Roya or Leaf Rust in Central America and to lower farm inputs within many producing countries, that world coffee production would decline for the October 2013 to September 2014 coffee year, to 145.2 million bags. This figure compared to the International Coffee Organisations forecast for world coffee consumption for the same coffee year at 146 million bags, would indicate a marginal deficit supply for the present coffee year.

However with the general trade and industry forecasts indicating that world coffee production shall exceed 151 million bags and some even looking higher in terms of the increasing supply from Colombia and Vietnam, there can be little influence to the prevailing bearish sentiment within the markets, coming with this personal rather than official forecast from the ICO chief. Especially so as following this coffee years supply forecasts that include the recently completed new Brazil crop, all forecasts are for the next Brazil crop that shall come into play during the tail end of the present coffee year, is forecasted to be a biennially bearing new crop that shall be significantly higher than the just completed crop, at around 56 to 60 million bags. This aside from the fact that it is forecasted that Brazil shall carry coffee stocks in excess of 7 million bags, into this next 2014 new crop.

In terms of the next Brazil crop and following an overall light rainfall start to the month of November, most of the main coffee districts have experienced good rains for the second half of the month and overall with perhaps the exception of Vitoria da Conquista, the coffee districts now report good supportive rains for the month to maintain ground water retention levels and the development of the new crop for next year. Amongst this the main arabica coffee district of Minas Gerais, has in fact reported rainfall that is overall slightly above their five year average and so far, there has been no weather threats to the prospects for the next Brazil crop.

Meanwhile and despite the Brazil Real having slipped back in value to below 2.3 to the U.S. dollar, trade within the internal market in Brazil has been slow this week and with volumes further dampened, by the lack of reference prices from the New York market yesterday. This is most likely and so long as the exchange rate remains within its present range, to encourage a rise in volumes for the coming week, which with the resulting price fixation hedge selling on the part of the exporters into the New York market, shall create a ceiling for this market for early December.

Trade in Vietnam with the new crop that many forecast to easily exceed 27 million bags and including over 26 million bags of robusta coffee is picking up, but with the inverted nature of the reference prices in the London market that does not allow for the international trade houses and exporters to hedge the carry of stocks, there is no encouragement for the purchase of longer term stocks. Thus most of the buying activity within Vietnam is related to only short term requirements for shipment over December to February, rather than to the carry of stocks for the year thereon and thus it shall be left to farmers in the speculative internal trade to finance the carry of the larger percentage of the now surging new crop harvest coffee stocks.

This shall limit to a degree the volumes of price fixation hedge selling against the London market, which might be seen to be a positive factor for this market that hit new six weeks highs yesterday. While with farmers in Vietnam looking to cash in a good percentage of new crop stocks ahead of the Tet New Year holidays to kick off the Year of the Horse at the end of January, it can be expected to be something of a short term buyer’s market over the next two months and one that should lower the internal market differentials relative to the reference prices of the London market.

In Indonesia where exports have surged for most of this year compared to the previous year, the combination of well sold export stocks and the steadily rising internal market demand has slowed export selling activity and with little in the way of new offers coming to the international markets for shipment over the first quarter of the coming year. Likewise with the insecurity of the internal market supply where internal traders traditionally pressure the short sold exporters by withholding stocks, there are very limited volumes of forward offers and these with unrealistically high differentials for robusta coffees, for the second quarter of the coming year.

The Certified washed Arabica coffee stocks held against the New York market which were seen to decrease by 2,731 bags on Wednesday were unchanged yesterday due to the Thanksgiving holiday, to register these stocks at 2,685,098 bags. There was likewise no to the number of bags that were pending grading for the exchange; to register these pending grading stocks at 6,264 bags.

The majority of the commodity markets were closed yesterday, with the Thanksgiving holiday in the U.S.A. and with many players due to take a long weekend, there is little expected from what shall be a shortened days trade from the markets, for trade today. Thus the Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is unchanged from being 0.24% lower on Wednesday, to see Index registered at 505.16. The day starts with a softer U.S. dollar trading at 1.635 to Sterling and 1.361 to the Euro, while Brent Crude is showing buoyancy in early trade and is selling at $ 111.25 per barrel.

The New York market was closed yesterday to leave the London market to trade solo for the day and with cautiously thin volumes of trade, but starting the day on a near to steady note. The market did however start to show some buoyancy as the day progressed and with the market showing some muscle late in the day, to end off the day on a positive note and with 87.5% of the gains of the day intact. This positive close for the London market and with many players on holiday today, along with the soft nature of the U.S. dollar, is likely to encourage a steady start for early trade today for the markets against the marginally softer close for the New York market on Wednesday and the positive close for the London market, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

NOV 1623 + 22 DEC 107.60 – 0.55

JAN 1628 + 14 MAR 108.10 – 0.65

MAR 1614 + 10 MAY 110.35 – 0.60

MAY 1592 + 6 JUL 112.60 – 0.65

JUL 1580 + 5 SEP 114.90 – 0.60

SEP 1576 + 4 DEC 118.00 – 0.65

NOV 1576 + 4 MAR 121.10 – 0.65

JAN 1571 + 1 MAY 123.25 – 0.60

MAR 1569 + 1 JUL 125.35 – 0.60

MAY 1569 + 1 SEP 127.25 – 0.50

 


Coffee Market Report

November 28 2013

Prior to the Monsoon rains over the past few month in India, that Coffee Board of India had been forecasting a new crop for this new October 2013 to September 2014 coffee year of near to 5.7 million bags. However the latest report from the United States Department of Agriculture and based on data collected by their embassy staff in India, are talking in terms of an excessive rain affected crop of only 5.1 million bags. This crop, which they report shall be made up from an approximate 70 to 30 mix of robusta and arabica coffees, will see the arabica coffees in particular having suffered from the 30% higher than normal rainfall.

There has so far been no contradiction to this more modes USDA forecast from the Coffee Board in India and one might suggest that for purely market manipulative reasons in terms of the prevailing modest international prices, that it is unlikely that there would be any such prediction. Thus one might think that for the time being at least; this lower 2013 to 2014 crop figure shall be the one that shall be commonly reported, until such time later next year when the post crop sales figures shall finally provide more accurate data. Albeit that in the meantime the negative influences of the reference prices of the international markets, are retarding internal market sales of the early new crop coffees that are coming to the market.

The Colombian President Juan Manuel Santos and with nearly 5% of the country’s population related to the coffee industry, has announced that the prevailing subsidy to the countries coffee farmers that equated to the equivalent of 519 million U.S. dollars and was due to come to close in February or March next year, would continue so long as the coffee market remained soft. This subsidy that is the equivalent of 27.28 usc/Lb., is designed to take the bite out of the negative effects of the reference prices in New York and to ensure profitability for the countries coffee farmers, albeit that in terms of the present market, even the Colombian farmers with this subsidy, are struggling to make reasonable profits.

Meanwhile and adding to the bearish nature of this report in terms of its influence upon speculative sentiment within the New York market, the President reiterated the Colombian Coffee Federations forecasts that the annual crop shall within the next couple of years rise from the present 10.5 to 11 million bags to 14 million bags per annum. These improved yields that are related to both improve climatic conditions and the high percentage of farms that have been subsidised in a long term replacement program of aged trees with new higher yielding and disease resistant trees, now targeting annual crops of 18 million bags per annum in the next five years.

This is perhaps and ambitious and bullish target and one might suggest that 14 to 15 million bags per annum is a more realistic medium to longer term figure, but it is nevertheless a volume that would counter the negative yield issues developing within Central America and parts of Mexico. While on the short term and with Colombia that had seen its crop fall to 7.7 million bags of coffee in 2012 and a resulting loss in market share within the consumer markets, is now very quickly regaining its dominant share within the quality coffee sector of the markets.

The London robusta coffee market has recovered to a six week high, but the market still offers a 35.34 usc/Lb. or 32.69% price discount to the New York arabica coffee market and makes robusta coffees an attractive buy and blend component to the more price sensitive consumer roasters, which maintains good buying interest in these traditionally seen to be lower quality coffees. This evident in the fact that the recovery in the London market price has been heavily influenced by active consumer roaster buying interest that is more than likely to continue, with the influence of the improve market value, contributing to more active selling interest now coming forth from Vietnam.

The Certified washed Arabica coffee stocks held against the New York market were seen to decrease by 2,731 bags yesterday, to register these stocks at 2,685,098 bags. There was meanwhile a smaller 1,625 bags increase to the number of bags that were pending grading for the exchange; to register these pending grading stocks at 6,264 bags.

The commodity markets were effected by lighter than normal trading interest yesterday; ahead of most markets closing for today’s Thanksgiving holiday and with the prospects of many U.S.A. players planning to take the holiday through to Monday. The U.S. dollar stabilised as the day progressed and this too, had its influence upon many markets that started to soften later in the day’s trade. The Natural Gas, London robusta Coffee, Cocoa, Orange Juice, and Wheat markets nevertheless had a day of buoyancy, while the Oil, Sugar, New York arabica Coffee, Cotton, Copper, Corn, Soybean, Gold, Silver, Platinum and Palladium markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.24% lower, to see Index registered at 505.16. The day starts with a softer U.S. dollar trading at 1.632 to Sterling and 1.358 to the Euro, while Brent Crude is once again showing buoyancy and is selling at $ 111.85 per barrel.

The New York market started the day yesterday with early buoyancy and followed by buoyancy within the London market, with both markets taking a positive track into the afternoon’s trade, but with the New York market that was also influenced by the negative nature of the macro commodity index, losing its way as the afternoon progressed. This reversal of fortunes within the New York market seemingly had some influence upon sentiment and the positive progress within the London market, but this market managed to hold steady and ended the day on a positive note and with 44% of the gains intact, while the New York market ended on a softer note but having recovered 58% of the earlier losses of the day. The New York market is closed for today and shall leave the London market to trade solo for the day, but we would expect following the relatively steady overall close yesterday that this market shall be cautiously steady to buoyant in early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

NOV 1601 + 20 DEC 107.60 – 0.55

JAN 1614 + 11 MAR 108.10 – 0.65

MAR 1604 + 13 MAY 110.35 – 0.60

MAY 1586 + 15 JUL 112.60 – 0.65

JUL 1575 + 17 SEP 114.90 – 0.60

SEP 1572 + 20 DEC 118.00 – 0.65

NOV 1572 + 20 MAR 121.10 – 0.65

JAN 1570 + 18 MAY 123.25 – 0.60

MAR 1568 + 14 JUL 125.35 – 0.60

MAY 1568 + 14 SEP 127.25 – 0.50

 


Coffee Market Report

November 27 2013

The State General Statistical Office in Vietnam have adjusted their coffee export figures of mostly robusta coffees for the month of October 6.15% lower than initially reported, to a figure of 1,018,333 bags. While with the coffee export registrations in hand for the month of November, they are forecasting November coffee exports to be 34.4% lower than the same month last year, at a total of 1,333,333 bags. This is however a more ambitious figure that that of the private exporters, who have been forecasting a more modest coffee export figures for this month, of approximately 1,166,666 bags.

Based on the official General Statistical Office figures and their projection for this month’s export figures, it would indicate that the countries cumulative coffee exports for the first two months of the present October 2013 to September 2014 coffee year, shall be 37% lower than the same period in the previous coffee year, at a total of 2,351,667 bags. One does however have to recognise that late last year and following restrained price resistant selling during the middle of last year, that the year ended with a bout of aggressive catch up selling of large volumes of past crop coffee stocks, which inflated the year end exports.

Thus despite lower volumes of robusta coffee exports from Vietnam in the recent months and exports that have been accompanied by significantly higher volumes of robusta coffee exports from Indonesia, the flow of robusta coffees into the consumer markets remain more than sufficient to fuel consumer roaster demand. While with well in excess of 30% of the new crop in Vietnam already harvested and the harvest due to accelerate during the next five weeks to near to completion, there is a flood of coffees soon due to come to the market.

Meanwhile with the reference prices of the London robusta coffee market remaining in what is a relatively soft trading range, the farmers shall be under pressure to start cashing in stocks and one can expect that during next week’s coffee conference in Ho Chi Minh City, that there shall be many voices of concern from local industry players, over the prices that farmers can expect to receive for their new crop coffees. Where despite some discussions over government finance for farmers to carry stocks of up to 3 million bags, the private trade and industry forecasts for this new crop to be potentially as much as 29 million bags, shall dampen speculative spirits towards internal market prices.

Within Brazil and with the exception of the coffee farms in Vitoria da Conquista, which has had a dry month so far, the majority of the main coffee districts have had lower than their five year average rainfall for the month so far, but mostly more than sufficient rainfall within this traditionally heavy rainfall month, to maintain ground water retention levels. Thus for the present aside from concerns developing that some farmers might struggle to maintain fertiliser input levels, there would appear to be little threat to the potential for the biennially bearing larger new Brazil crop for next year.

These issues of weather can still become a factor if Brazil does not have a near to normal rainfall for the coming month of December and one can expect to see much focus upon the rainfall reports during the coming month, as internal industry players shall be grasping for any emotive factor that can be used to buoy international coffee market prices. Especially so as there is no doubt that having to sell new crop coffees against the reference prices of the prevailing soft international markets, there are many farmers who are selling new crop coffees at loss making price levels.

The Certified washed Arabica coffee stocks held against the New York market were seen to decrease by 140 bags yesterday, to register these stocks at 2,687,829 bags. There was meanwhile a larger 2,545 bags decline to the number of bags that were pending grading for the exchange; to register these pending grading stocks at 4,639 bags.

The commodity markets were in receipt of little in the way of directional news, but there was some support within selected markets coming with the softer nature of the U.S. dollar. This is however being countered by the fundamental of abundant supply for the majority of commodities, which tends to dampen investment spirits on the part of the funds. While with the U.S.A. markets due to close for the Thanksgiving holiday tomorrow and with many players likely to take a long weekend and be off the field of play until Monday, there is most likely already a degree of month end book squaring taking place. The London robusta Coffee and Cotton markets had a relatively positive day and the Brent Oil, Natural Gas, New York arabica Coffee, Sugar, Orange Juice and Gold markets showed buoyancy, while the Cocoa, Copper, Wheat, Corn, Soybean, Silver, Platinum and Palladium markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.08% lower, to see Index registered at 506.40. The day starts with a softer U.S. dollar trading at 1.622 to Sterling and 1.359 to the Euro, while Brent Crude is showing buoyancy in early trade and is selling at $ 111.55 per barrel.

The New York market started the day yesterday on a steady note and followed by a steady start for the London market, but with the New York market coming under spells of pressure in thin trade, while the London market started on a modest but upside steady track. The New York market started to gain support later in the afternoon and took on a positive stance, while the London market added to its earlier gains. The London market continued to end the day on a strong note and with 92.5% of the gains of the day intact, while the New York market had a less convincing close and ended the day on only a modestly positive note and with only 14.8% of the earlier in the day’s gains intact. This close albeit that the New York market did not look convincing might nevertheless encourage a steady start for the New York market and perhaps an advantageous producer price fixation selling marginally softer start for the London market for early trade today against the prices set for the markets yesterday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

NOV 1581 + 27 DEC 108.15 + 0.05

JAN 1603 + 37 MAR 108.75 + 0.20

MAR 1591 + 37 MAY 110.95 + 0.20

MAY 1571 + 32 JUL 113.25 + 0.25

JUL 1558 + 28 SEP 115.50 + 0.20

SEP 1552 + 28 DEC 118.65 + 0.25

NOV 1552 + 28 MAR 121.75 + 0.30

JAN 1552 + 28 MAY 123.85 + 0.30

MAR 1554 + 28 JUL 125.95 + 0.30

MAY 1554 + 28 SEP 127.75 + 0.30

 


Coffee Market Report

November 26 2013

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market decrease their net short sold position within this market by 21.33% in the week of trade leading up to Tuesday 19th. November, to see this short sold position registered at 8,490 Lots, on the day. This net short sold position which is the equivalent of 1,415,000 bags, has likely to be little changed over with the period of mixed trade that has since followed.

Following the October export reports from neighbouring Central American countries of Guatemala, El Salvador, Honduras, Costa Rica and Nicaragua, the National Coffee Association of Mexico have reported that the countries coffee exports for the month were 64,657 bags or 27.75% lower than the same month last year, at a total of 168,338 bags. This lower performance is however of little significance, as the exports in October from this region are mostly related to carryover stocks from the past crop, rather than a reflection of the new crop that is only just starting to be harvested. Albeit that these six countries combined have registered exports for the month of August to be 270,239 bags or 40.67% lower than the same month last year, at a total of 394,226 bags.

Meanwhile on a broader spectrum in terms of fine washed arabica coffee supply, the producer bloc of Mexico, Central America, Dominican Republic, Colombia and Peru have reported that their combined coffee exports for the month of October were 4.5% higher than the same month last year, at a total of 1.95 million bags. This figure clearly illustrating that with surging coffee supply being experienced in Colombia, that it is presently countering any threat of tighter supply from the Roya or Leaf Rust affected Central American producers.

The longer term question is that following what were seen to be more than adequate fine washed arabica coffee exports from the combination of Mexico, Central America, Dominican Republic, Colombia and Peru of 29.37 million bags during the previous October 2012 to September 2013 coffee year, what this producer bloc shall export during this new October 2013 to September 2014 coffee year. So far there are already early indications that Colombia shall conservatively be exporting approximately 10.5 million bags during this new coffee year and forecasts for Peru to export approximately 4.4 million bags, which would if the supply were to be matched, require a coffee supply of approximately 14.47 million bags from Mexico, Central America and the Dominican Republic.

This figure of 14.47 million bags is already 1,410,330 bags or 8.89% lower than the exports of 15,880,330 bags from Mexico and Central during the previous 2012 to 2013 coffee year and with the exports from the Dominican Republic to be added, would indicate during these early days that even with a further dip in production from the Central American region, there might not yet be reason to worry about overall fine washed arabica coffee supply for the coming year. Albeit that there might nevertheless be some small degree of tightening supply from this larger producer bloc, should the overall losses in production from Roya or Leaf Rust prove to exceed 2 million bags, as many local industry players have suggested.

The question is however what might such a small dip in fine washed arabica coffee supply mean for market prices as with many price sensitive consumer market roasters now very flexible in their blending and a surplus of Brazil natural arabica coffee supply, one would think that these latter coffees shall come in to supplement washed arabica coffees. Thus for the present and while there continue to be concerns voiced over Roya, the actual situation within the physical coffee markets remains fundamentally conducive for sideways rather than an upside move for the reference prices of the New York washed arabica coffee market.

The Certified washed Arabica coffee stocks held against the New York market remained unchanged yesterday, to register these stocks at 2,687,969 bags. There was meanwhile a further but relatively modest 1,554 bags increase to the number of bags that were pending grading for the exchange; to register these pending grading stocks at 7,184 bags.

The commodity markets gained some degree of support from the positive emotion following the signs of good progress being made to normalise relationships between the west and Iran and likewise, from the early signs of modest but nevertheless improved economic figures for the U.S.A. and Europe for the coming year. Albeit that the news from Iran and the prospects for the lifting of sanctions and increased supply, took some of the lustre out of the Oil markets. The Natural Gas, New York arabica Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Silver, Platinum and Palladium markets showed buoyancy and the Brent Oil and Cocoa markets were steady, while the U.S. Oil, Sugar, London robusta Coffee and Gold markets tended easier. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.22% higher, to see Index registered at 506.81. The day starts with a near to steady U.S. dollar trading at 1.615 to Sterling and 1.354 to the Euro, while Brent Crude is showing buoyancy in early trade and is selling at $ 112.35 per barrel.

The New York market started the day yesterday on a steady to buoyant note, but followed by a softer start for the London market. The New York market did however start to lose its way and both markets entered the afternoon taking a softer track, but with some support coming from the positive nature of the macro commodity index and perhaps the firmer nature of the Brazil real dampening selling spirits and volumes in Brazil, the New York market recovered as the afternoon progressed and accompanied by some positive pips upwards, for the London market. The London market continued to end the day on the negative side of the line and with 52.6% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 72.4% of the gains of the day intact. This overall steady close for the markets might well encourage a follow through steady start for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

NOV 1554 – 10 DEC 108.10 + 1.00

JAN 1566 – 10 MAR 108.55 + 1.05

MAR 1554 – 6 MAY 110.75 + 0.95

MAY 1539 – 3 JUL 113.00 + 0.90

JUL 1530 + 2 SEP 115.30 + 0.90

SEP 1524 + 1 DEC 118.40 + 0.90

NOV 1524 + 2 MAR 121.45 + 0.90

JAN 1524 – 3 MAY 123.55 + 0.85

MAR 1526 – 1 JUL 125.65 + 1.00

MAY 1526 – 1 SEP 127.45 + 1.05

 


Coffee Market Report

November 26 2013

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market decrease their net short sold position within this market by 21.33% in the week of trade leading up to Tuesday 19th. November, to see this short sold position registered at 8,490 Lots, on the day. This net short sold position which is the equivalent of 1,415,000 bags, has likely to be little changed over with the period of mixed trade that has since followed.

Following the October export reports from neighbouring Central American countries of Guatemala, El Salvador, Honduras, Costa Rica and Nicaragua, the National Coffee Association of Mexico have reported that the countries coffee exports for the month were 64,657 bags or 27.75% lower than the same month last year, at a total of 168,338 bags. This lower performance is however of little significance, as the exports in October from this region are mostly related to carryover stocks from the past crop, rather than a reflection of the new crop that is only just starting to be harvested. Albeit that these six countries combined have registered exports for the month of August to be 270,239 bags or 40.67% lower than the same month last year, at a total of 394,226 bags.

Meanwhile on a broader spectrum in terms of fine washed arabica coffee supply, the producer bloc of Mexico, Central America, Dominican Republic, Colombia and Peru have reported that their combined coffee exports for the month of October were 4.5% higher than the same month last year, at a total of 1.95 million bags. This figure clearly illustrating that with surging coffee supply being experienced in Colombia, that it is presently countering any threat of tighter supply from the Roya or Leaf Rust affected Central American producers.

The longer term question is that following what were seen to be more than adequate fine washed arabica coffee exports from the combination of Mexico, Central America, Dominican Republic, Colombia and Peru of 29.37 million bags during the previous October 2012 to September 2013 coffee year, what this producer bloc shall export during this new October 2013 to September 2014 coffee year. So far there are already early indications that Colombia shall conservatively be exporting approximately 10.5 million bags during this new coffee year and forecasts for Peru to export approximately 4.4 million bags, which would if the supply were to be matched, require a coffee supply of approximately 14.47 million bags from Mexico, Central America and the Dominican Republic.

This figure of 14.47 million bags is already 1,410,330 bags or 8.89% lower than the exports of 15,880,330 bags from Mexico and Central during the previous 2012 to 2013 coffee year and with the exports from the Dominican Republic to be added, would indicate during these early days that even with a further dip in production from the Central American region, there might not yet be reason to worry about overall fine washed arabica coffee supply for the coming year. Albeit that there might nevertheless be some small degree of tightening supply from this larger producer bloc, should the overall losses in production from Roya or Leaf Rust prove to exceed 2 million bags, as many local industry players have suggested.

The question is however what might such a small dip in fine washed arabica coffee supply mean for market prices as with many price sensitive consumer market roasters now very flexible in their blending and a surplus of Brazil natural arabica coffee supply, one would think that these latter coffees shall come in to supplement washed arabica coffees. Thus for the present and while there continue to be concerns voiced over Roya, the actual situation within the physical coffee markets remains fundamentally conducive for sideways rather than an upside move for the reference prices of the New York washed arabica coffee market.

The Certified washed Arabica coffee stocks held against the New York market remained unchanged yesterday, to register these stocks at 2,687,969 bags. There was meanwhile a further but relatively modest 1,554 bags increase to the number of bags that were pending grading for the exchange; to register these pending grading stocks at 7,184 bags.

The commodity markets gained some degree of support from the positive emotion following the signs of good progress being made to normalise relationships between the west and Iran and likewise, from the early signs of modest but nevertheless improved economic figures for the U.S.A. and Europe for the coming year. Albeit that the news from Iran and the prospects for the lifting of sanctions and increased supply, took some of the lustre out of the Oil markets. The Natural Gas, New York arabica Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Silver, Platinum and Palladium markets showed buoyancy and the Brent Oil and Cocoa markets were steady, while the U.S. Oil, Sugar, London robusta Coffee and Gold markets tended easier. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.22% higher, to see Index registered at 506.81. The day starts with a near to steady U.S. dollar trading at 1.615 to Sterling and 1.354 to the Euro, while Brent Crude is showing buoyancy in early trade and is selling at $ 112.35 per barrel.

The New York market started the day yesterday on a steady to buoyant note, but followed by a softer start for the London market. The New York market did however start to lose its way and both markets entered the afternoon taking a softer track, but with some support coming from the positive nature of the macro commodity index and perhaps the firmer nature of the Brazil real dampening selling spirits and volumes in Brazil, the New York market recovered as the afternoon progressed and accompanied by some positive pips upwards, for the London market. The London market continued to end the day on the negative side of the line and with 52.6% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 72.4% of the gains of the day intact. This overall steady close for the markets might well encourage a follow through steady start for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

NOV 1554 – 10 DEC 108.10 + 1.00

JAN 1566 – 10 MAR 108.55 + 1.05

MAR 1554 – 6 MAY 110.75 + 0.95

MAY 1539 – 3 JUL 113.00 + 0.90

JUL 1530 + 2 SEP 115.30 + 0.90

SEP 1524 + 1 DEC 118.40 + 0.90

NOV 1524 + 2 MAR 121.45 + 0.90

JAN 1524 – 3 MAY 123.55 + 0.85

MAR 1526 – 1 JUL 125.65 + 1.00

MAY 1526 – 1 SEP 127.45 + 1.05

 


Coffee Market Report

November 25