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I. & M. Smith (Pty) Ltd.

Coffee Market Report

13 Jan 2014


Coffee Market Report

January 13 2014

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 55.34% in the week of trade leading up to Tuesday 7th. January, to see this short sold position registered at 4,656 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 0.04%, to register a net long on the day of 53,458 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 28.62%, to register a net short sold position of 12,780 Lots on the day. This speculative net short position within the New York market which is the equivalent of 3,623,073 bags has most likely been further reduced over the following days of overall positive trade for the market and likewise, the Managed Money fund net short position within this market.

The question is now with the evidence of the sharply reduced net short positions of the Managed Money Funds and the Non Commercial Speculative sectors of the New York market and positions that have most probably been further reduced since Tuesday last week, if this might cause a degree of hesitation for these Funds and the Speculative sector of the market for trade today. If this might be the case, it might also inspire some increased volumes of catch up producer price fixation selling coming to the market, should the market start to look a bit toppy for the short term, all be it that the charts would seemingly support the view that this market is now within a new and more buoyant trading range.

This renewed buoyancy for the New York market has aside from the charts and restrained producer price fixation selling, also been influenced by the recent reports of the potential for a modest deficit new crop for Brazil this year. This does however still remain a questionable factor and one would comment that it is the coffee farmers in the country who know best and the very fact that they are yet to show signs of restrained selling to stretch out stocks over a forthcoming year and through to the 2015 crop, would seemingly indicate that the new crop might not actually be as low as some have been forecasting.

There has been much debate within Vietnam over the past year, over the 5% Value Added Tax that has been levied upon agricultural products and including coffee, which has often been a factor that has often delayed sales transactions within the internal market, while export refund claims were being processed. Thus the announcement that the Vietnam Government has abolished this controversial tax would seemingly free up trade and sales and shall potentially bring higher volumes of new crop coffees to the short term market, but it is early days and this general announcement has yet to be clarified and confirmed and might still take a couple of days to impact upon the market.

Meanwhile there are now just over two and half weeks before Vietnam closes down for the week long Tet New Year holiday, which shall bring in the year of the horse. Traditionally farmers increase their selling activity ahead of the holiday and to raise funds for their celebrations and so far selling has been somewhat restrained, which might along with the elimination of the VAT issue, result in increased selling aggression over the next two weeks within the internal market in Vietnam. Albeit that with the prevailing inverted nature of the reference prices in the London robusta coffee market, that it is restraining international trade house buying and making it difficult for exporters in Vietnam to be aggressive buyers.

The Certified washed Arabica coffee stocks held against the New York market were seen to have decreased by 11,130 bags on Friday, to register these stocks at 2,692,683 bags. There was meanwhile a much more modest 293 bags increase to the number of bags pending grading for the exchange; to register these pending grading stocks at 5,098 bags.

The commodity markets experienced a positive reversal in fortunes within many markets on Friday, in reaction to the news of weaker than expected non-farm new job figures within the U.S.A. that came in 62.24% below expectations, which dampened speculation of rising rates and weakened the U.S. dollar. The Oil, Natural Gas, Sugar, Cocoa, Coffee, Copper, Orange Juice, Corn, Soybean, Gold, Silver, Platinum and Palladium markets had a day of buoyancy, while the Cotton and Wheat markets bucked the trend and were fundamentally softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.07% higher, to see the Index registered at 509.32. The day starts with a softer U.S. dollar trading at 1.650 to Sterling and 1.367 to the Euro, while Brent Crude is showing a degree of hesitant buoyancy in early trade and is selling at $ 107.00 per barrel.

The New York market started the day on a softer note on Friday and followed by a similar softer start for the London market and with both markets maintaining a soft stance into the afternoons trade, however with the lack of producer selling over the market and with the positive influences of the softer dollar and its effect upon the macro commodity index coming into play, the markets recovered and moved back into positive territory for the rest of the day. The London market continued to end the day on a positive note and with 66.7% of the earlier gains of the day intact and followed by a positive close for the New York market, which ended the day with 83.9% of the earlier gains of the day intact, while the arbitrage broadened marginally to 41.77 usc/Lb., which equates to a 34.62% price discount for the London robusta coffee market. This overall positive close for the markets and with the softer U.S. dollar is most likely due to inspire a steady start for early trade today against the prices set on Friday, as follows:

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

JAN 1757 + 14

MAR 1739 + 12 MAR 120.65 + 1.30

MAY 1709 + 18 MAY 122.90 + 1.40

JUL 1682 + 19 JUL 125.15 + 1.45

SEP 1675 + 17 SEP 127.20 + 1.50

NOV 1673 + 17 DEC 130.00 + 1.65

JAN 1672 + 17 MAR 132.80 + 1.80

MAR 1669 + 17 MAY 134.50 + 2.00

MAY 1674 + 17 JUL 136.05 + 2.10

JUL 1669 + 17 SEP 137.55 + 2.15

 


Coffee Market Report

January 10 2014

The Brazil Government Crop Supply Agency has contributed to the speculation on the prospects of this year’s new crop, by downgrading their forecast for this crop by 1.65% to now forecast this new crop at 48.34 million bags. With this new crop being made up by 36.3 million bags of arabica coffees and 12.04 million bags of Conilon robusta coffee, which is as usual a very conservative estimate. This decline in their forecast being attributed to the combination of increased levels of pruning, to a small decline in land under arabica coffee and to what they questionably term as excessive rains, over the month of December. Especially so as the forecast for the Conilon robusta coffees is approximately 4 million bags lower than the majority of private trade and industry forecasts, which would already inflate the official figures to over 52 million bags.

One has to comment however that it is traditional for the official crop forecasts to be approximately 87% to 90% of reality and in this respect, one would read from this forecast that the new crop shall be between 53.7 million to 55.6 million bags. While in the meantime everyone awaits the final and more precise export figures for the month of December, which upon preliminary figures, would indicate that Brazil exported approximately 31 million bags of coffee during 2013.

Thus with an export volume of 31 million bags of coffee in 2013 and added to approximately 21.5 million bags of domestic consumption, one would see coffee demand for Brazil coffees for last year at 52.5 million bags. Thus in terms of this year, one might be safe to see demand related to a figure of around 54 million bags, which against a new crop that might still exceed this figure and with a carryover stock of around 8 to 9 million bags from the past crop, a safe supply of Brazil coffees for the foreseeable future.

There remains meanwhile some degree of price resistance within the Brazil market, with farmers looking to resist the price levels dictated by the still relatively soft international markets and looking to pressure their prices to short sold exporters higher. This is tending to restrain the volumes of exports for the present, as the international trade and consumer roasters buy mostly their most immediate needs and do not look to take on much in the way of speculative stocks.

The well respected Climate Protection Agency in the U.S.A. has forecasted that the El Nino and La Nina phenomenon factors in the Pacific Ocean shall remain neutral for the next eight months, which would indicate no threat of either droughts or excessive rains for the Pacific Rim countries. Thus one might be safe to speculate good crops for Colombia and Indonesia for this year, which shall assist with a par Brazil crop, for good and continued overall surplus coffee supply for the year. Albeit that within this region the forecasts from Peru and with their new crop starting in April, are for the combination of Roya or Leaf Rust and lower inputs related to unprofitable prices, might result in another relatively modest crop of around 4.3 million bags.

The Certified washed Arabica coffee stocks held against the New York market were seen to have increased by 2,010 bags yesterday, to register these stocks at 2,703,813 bags. There was meanwhile a larger 4,805 bags decrease to the number of bags pending grading for the exchange; to register these pending grading stocks at 4,458 bags.

The Certified Robusta coffee stocks held against the London market were seen to have decreased by 30,333 bag in the two weeks of trade leading up to Monday 6th. January, to see these stocks registered at a modest 470,000 bags. This decline in the stocks having been very predictable, as the price resistance within the origin countries has firmed origin differentials and resulted in these stocks been seen to be competitive in value.

The commodity markets were overshadowed yesterday by further speculation that the constant indicators of improved growth for the leading U.S.A. economy might result in higher interest rates for the dollar and with the resulting firming of the dollar, the commodity prices more expensive in other currencies. This factor tended to dampen spirits within the majority of the markets, to result in an overall softer day’s trade. The London robusta Coffee, Orange Juice, Gold, Silver and Platinum markets nevertheless had a day of buoyancy, while the Oil, Natural Gas, Sugar, Cocoa, New York arabica Coffee, Cotton, Copper, Wheat, Corn, Soybean and Palladium markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.69% lower, to see the Index registered at 503.90. The day starts with a softer U.S. dollar trading at 1.648 to Sterling and 1.361 to the Euro, while Brent Crude is showing a degree of recovering buoyancy in early trade and is selling at $ 107.50 per barrel.

The New York market started the day on a softer note and followed by a softer start for the London market, but with the New York market soon recovering and heading back into positive territory for the afternoons trade and with the London market following suit, to see both market showing buoyance during the afternoon. The New York market and with the influences of the negative nature of the macro commodity index coming into play and accompanied by producer price fixation selling, lost its way and headed back into negative territory, while the London market maintained its buoyancy. The London market continued to end the day on a positive note and with 44.1% of the earlier gains of the day intact, while the New York market ended the day on a soft note and with 59.6% of the earlier losses of the day intact and with the arbitrage having narrowed to 41.01 usc/Lb., which equates to a still attractive to the industry 34.36% price discount for the London robusta coffee market. This mixed close and with the London market moving north while the New York market headed south, might well inspire increased volumes of producer selling against the London market for early trade today, while with the dollar a little softer, one might expect to see some buoyancy for early trade for the New York market against the prices set yesterday, as follows:

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

JAN 1743 + 18

MAR 1727 + 15 MAR 119.35 – 1.55

MAY 1691 + 15 MAY 121.50 – 1.50

JUL 1663 + 15 JUL 123.70 – 1.50

SEP 1658 + 14 SEP 125.70 – 1.35

NOV 1656 + 14 DEC 128.35 – 1.30

JAN 1655 + 11 MAR 131.00 – 1.25

MAR 1652 + 6 MAY 132.50 – 1.25

MAY 1657 + 6 JUL 133.95 – 1.25

JUL 1652 + 6 SEP 135.40 – 1.30

 


Coffee Market Report

January 09 2014

The Chaparrastique volcano eruption in El Salvador has predictably done little damage to the new crop that is presently in harvest, but this crop due to damage caused by Roya or Leaf Rust is nevertheless now forecasted by the countries National Coffee Council to be 456,500 bags or 35.1% lower than the past crop. This severe dip in production is apparently not as much related to Roya damaged trees, but to the more radical reaction to the problem on the part of the commercial farming sector of the country’s coffee industry that account for approximately 70% of the coffee farms, who have taken the route of either stumping their trees or replanting coffee fields with new trees, to more easily counter the diseased fields.

This is however a rather dramatic dip in the new crop that has been forecasted by the National Coffee Council, as to date the majority of the private industry forecasts had been looking to an approximately 300,000 bags or 23% dip in the size of the new crop for El Salvador. Only time shall tell, but in the meantime with production of fine washed arabica coffees surging in Colombia and with an approximate 6% increase forecasted for the New Crop in Honduras, this dip in production from El Salvador which is anyhow a relatively small regional producer, is not proving to be a concern for the consumer markets.

The first week of the month of January has proven to be relatively dry for the majority of the main coffee districts in Brazil, but with good ground water retention levels that have come with normal rainfall for the preceding three months, there are no concerns being voiced for the development of the new crop. There are however conflicting reports from within the trade and industry in terms of this new crop as following the recent forecast from Volcafe that they have downgraded this crop from their initial 60 million bags forecast to 51 million bags, there are other private trade and industry forecasts still voicing a figure of close to 60 million bags. Thus the very important to market sentiment Brazil crop factor remains a mystery, which shall only become clear by the third quarter of this year and is in the meantime a factor that shall undoubtedly bring forth volatility for the markets.

Meanwhile with the funds stepping in to buy into the New York market, this market has moved into a new trading range, but while the late in the previous year charts were pointing to a step up for this market, it is difficult to adjudge the appetite of the funds and it shall take a week or two to see if the new trading range can hold. Especially so as there remain large volumes of new crop coffees from Mexico, Central America and Colombia and 2013 crop Brazil arabica stocks hanging over the market, which once the market steadies might start coming to the market and with the negative pressures of price fixation hedge selling. But one might speculate that with price or premium differential price resistance on the part of the consumer roasters resulting in hand to mouth buying from many origins, that underlying roaster price fixation buying might well come to the fore to buoy the New York market against any negative correction and that the new trading range might well have a degree of substance. Albeit that in reality and with unforeseen negative weather conditions for Brazil aside, that there is no sign of tight arabica coffee supply foreseen for this year.

The Certified washed Arabica coffee stocks held against the New York market were seen reported to be unchanged yesterday, to register these stocks at 2,701,803 bags. There was meanwhile a very modest 640 bags decrease to the number of bags pending grading for the exchange; to register these pending grading stocks at 9,263 bags.

The commodity markets encountered little in the way of striking news yesterday and focus was more related towards the influences of New Year repositioning of investment on the part of the longer term Index Funds, between selected markets. There was however something of a negative influence coming forth with speculation that with upbeat economic figures coming forth from the U.S.A. that it might inspire a rate hike and some muscle for the dollar, which make market prices relatively more expensive in terms of the other currencies. The New York arabica Coffee, Cocoa and Soybean markets nevertheless had a day of buoyancy, while the Oil, Natural Gas, Sugar, Cotton, Copper, Orange Juice, Wheat, Corn, 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 0.62% lower, to see the Index registered at 507.43. The day starts with a steady U.S. dollar trading at 1.645 to Sterling and 1.358 to the Euro, while Brent Crude is showing a degree of buoyancy in early trade and is selling at $ 107.50 per barrel.

The New York market started the day with modest buoyancy and followed by a dip into negative territory for the London market. The New York market and with producer selling pressure side-lined continued to attract fund buying support and roaster buy stops coming into play, to build upon its gains into the afternoons trade, while the London market remained under pressure and encountered erratic trade within a lower range for the afternoon. The London market continued to end the day with a late in the day recovery to close only modestly lower and having recovered 87% of the earlier losses of the day, while the New York market conversely ended the day on a very positive note and with 85.9% of the gains of the day intact and with the arbitrage having broadened to 43.24 usc/Lb., which equates to an attractive to the industry 35.76% price discount for the London robusta coffee market. This close and with the London market having recovered late in the day might be seen to be somewhat positive for the markets and one might expect to see a follow through steady stance being taken for early trade today against the prices set yesterday, as follows:

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

JAN 1725 – 3

MAR 1712 – 3 MAR 120.90 + 3.65

MAY 1676 – 4 MAY 123.00 + 3.65

JUL 1648 – 18 JUL 125.20 + 3.75

SEP 1644 – 23 SEP 127.05 + 3.70

NOV 1642 – 28 DEC 129.65 + 3.60

JAN 1644 – 26 MAR 132.25 + 3.55

MAR 1646 – 29 MAY 133.75 + 3.50

MAY 1651 – 29 JUL 135.20 + 3.40

JUL 1646 – 29 SEP 136.70 + 3.30

 

 


Coffee Market Report

January 08 2014

Following the December coffee export reports from neighbouring Honduras and Costa Rica the National Coffee Association of Guatemala have reported that the countries coffee exports for the month of December were 2,738 bags or 1.95% lower than the same month in the previous year, at a total of 137,589 bags. This figure and following a slow start over the previous two months, contributes to the countries cumulative exports for the first three months of this new October 2013 to September 2014 coffee year being 117,398 bags or 28.61% lower than the same period in the previous coffee year, at a total of 292,921 bags.

This relatively sharp dip in exports for the first three months of this new coffee year from Guatemala and despite many reference towards the problems of Roya or Leaf Rust, has to be put into perspective as the exports over October and November are influenced by carryover stocks from the past crop. Thus one might need to focus on the fact that the December exports were only marginally lower and taking place within an environment of internal market price resistance and that the much lower performance over October and November are not really any reflection of severe problems for the new crop.

The International Coffee Organisation have reported that the World coffee exports for the month of November were 14.4% lower than the same month in the previous year, at a total of 7,842,838 bags. This decline was to a degree related to a sharp 25.7% dip in the exports of robusta coffees for the month, where unlike in late 2012 Vietnam was an aggressive catch up seller of carryover stocks of 2011/12 crop robusta coffee stocks, whereas in the second half of 2013 there was price resistance being experienced in Vietnam, which resulted in the holding back of stocks except when consumers were prepared to pay up positive differentials to buy their nearby industrial requirements.

The dip in exports in November did also reflect declines in the overall exports of arabica coffees, with a price resistant dip in the exports of Brazil natural coffees, a natural tighter supply dip in the exports of other mild arabica coffees, but a sharp 43.5% increase in the exports of Colombian Mild arabica coffees. However despite the dip in November coffee exports, the shipments for the month were nevertheless close to consumer market requirements and this dip, has lowered modestly but has seemingly not really had a dramatic negative effect upon consumer market coffee stocks.

With the week-long Tet New Year holiday to celebrate the incoming Year of the Horse now only sixteen days to the fore, there is evidence of increasing interest in selling within the internal market in Vietnam, as farmers look to raise cash to finance these very important celebrations. These sales have however hit a bit of a hurdle with the sudden and unforeseen rally within the international market over Friday and Monday, which has inspired many to step back to await new highs for the market. The trade within Vietnam is nevertheless forecasting that with forward trade export commitments to fulfil, that they foresee exports of mostly robusta coffees for the month shall be between 1.67 million to 2.5 million bags.

Such a performance would still be much lower than the impressive 3.65 million bags exported in January last year, which illustrates the fact that despite a larger new crop that has just been completed and good carryover stocks from the past crop, the internal market price resistance that has prevailed over the past six months has had a marked effect upon export volumes. This price resistance having likewise contributed to premium differentials for the coffees that have been shipped and to the prevailing inverted structure of the reference prices of the London market, which by nature of the premiums for the prompt months, does not allow for the international trade to take on medium terms stocks and finance the carry of the stocks by moving their hedges forward within the London market.

The Certified washed Arabica coffee stocks held against the New York market were seen to decrease by 975 bags yesterday, to register these stocks at 2,701,803 bags. There was meanwhile a very similar 960 bags increase to the number of bags pending grading for the exchange; to register these pending grading stocks at 9,903 bags.

The commodity markets were mixed yesterday, but with the Cotton market a feature for the day against the news that China would possibly be planting 9% less cotton this year, albeit that improved prices might actually inspire farmers to plant more cotton. There are however renewed fears being voiced for the negative effects of local government debt within China, possibly due to slow growth for 2014 and thus inspiring caution within some of the markets. The Oil, Natural Gas, Sugar, Cocoa, London robusta Coffee, Cotton, Copper, Orange Juice, Soybean and Palladium markets had a day of buoyancy, while the New York arabica Coffee, Wheat, Corn, Gold, Silver and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.38% lower, to see the Index registered at 510.61. The day starts with a steady U.S. dollar trading at 1.641 to Sterling and 1.362 to the Euro, while Brent Crude is showing follow through buoyancy in early trade and is selling at $ 107.45 per barrel.

The New York market once again started the day yesterday with modest buoyancy and followed by a similar trend for the London market, within an environment of thin trade and with producer price fixation selling muted by the bid by many to wait for new highs, both markets entered the afternoon on a quiet and lacklustre positive track but starting to pick up volume and adding some additional value. As the afternoon progressed the funds started to lose their appetite and with the markets stalled, the negative effects of catch up producer price fixation selling started to come into play and with both markets falling back into negative territory. This reversal in the fortunes of the markets triggered speculative profit and high volumes of trade to extend the losses for the New York market, but with the London market recovering late in the day and ending off with a thinner arbitrage of 39.46 usc/Lb., which equates to a reduced 33.65% price discount for the London robusta coffee market. The London market continued to end the day on a positive note and with 45.45% of the earlier gains of the day intact, while the New York market ended the day on a soft note and with 86.2% of the earlier losses of the day intact. This mixed close for the markets provides for some degree of caution in early trade today which might see the New York market taking a steady stance, but with perhaps the London market attracting some negative producer fixation selling against eh prices set yesterday, as follows:

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

JAN 1728 + 21

MAR 1715 + 10 MAR 117.25 – 3.75

MAY 1680 + 10 MAY 119.35 – 3.80

JUL 1666 + 11 JUL 121.45 – 3.80

SEP 1667 + 13 SEP 123.35 – 3.85

NOV 1670 + 14 DEC 126.05 – 3.85

JAN 1670 + 14 MAR 128.70 – 3.90

MAR 1675 + 14 MAY 130.25 – 3.95

MAY 1680 + 14 JUL 131.80 – 3.90

JUL 1675 + 14 SEP 133.40 – 3.75

 


Coffee Market Report

January 07 2014

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 increase their net short sold position within this market by 8.49% in the week of trade leading up to Tuesday 31st. December, to see this short sold position registered at 10,426 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 0.84%, to register a net long on the day of 53,478 Lots.

During this same week of trade the Non Commercial Speculative sector of the market increased their net short sold position within the market by 4.68%, to register a net short sold position of 17,905 Lots on the day. This speculative net short position within the New York market which is the equivalent of 5,075,988 bags has most likely been significantly reduced over the past two days of positive correction for the market and likewise, the Managed Money fund net short position within this market.

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market decrease their net long position within this market by 8.38% in the week of trade leading up to Monday 30th. December, to see this short long position registered at 8,894 Lots, on the day. This net long which is now the equivalent of 1,482,333 bags has most likely been little changed over during the period of holiday interrupted mixed and relatively thin trade that has since followed.

The National Coffee Institute of Costa Rica have reported that the countries coffee exports for the month of December were 35,335 bags or 35.29% lower than the same month in the previous year, at a total of 64,784 bags. This figure and following a slow start over the previous two months, contributes to the countries cumulative exports for the first three months of this new October 2013 to September 2014 coffee year being 42,704 bags or 23.63% lower than the same period in the previous coffee year, at a total of 138,031 bags.

The speculative and fund sectors of the coffee markets experienced an injection of bullish news yesterday morning, with the report from the Swiss based but internationally represented coffee trading house Volcafe, who have sharply reduced their earlier 2014 new Brazil crop forecast by 15%, to now forecast a new crop for this year of a relatively modest 51 million bags. This adjustment in their forecast being mostly related to their expectation that a number of farmers have brought forward their usual pruning cycles and therefore, shall prune or retune back larger percentages of their farms, with these pruned trees now only due to come back into full production for the 2015 crop. One might comment that with this speculative forecast aside and with not all of Brazil’s farmers having the cash resources for full farm inputs, that many had already been talking this year’s new crop at around 56 million bags.

Nevertheless if one is to apply a domestic demand of 22 million bags and an export demand of 32 million bags for Brazil and therefore a total demand of 54 million bags, this new forecast would initially indicate a 3 million bags shortfall. This does however have to be seen against a carryover stock of approximately 8 million bags of mostly arabica coffees into the new crop, which would even with a crop of only 51 million bags, guarantee a steady supply of Brazil coffees into the next 2015 crop. This latter 2015 crop due to be a biennially bearing down year crop, but if there is reality to a sharp increase in the retuned coffees this year, these same trees shall be coming back with a good crop for the following year and therefore while the news is emotionally bullish, the longer term reality is that there shall still be overall surplus world coffee supply for 2014.

The new Indian crop is picking up steam and new crop coffees are starting to come to the market, but with still some degree of price resistance being shown by the farmers. Nevertheless the Indian coffee exports for the first three months of the present October 2013 to September 2014 coffee year are 261,300 bags or 33.85% higher than the same period in the previous coffee year, at a total of 1,033,250 bags.

The Certified washed Arabica coffee stocks held against the New York market were seen to decrease by 2,054 bags yesterday, to register these stocks at 2,702,778 bags. There was meanwhile no change to the number of bags pending grading for the exchange; to register these pending grading stocks at 8,943 bags.

The commodity markets were again partially influenced by the disruptive winter weather in the North East of the U.S.A., which kept a large number of players off the field of play for the day. While lower than expected U.S. services figures for December, took some of the lustre out of the confidence in continued growth for this leading economy for this year. The markets overall benefited from a marginally softer dollar and tended higher for the day and with the Coffee markets sharply higher against fund buying, the Sugar, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Platinum and Palladium markets showing buoyancy, while the Natural Gas market was steady and the Oil, Gold and Silver markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.41% higher, to see the Index registered at 512.56. The day starts with a softer U.S. dollar trading at 1.639 to Sterling and 1.362 to the Euro, while Brent Crude is steady in early trade and is selling at $ 106.80 per barrel.

The New York market started the day yesterday with modest buoyancy and followed by a similar trend for the London market, within an environment of thin trade, but with a short dip into negative territory for both of the markets. However as the markets entered the afternoon and with emotional support from the relatively bullish news of a potential for a smaller Brazil crop this year that both assisted to attract fund and speculative buying and to slow the price fixation selling pressure over the markets, both markets were in receipt of underlying support and with buy stops being triggered to see their individual gains extended. The London market continued to end the day on a strong note and with 83.6% of the gains of the day intact and the New York market likewise ended the day on a strong note and with 91.2% of the gains of the day intact. This strong close does tend to inspire confidence but if the funds do not once again step in to buy into the markets, they are both vulnerable to catch up producer price fixation selling pressure and this might well inspire a negative correction for early trade today against the positive prices set yesterday, as follows:

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

JAN 1707 + 47

MAR 1705 + 61 MAR 121.00 + 4.65

MAY 1670 + 57 MAY 123.15 + 4.60

JUL 1655 + 58 JUL 125.25 + 4.55

SEP 1654 + 57 SEP 127.20 + 4.40

NOV 1656 + 57 DEC 129.90 + 4.15

JAN 1656 + 57 MAR 132.60 + 4.00

MAR 1661 + 57 MAY 134.20 + 3.95

MAY 1666 + 57 JUL 135.70 + 3.80

JUL 1661 + 57 SEP 137.15 + 3.65

 


Coffee Market Report

January 06 2014

The National Coffee Federation in Colombia have reported that the countries coffee production for the month of December was 211,000 bags or 23.34% higher than the same month in the previous year, to total production for the month at 1,115,000 bags. This increase has fuelled exports for the month of December to have been 223,000 bags or 28.34% higher than the same month in the previous year, at a total of 1,010,000 bags.

While in terms of the present October 2013 to September 2014 coffee year, the coffee production in Colombia has been recorded to have been 959,000 bags or 41.21% higher than the same period in the previous coffee year, at a total of 3,286,000 bags. This has likewise corresponded to the Colombia’s coffee exports for the first three months of the present coffee year to have been 892,000 bags or 42.46% higher than the same period in the previous coffee year, at a total of 2,993,000 bags.

These rather dramatic production figures in Colombia which has seen calendar production for 2013 to have been 3.2 million bags or 41.56% higher than the production of the previous 2012 calendar year at 10.9 million bags for 2013, is due to the combination of much improved weather conditions and to the long term state subsidised program of replacement of aged trees with new higher yielding and disease resistant coffee varieties. This latter program the Colombian Coffee Federation says has seen 2.8 billion new trees planted out over the past five years is on-going and with many new trees still to come into full production maturity, which inspires their confidence in improve production for this year which might indicate a crop for this calendar year that might pip the 12 million bags mark and with unforeseen negative weather conditions aside, to see improved production levels for the follow years.

Meanwhile with fine washed arabica coffee supply from Colombia steadily increasing, the country is very quickly regaining the lost market share they encountered within the main consumer markets, over the past four years of tighter supply. This share being taken back from their neighbouring producers in Central America, who with the exception of Honduras, continue to show price resistance to the dictates of the relatively soft reference prices of the New York market.

The Indian Coffee Board with the monsoon season over and the new crop harvest starting, have downgraded their earlier new crop forecast by 10.23% to now forecast a new crop for the October 2013 to September 2014 coffee year of 5,191,667 bags. This new crop to be made up by 1,700,00 bags of arabica coffee and 3,491,667 bags of robusta coffees, with the Coffee Board having attributed the reduction in the new crop forecast to spells of dry weather during the early part of the monsoon season and followed by excessive rains later in the season.

These official crop forecasts are however always suspect, as with the influences of the soft international market prices coming into play, the contributions of figures from the coffee farmers are often discounted in a bid to try to buoy market sentiment, but one has nevertheless has to see some degree of reality to the reports from this well respected Coffee Board of India. Albeit that the slight drop in the forecasted Indian coffee crop is more than countered by the new larger crop forecasts that are emanating from leading producers, such as Brazil, Vietnam, Colombia and Indonesia.

The Certified washed Arabica coffee stocks held against the New York market were seen to decrease by 4,224 bags on Friday, to register these stocks at 2,704,832 bags. There was meanwhile a more modest 3,200 bags increase to the number of bags that were pending grading for the exchange; to register these pending grading stocks at 8,943 bags.

The commodity markets were partially influenced by the disruptive winter weather in the North East of the U.S.A., which kept a large number of players off the field of play on Friday. The markets were mixed for the day and with the Cocoa, Coffee, Orange Juice, Wheat, Corn, Gold, Silver, Platinum and Palladium markets showing buoyancy, while the Oil, Natural Gas, Sugar, Cotton, Copper and Soybean markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.33% higher, to see the Index registered at 510.49. The day starts with a steady to buoyant U.S. dollar trading at 1.636 to Sterling and 1.358 to the Euro, while Brent Crude is once again tending softer in early trade and is selling at $ 106.55 per barrel.

The New York market started the day on Friday with early buoyancy in thin trade, but followed by a softer start for the London market and with the New York market holding its modest gains into the afternoon, to be joined by a recovery to par for the London market. As the afternoon progressed however the New York market started to attract speculative short covering and with the added value triggering buy stops, to accelerate and accentuate the gains and with the influence of this market recovering the previous few days losses, coming in to side-line producer selling activity for the London market and to buoy the prompt month value and once again set a strong inverted value structure for this market. The London market continued to end the day on a positive note and with 63.8% of the earlier gains of the day intact and followed by the New York market that ended the day on a very positive note and with 96.1% of the earlier gains of the day intact, while the surge in value in New York has seen the arbitrage broaden to 41.78 usc/Lb., which equates to the London robusta coffee market now offering a 35.91% price discount to the New York arabica coffee market. This sudden and somewhat unexpected positive end to the day last week would be seen to be constructive for sentiment for early trade today, but one might expect that with the basis for the gains having been technical rather than fundamental that there might be some producer price fixation selling pressure due to come into play against the positive prices set on Friday, as follows:

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

JAN 1660 + 35

MAR 1644 + 30 MAR 116.35 + 4.95

MAY 1613 + 17 MAY 118.55 + 4.85

JUL 1597 + 13 JUL 120.70 + 4.80

SEP 1597 + 12 SEP 122.80 + 4.90

NOV 1599 + 14 DEC 125.75 + 4.95

JAN 1599 + 14 MAR 128.60 + 4.90

MAR 1604 + 14 MAY 130.25 + 5.00

MAY 1609 + 14 JUL 131.90 + 5.15

JUL 1604 + 14 SEP 133.50 + 5.10

 


Coffee Market Report

January 03 2014

With the month of December passed, the usual monthly export figures are starting to come forth from Central America with The National Coffee Institute of Honduras reporting that their coffee exports for the month were 1,014 bags or 0.3% higher than the same month in the previous year, at a total of 344,094 bags. This figure and following a slow start over the previous two months, contributes to the countries cumulative exports for the first three months of this new October 2013 to September 2014 coffee year being 53,071 bags or 10.84% lower than the same period in the previous coffee year, at a total of 436,326 bags.

This modest increase in export volumes from Honduras is seemingly more related to new crop coffees rather than to carry over stocks from the past crop and with the country forecasting the new crop that is presently in harvest to be 6% larger than the past crop, one can expect that Honduras shall continue in the coming months to report relatively good export volumes. This country unlike its neighbours in Central America, having managed to counter the negative effects of Roya or Leaf Rust by having a good percentage new coffee trees coming into production, which are mostly disease free for the present.

Brazil have announced their preliminary export figures for the month of December and have reported that the countries coffee exports for the month were 3.8% lower than the same month in the previous year, at a total of 2.52 million bags. This modest dip in export volumes is however no indication of tighter supply, but is more related to the internal market price resistance, which has tended to likewise slow export volumes.

The month of December has seen the all of the main coffee districts within Brazil in receipt of sufficient rains to maintain ground water retention levels and to guarantee so far, the steady development of the immature cherries towards the next and biennially bearing larger new crop. Thus for the present, there are no fears on the part of the consumer markets, in terms of longer term arabica coffee supply and with the evidence of the potentially good crop being further confirmed, by the steady internal market selling of past crop stocks.

Following the positive robusta coffee export figures from Indonesia’s leading producing island of Sumatra, the countries Agricultural Ministry have forecasted that 2014 shall bring in a 2,080,900 bags or 18.74% larger coffee crop for this calendar year, which they forecast shall total 13,183,333 bags. This is a rather surprisingly bullish forecast, as there have been many earlier private industry forecasts that production for 2014 would in fact be a little more modest than the 2013 crop.

This report from the authorities for a 2014 Indonesian coffee crop that is approximately 1 million bags larger than many of the private trade and industry forecasts, is expected to have a ratio of approximately 86 to 24 robusta and arabica coffees. Thus aside from the already bearish news of a significantly larger new crop of mostly robusta coffees from Vietnam, the report does not inspire confidence for the London market. This market having taken a knock yesterday that saw the arbitrage widen to 38.19 usc/Lb., which equates to a more attractive for the industry 34.28% price discount to the New York arabica coffee market.

The Certified washed Arabica coffee stocks held against the New York market were seen to decrease by 250 bags yesterday, to register these stocks at 2,709,056 bags. There was meanwhile no change to the number of bags that were pending grading for the exchange; to register these pending grading stocks at 5,743 bags.

The commodity markets had a mixed day’s trade yesterday and with the Gold and Silver markets surging against fund support, while the fundamentals of tighter supply buoyed the Natural Gas market and conversely resulted in a sharp negative correction for the Oil, Soybean and Robusta Coffee markets. There were however renewed concerns over slower growth for the Chinese and Indian economies for this year, which tended the counter the positive forecasts for the U.S.A. and European economies. The Natural Gas, New York arabica Coffee, Cotton, Gold, Silver, Platinum and Palladium markets had a positive day, while the Oil, Sugar, Cocoa, London robusta Coffee, Copper, Orange Juice, Wheat, 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 0.15% higher, to see the Index registered at 508.83. Thus the index and in line with the softer stance for 2013 for the majority of the markets, ended the year 8.64% lower for the year. The day starts with a steady to buoyant U.S. dollar trading at 1.644 to Sterling and 1.365 to the Euro, while Brent Crude is tending softer in early trade and is selling at $ 106.95 per barrel.

The London market started the day yesterday predictably under negative pressure, following the influences of the news of an extended speculative net long position within the London market and the very negative nature of the close on Tuesday, in New York and with the London market quickly moving back into one month lows in value. This was followed by a in New York market that initially started off on a steady to buoyant note in thin trade, but soon to start coming under pressure and slipping back to par but with renewed buoyancy coming into play, while the London market crawled back from its earlier solo lows. The London market did not however sustain its short term sympathetic steadiness and within an environment of relatively good volumes of trade and with speculative selling accompanied by producer selling activity ended the day on a soft note and with 89.6% of the earlier losses of the day intact, while the New York market continued to end the day on a modestly positive note and with 43.7% of the earlier gains of the day intact. This mixed close does not provide much in the way of an indication for direction for trade today, which is likely to be somewhat hesitant and on a near to steady track against the prices set yesterday, as follows:

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

JAN 1625 – 60

MAR 1614 – 69 MAR 111.40 + 0.70

MAY 1596 – 58 MAY 113.70 + 0.75

JUL 1584 – 61 JUL 115.90 + 0.80

SEP 1585 – 60 SEP 117.90 + 0.75

NOV 1585 – 60 DEC 120.80 + 0.70

JAN 1585 – 60 MAR 123.70 + 0.65

MAR 1590 – 60 MAY 125.25 + 0.50

MAY 1595 – 60 JUL 126.75 + 0.30

JUL 1590 – 60 SEP 128.40 + 0.20

 


Coffee Market Report

January 02 2014

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market increase their net long position within this market by 23.5% in the week of trade leading up to Tuesday 24th. December, to see this short long position registered at 9,707 Lots, on the day. This net long which is now the equivalent of 1,617,833 bags has most likely been little changed over during the period of holiday interrupted and extremely thin trade that has since followed.

While the rising volumes of this questionable in terms of fundamental reality net long position, has contributed to the unrealistic inverted price structure of the London market, with the prompt delivery months still registered at premium prices to the follow on months and limiting the potential for the international coffee traders to take on and carry longer term robusta coffee stocks. This a factor and with no fundamental reasons to fear longer term robusta coffee supply tightness, that one might foresee shall start to change as this year progresses and with perhaps the speculative sector of the London market starting to liquidate some if not all of the present net long position.

With the month of December passed, the Indonesia Government trade statistics have reported that the robusta coffee exports from the main producing island of Sumatra were 55,912 bags or 17.59% higher than the same month in the previous year, at a total of 373,762 bags. This improved performance and following a year of improved robusta coffee export volumes with all of the months with the exception of June last year being positive, has contributed to Sumatra’s robusta coffee exports for the calendar year of 2013 being a very impressive 2,639,155 bags or 80.21% higher than the previous year, at a total of 5,929,520 bags.

The question now is with the new robusta crop starting to be harvested late in the first quarter of this year and starting to come to the market in April, what shall be the production and exports of robusta coffees from Sumatra for this year. So far the weather conditions within Indonesia have not been threatening towards yields, but there might have been some modest degree of withholding of inputs with the less profitable sales during an overall softer in value 2013, but this has not been such a severe dip in value for the robusta coffee market with 2013 ending off with the reference prices in the London market on the 31st. December only 12.53% lower than the same month in the previous year. There is however also a steadily growing domestic coffee market within Indonesia and one that favours the robusta rather than the more expensive arabica coffees and therefore, one might expect to see a dip in Sumatran robusta coffee exports for 2014.

Any dip in robusta coffee exports from Sumatra which would more than likely only be 10% to 20% lower for 2014, would not be foreseen to be a problem for consumer market supply of robusta coffees for this year, as Vietnam is just completing a new robusta coffee crop that many foresee to be from 2.6 to 3 million bags larger than the previous crop. Furthermore due to price resistance over the second half of 2013, the robusta coffee export volumes from Vietnam have been relatively low and the country is assessed to be carrying considerable stocks of robusta coffees, which shall eventually have to come to the market.

Illustrating the dip in exports from Vietnam with a crop that is made up from an approximate 96 to 4 ratio of robusta and arabica coffees, is the report that the countries coffee exports for the first three months of the present September 2013 to October 2014 coffee year are 2,050,983 bags or 32% lower than the same period in the previous coffee year, at a total of 4,358,333 bags. This slow end to the year having contributed to coffee exports for the calendar year of 2013 being 25.7% lower than the previous year, at a total of 21.5 million bags and with stocks at hand a larger new crop coming into play, the potential for exports to rise in 2014 to in excess of 25 million bags.

The question now is with Vietnam well stocked with robusta coffees and the Tet New Lunar New Year holiday that shall run for a week starting on the 30th. January, what shall be the effect upon selling aggression prior to this holiday that is now only four weeks away and likewise with the resulting price fixation hedge selling against the London market, what pressure might start to come against this market. This market ended the year with the arbitrage at a relatively modest 34.36 usc/Lb. that equates to a likewise modest 31.04% price discount to the New York market, which one might expect to foresee to widen over the next few weeks, as a result of more selling aggression within the internal market in Vietnam.

The Certified washed Arabica coffee stocks held against the New York market were seen to decrease by 6,445 bags but an increase by 28,177 bags on Tuesday, from our incorrectly reported sharp drop the previous day, to register these stocks at 2,709,306 bags. There was meanwhile an 8,000 bags decrease to the number of bags that were pending grading for the exchange; to register these pending grading stocks at 5,743 bags.

The commodity markets ended off the year with the majority of the markets having experienced a negative year and with only the Cocoa and Natural Gas markets having had a strongly positive year, while the Oil and Palladium markets ended the year with some modest buoyancy. The biggest losers for the year were the Silver, Gold and the New York arabica Coffee markets, with the Silver market 35.9% lower, the Gold market 28.2% lower and the New York Coffee market 23% lower in value for the year. While in terms of trade on New Year’s Eve and with year-end book squaring playing a part, the Sugar, Cotton, Copper, Wheat, Platinum and Palladium markets had a day of buoyancy, while the Cocoa and Gold markets were near to steady and the Oil, Natural Gas, Coffee, Orange Juice, Soybean and Silver markets had a softer days trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.62% lower, to see the Index registered at 508.06. Thus the index and in line with the softer stance for 2013 for the majority of the markets, ended the year 8.64% lower for the year. The day starts with a steady U.S. dollar trading at 1.660 to Sterling and 1.375 to the Euro, while Brent Crude is showing some buoyancy in early trade and is selling at $ 110.95 per barrel.

The New York market started the day on Tuesday on a modestly softer note and followed by a similar softer start for the London market and with both markets tending softer into the afternoons trade, with perhaps the influence of the negative nature of the macro commodity index coming into play to further influence the downside track being taken within the New York market later on in the afternoon. The London market did however later on in the afternoon register a partial recovery and ended the day on a soft note, but having recovered 56% of the earlier losses of the day, while the New York market ended the day on a very soft note and with 96.4% of the earlier losses of the day intact. The New York market shall start the day late today and at only 1300 hrs. GMT while the London market shall have a normal days trade to kick off at 0900 hrs GMT, with the potential for hesitantly thin and lacklustre and possibly catch up negative for London trade due for the markets today against the prices set on Tuesday, as follows:

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

JAN 1685 – 11

MAR 1683 – 11 MAR 110.70 – 4.00

MAY 1654 – 14 MAY 112.95 – 4.00

JUL 1645 – 14 JUL 115.10 – 3.95

SEP 1645 – 13 SEP 117.15 – 3.85

NOV 1645 – 13 DEC 120.10 – 3.70

JAN 1645 – 13 MAR 123.05 – 3.55

MAR 1650 – 13 MAY 124.75 – 3.45

MAY 1655 – 13 JUL 126.45 – 3.30

JUL 1650 – 13 SEP 128.20 – 3.15

 


Coffee Market Report

December 31 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 31.52% in the week of trade leading up to Tuesday 24th. December, to see this short sold position registered at 9,610 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 1.34%, to register a net long on the day of 53,929 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 22.63%, to register a net short sold position of 17,105 Lots on the day. This speculative net short position within the New York market which is the equivalent of a now much more modest 4,849,192 bags has most likely been little changed over during the period of holiday interrupted and extremely thin trade that has since followed.

The question is now with both the managed money funds and the speculative sectors of the market having significantly reduced their net short sold positions within the New York market, how they shall react in the New Year to the markets that shall presumably start attracting increased volumes of producer price fixation selling activity from the undersold new crops from Central America. This selling activity to be accompanied by steady selling of new crop coffees from Colombia and the new crop arabica coffee stocks from Brazil, which are steadily coming to the market.

This is a very big question as while the fundamentals of supply and demand would logically support a bearish trend to continue for the market, the charts that more often than not dominate fund sentiment, would suggest that over the past couple of weeks that the down trend that started on the 6th. May has turned and would suggest the market to build increased muscle. Thus there might be a chance that many producers looking to the charts that presently point to a first quarter recovery to a 135 usc/Lb. plus trading range, might start the year by holding back for improved value and thus by nature, inspire some degree of buoyancy. However if the buoyancy is not sustained, it might in turn trigger bouts of catch up selling and turn the market south and thus we enter the New Year, with a great degree of uncertainty as to which direction the New York market might take and likewise, influence sentiment within the London market.

The Certified washed Arabica coffee stocks held against the New York market were seen to decrease by 32,362 bags yesterday, to register these stocks at 2,681,129 bags. There was meanwhile no change to the number of bags that were pending grading for the exchange; to register these pending grading stocks at 13,545 bags.

The commodity markets are ending off the year with the usual book squaring activity, but with economic indicators tending to point to modest but nevertheless better overall growth prospects for the major economies for the coming year. Year-end trade was thin yesterday with the Cotton, Copper, Orange Juice, Platinum and Palladium markets showing buoyancy, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Wheat, Corn, Soybean, Gold and Silver markets having a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.64% lower, to see the Index registered at 511.24. The day starts with a steady to modestly buoyant U.S. dollar trading at 1.648 to Sterling and 1.379 to the Euro, while Brent Crude is tending marginally softer in early trade and is selling at $ 110.65 per barrel.

The New York market started the day yesterday modestly softer and followed by a similar stance being taken within the London market, but with the New York market recovering and showing hesitant buoyancy within an environment of very thin trade as the morning progressed and into the afternoon. This recovery was not however sustained and while trade remained thin the New York market and possibly with some influence from the negative nature of the macro commodity index, started to lose its way and to join London in negative territory. The London market continued to end the day on a soft note and with 83.3% of the earlier losses of the day intact and followed by a soft close for the New York market, with 78.6% of the earlier losses of the day intact. This overall soft close is unlikely to inspire confidence and one might expect little better than a steady close for both markets in early trade today against the prices set yesterday, as follows:

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

JAN 1696 – 14

MAR 1694 – 20 MAR 114.70 – 1.65

MAY 1668 – 15 MAY 116.95 – 1.65

JUL 1659 – 8 JUL 119.05 – 1.60

SEP 1658 – 6 SEP 121.00 – 1.60

NOV 1658 – 5 DEC 123.80 – 1.55

JAN 1658 – 3 MAR 126.60 – 1.55

MAR 1663 – 3 MAY 128.20 – 1.50

MAY 1668 – 3 JUL 129.75 – 1.40

JUL 1663 – 3 SEP 131.35 – 1.35

 


Coffee Market Report

December 30 2013

The weekend has seen the Chaparrastique volcano in El Salvador erupting, with this volcano lying within a coffee growing district. So far there are no reports of direct lava flow damage to any coffee, but there are clouds of ash falling upon the surrounding farms and with cherries maturing and the harvest already in progress, there shall be some difficulties in identifying and harvesting coated rip cherries. Especially so as there are no signs of forthcoming hea