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I. & M. Smith (Pty) Ltd.

Coffee Market Report

02 Jun 2014

Coffee Market Report

June 02 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 long position within this market by 2.99% in the week of trade leading up to Tuesday 27th. May; to register a net long position of 41,201 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 0.34%, to register a net long on the day of 44,031 Lots.

During this same week of trade the Non Commercial Speculative sector of the market decreased their net long position within the market by 5.78%, to register a net long position of 27,447 Lots on the day. This speculative net long position within the New York market which is the equivalent of 7,781,103 bags has most likely been marginally decreased over the following days of mixed but overall softer trade, which has since followed and so too, the net long that was held by the Managed Money Fund sector of the market.

With the month of May passed the Government Trade data from Sumatra as the main coffee growing island of Indonesia has reported that the islands Robusta coffee exports for the month of April were 249,659 bags or 66.31% lower than the same month last year, at a total of 126,822 bags. This lower performance contributes to the islands cumulative robusta coffee exports from Sumatra for the first eight months of the present October 2013 to September 2014 coffee year to being 554,564 bags or 16.58% lower than the same period in the previous coffee year, at a total of 2,790,105 bags.

This dip in robusta coffee exports from Sumatra would tend to support the many private trade and industry forecasts for a weather related lower new robusta coffee crop that started to come into play in April, which contradict the more positive forecasts by the countries official trade and industry bodies. But one might also appropriate the dip in robusta coffee exports for the month of May partially to the negative influences of internal market price resistance that has seen demands for relatively high prices for new crop coffees, which extrapolates to uncompetitive export price differentials being demanded by the countries exporters. This with good volumes of more affordable Vietnam coffees chasing the consumer markets has dulled the demand from the consumers for the Indonesia robusta coffees, which is a scenario that one can expect to continue so long as the reference prices of the London market remain within their present lower trading range, or at least until such time as the new trading range becomes clearly set for the foreseeable future.

The dangers of official state intervention or price controls in the commodity markets has once again come to the fore in the Ivory Coast, with the pre crop sales by the Ivory Coast Coffee and Cocoa Council to the countries exporters that were based on farm gate prices to the countries farmers at the equivalent of US$ 1,290.00 per metric ton apparently resulting in many defaults. This has left many exporters with forward export sales commitment to fill, struggling to fulfil contracts which were reliant upon the supply commitments of the Coffee and Cocoa Council.

The reason for the deficit supply is not being appropriated to problems with the size of the new crop, but is presumed to be related to farmers chasing better value from the neighbouring countries and supporting smugglers rather than the official state dictated price for new crop coffees. It is however an unfortunate situation for all parties, as it negatively affects both the financial situation for the individual private exports and the export revenue for the state, from the countries coffee sales.

The flood of tourists that are soon due to enter Brazil for the forthcoming world cup have been preceded by a relatively high number of coffee industry tourists, who have been touring the main arabica coffee districts in Brazil to gain a better hands on perspective as to the actual extent of the damage done to the new crop potential and with the resulting forecasts. These forecasts in terms of the consumer roaster industry players tend to remain confidential, but there are many trade coffee tours that result in public statements.

These reports so far have been relatively mixed in their numbers but with many still topping the 50 million bags mark and by nature with significant carryover stocks evident and supporting the view that despite a combined domestic market and export market demand for approximately 54 million bags per annum, there shall be more than sufficient Brazil coffee available through to the next 2015 crop and therefore, these reports contribute to a softening in speculative sentiment towards the New York market. They have not however completely paddocked the bulls in the market as there still remains the question as to what shall be the prospects for the next 2015 Brazil crop that shall not have the advantage of the support from good carryover stocks and while the New York market might have taken a sorter track over the past few weeks, there does remain some degree of underlying speculative support.

The arbitrage between the markets narrowed on Friday to register this at 89.64 usc/Lb., while this equates to a very attractive 50.5% price discount for the London robusta coffee market. This arbitrage continuing to inspire consumer market roaster interest in robusta coffees, to assist to take some of the bite out of the rise in arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 13,040 bags on Friday, to register these stocks at 2,545,704 bags. There was meanwhile a smaller in volume 1,002 bags increase in the number of bags pending grading for the exchange; to register these pending grading stocks at 11,511 bags.

The commodity markets lacked excitement on Friday and suffered from overall lacklustre trade, which was not assisted much by a good number of Western European players taking a bridging long weekend holiday follow Thursday’s Ascension Day holiday. The Cocoa, Cotton, Orange Juice and Palladium markets nevertheless showed some buoyancy for the day, while the Oil, Natural Gas, Sugar, Coffee, Copper, Wheat, Corn, Soybean, Gold, Silver and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.55% lower; to see this Index registered at 547.99. The day starts with the U.S. Dollar near to steady and trading at 1.676 to Sterling and 1.363 to the Euro, while Brent Crude is showing some buoyancy in early trade and is selling at $ 109.90 per barrel.

The coffee markets opened the day of Friday on an early downside track in thin trade, which was something of a surprise in terms of the previous day’s buoyancy. Both markets entered the afternoons trade maintaining their softer stance, but with the New York market coming under more severe negative pressure in line with the waning speculative support for the market that comes with the presently diminishing fears over medium term Brazil coffee supply. The London market continued to end the day on a softer note, but having recovered 69.2% of the earlier losses of the day, while the New York market ended the day on a soft note and having only recovered 39% of the earlier losses of the day by the close. This overall soft close for the market is unlikely to inspire little better than a cautiously steady start for early trade today against the prices set on Friday, as follows:

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

JUL 1937 – 12 JUL 177.50 – 4.45

SEP 1956 – 11 SEP 179.90 – 4.45

NOV 1969 – 11 DEC 183.20 – 4.40

JAN 1979 – 12 MAR 185.95 – 4.35

MAR 1986 – 13 MAY 187.35 – 4.00

MAY 1995 – 14 JUL 187.60 – 3.75

JUL 2003 – 14 SEP 186.95 – 3.50

SEP 2009 – 14 DEC 185.80 – 3.40

NOV 2018 – 14 MAR 184.65 – 3.35

JAN 2018 – 14 MAY 183.65 – 3.35

 


Coffee Market Report

May 30 2014

Firstly apologies for the typo errors and grammatical errors in yesterday’s report, which suffered from interruptions that were related to a series of phone calls and a somewhat confusing paragraph, ensued. The Companhia Nacional de Abastecimento (CONAB) or National Food Supply Agency new Brazil crop forecast on the morning of the 15th. May, was in fact for 44.6 million bags. This figure was well above the many speculative suggestions prior to the scheduled report, which suggested that this traditionally very conservative forecast would only indicate a new crop of between 39 and 40.5 million bags. Thus this forecast when it came out at 44.6 million and when adjusted for the approximate 10% below reality factor, indicated a new crop that is more likely to be 49.5 million bags.

Countering the recent reports that Brazil shall have a carryover stock of mostly arabica coffees from the past crop into the partial drought affected new Brazil crop this year that varied between 8 million to 12.5 million bags, the respected Brazil analysts Safras e Mercado have announced yesterday that these stocks would only be a more modest 5.34 million to 8 million bags, as at the end of June. This report tended to buoy some of the waning speculative spirits in trade yesterday, as it does by nature indicate a tighter supply for the coming year.

However if one is to believe in a new crop of 49.5 million bags as against a domestic market and export market demand of between 53 million and 54 million bags per annum, these stocks even if they are more modest than many if not most believe in, there is no indication of tight supply of Brazil coffees for the foreseeable future. But only time shall tell and in this respect the evidence of the yield outturns from the new arabica harvest that shall really only start to become clearer by August and following this, the late September to November spring and summer rainfall and the resulting flowering for the new 2015 Brazil crop, which shall indicate the crop potential for next year.

A new Brazil crop that shall potentially not have the advantage of significantly large carryover stocks and one that shall need to exceed 50 million bags, if there is not to be a tight Brazil coffee supply for the follow on 2015/2016 coffee year. Thus Brazil crop and weather news is due to bring much volatility to the market and a seesaw in speculative sentiment for the rest of the year, as one can expect many in the way of conflicting reports and forecasts to come into play for the rest of the year.

Meanwhile there has been slow and steady selling activity within the internal market in Brazil over the past week and despite a dip in the reference prices of the international markets, while the main arabica coffee districts have been in receipt of wide spread rain showers to assist to maintain ground water retention levels for the dry winter harvest season. Thus in terms of Brazil coffee supply to the consumer markets, there have been no real hiccups.

The dip in value of the London market this week tended to slow internal market selling activity within the Asian robusta coffee producing countries and slowed selling aggression on the part of Vietnams exporters for the week, but with last night’s recovery expected to encourage some more activity for trade today, the recovery is perhaps not enough to inspire any selling aggression. There are however following a large past crop and with a large new crop forecasted for the end of this year in Vietnam, good robusta coffee stocks held within internal market farm and trade hands that now with only four to five months to come to the market ahead of the new crop, some pressure for farmers and internal traders to remain steady sellers.

The arbitrage between the markets broadened yesterday to register this at 93.54 usc/Lb., while this equates to a very attractive 51.41% price discount for the London robusta coffee market. This arbitrage continuing to inspire consumer market roaster interest in robusta coffees, to assist to take some of the bite out of the rise in arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 630 bags yesterday, to register these stocks at 2,558,744 bags. There was meanwhile a larger in volume 6,027 bags decrease in the number of bags pending grading for the exchange; to register these pending grading stocks at 10,509 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 287,000 bags over the two weeks of trade leading up to Monday 26th. May; to register these stocks at a still relatively modest 846,000 bags. However with the London market having returned to a normal price structure following many moths of an inverted structure that was negative for the carry of stocks and a good flow of robusta coffees now coming to the consumer markets, one can expect these stocks to steadily increase through the year.

The commodity markets lacked participation from many leading European players yesterday, as they celebrated the Ascension Day holiday, while they shrugged off news of a relatively dismal GDP growth for the U.S.A. for the first quarter of the year, as it was seen to have been bad weather affected and of no significance to present circumstances. The Natural Gas, Sugar, Cocoa, Coffee, Cotton, Soybean, Platinum and Palladium markets had a day of buoyancy, while the Oil, Copper, Orange Juice, Wheat, Corn, Gold and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.18% higher; to see this Index registered at 551.03. The day starts with the U.S. Dollar near to steady and trading at 1.673 to Sterling and 1.360 to the Euro, while Brent Crude is steady in early trade and is selling at $ 109.60 per barrel.

The coffee markets opened the day yesterday with some predictable buoyancy in thin trade that maintained their positive track into the afternoon’s trade, with the combination of light roaster buying activity and speculative buying under the markets to assist towards this buoyancy. This remained the track for the rest of the day and with the London market ending the day on a positive note and with 95.5% of the gains of the day intact and with the New York market likewise ending the day on a positive note and with 85.3% of the gains of the day intact. This overall positive close is likely to inspire some confidence and with the funds unlikely to be aggressive sellers ahead of the month end today, one might expect some degree of follow through buoyancy for early trade today against the prices set yesterday, as follows:

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

MAY 1948 + 42

JUL 1949 + 42 JUL 181.95 + 5.80

SEP 1967 + 42 SEP 184.35 + 5.80

NOV 1980 + 42 DEC 187.60 + 5.70

JAN 1991 + 42 MAR 190.30 + 5.65

MAR 1999 + 41 MAY 191.35 + 5.60

MAY 2009 + 41 JUL 191.35 + 5.40

JUL 2017 + 41 SEP 190.45 + 5.10

SEP 2023 + 41 DEC 189.20 + 4.70

NOV 2032 + 41 MAR 188.00 + 4.40

 


Coffee Market Report

May 29 2014

The report from the U.S. Department of Agriculture that pegged the next Vietnam crop of which approximately 96% shall be robusta coffees at a bumper 29.2 million bags has unsurprisingly impacted upon speculative sentiment within the related London robusta coffee market, which is anyhow under pressure from the dampening of speculative spirits within the coffee market in general. These having been shocked out of their bullish trend by the official new Brazil crop forecast from CONAB who by forecasting a 46.6 million bags figure, indicated a realistic new Brazil crop figure of close to 50 million bags.

There is still some surprise that the Companhia Nacional de Abastecimento (CONAB) or National Food Supply Agency came forth with this figure that was 4 to 5 million bags higher than had been predicted on the morning of the 15th. May, but perhaps even though Brazil accounts for approximately 34% of world coffee production and 14% of world coffee consumption the fact that coffee exports now only account for approximately 3% of Brazils exports the officials are no longer so inspired to be market manipulative in their crop reports. While this report that by nature of its squashing the earlier forecasts for a much more modest new crop for this year has further turned speculative focus upon the relatively aggressive internal market selling of past crop arabica coffee stocks and forward sales of new crop coffees, which would indicate that the farmers who should know best the situation, likewise do not believe in an overly dramatic dip in the new crop potential.

This rather dramatic change in market sentiment over the past week and a half is in the meantime having some influence upon the selling aggression on the part of the producers in general, with many looking to be more aggressive in their selling activity ahead of a potential for further losses and for the present, there is a good supply of coffees on offer to the consumer industries from all of the major producer blocs. Albeit that there remains some degree of price resistance from many producers, which continues to buoy the asking export differentials for new sales and particularly so from the fine washed arabica coffee producer bloc. This latter producer bloc better able to so value add their new sales, as until there is a significant recovery in the production levels from the Roya or Leaf Rust affected Mexico and Central American bloc and despite the improved supply from Colombia, supply of these coffees remains relatively tight.

In terms of African robusta production and exports the Ivory Coast which remains the third largest coffee producer in Africa following Ethiopia and Uganda and likewise the third largest coffee exporter following Uganda and Ethiopia, has come forth with their latest export figures. In this respect they report that the countries cumulative exports for the first seven months of the present October 2013 to September 2014 coffee year are 35,133 bags or 6.47% higher than the same period in the previous coffee year, at a total of 577,867 bags. This figure is however well below the forecasted exports of approximately 1.6 million bags and one might expect to see some more aggressive selling and export activity to come from this country, for the coming months.

The coffee markets with most of the major players in the leading West European market on their Ascension Day holiday today and with many players due to take tomorrow off and turn it into a long weekend can be expected to be lackluster in terms of physical coffee trade, through to the end of the week. But this should have no impact upon the speculative and fund activity with the New York and London markets that are operating as usual today and tomorrow, with this sector of the market presently the dominating factor in market direction.

The arbitrage between the markets narrowed yesterday to register this at 89.65 usc/Lb., while this equates to a very attractive 50.89% price discount for the London robusta coffee market. This arbitrage continuing to inspire consumer market roaster interest in robusta coffees, to assist to take some of the bite out of the rise in arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,024 bags yesterday, to register these stocks at 2,558,114 bags. There was meanwhile a larger in volume 6,027 bags increase in the number of bags pending grading for the exchange; to register these pending grading stocks at 11,698 bags.

The commodity markets are presently within a narrow trading range, while with positive economic figures from both North America and Europe the equity markets are attracting investment activity. The Natural Gas, Sugar, Corn, Soybean, Silver and Palladium markets had a day of buoyancy, while the Oil, Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat, Gold and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.09% lower; to see this Index registered at 550.04. The day starts with the U.S. Dollar steady and trading at 1.672 to Sterling and 1.359 to the Euro, while Brent Crude is tending softer in early trade and is selling at $ 109.30 per barrel.

The coffee markets opened the day yesterday taking a softer stance but in follow through lacklustre and thin trade, with the markets taking a downside negative track into the afternoons trade and with speculative liquidation dominating direction and volumes picking up, but with the New York market bucking the trend later in the afternoon to bounce of its lows and post a partial recovery while the London market continued to head south. The London market ended the day on a soft note and with 95.1% of the losses of the day intact, while the New York market ended the day on a softer note but having recovered 62.6% of the earlier losses of the day by the close. This overall negative close does not inspire confidence, but there might be some sentimental support due from the late in the day partial recovery in New York that shall restrain sellers and set the markets for a steady start for early trade today against the prices set yesterday, as follows:

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

MAY 1906 – 59

JUL 1907 – 77 JUL 176.15 – 3.20

SEP 1925 – 77 SEP 178.55 – 3.15

NOV 1938 – 76 DEC 181.90 – 3.00

JAN 1949 – 75 MAR 184.65 – 2.95

MAR 1958 – 74 MAY 185.75 – 2.75

MAY 1968 – 73 JUL 185.95 – 2.55

JUL 1976 – 72 SEP 185.35 – 2.50

SEP 1982 – 72 DEC 184.50 – 2.65

NOV 1991 – 72 MAR 183.60 – 2.75

 


Coffee Market Report

May 28 2014

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 12.71% in the week of trade leading up to Tuesday 20th. May; to register a net long position of 25,437 Lots on the day. This speculative net long position within the London market which is the equivalent of 4,239,500 bags has most likely been further reduced, over the following days of mixed but overall negative trade which has since followed.

The National Coffee Council in El Salvador have reported that the countries coffee exports for the month of April were 64,876 bags or 50.32% lower than the same month last year, at a total of 64,052 bags. This modest performance has contributed to the countries cumulative exports for the first seven months of the present October 2013 to September 2014 coffee year to be 354,645 bags or 52.14% lower than the same period in the previous coffee year, at a total of 325,485 bags.

This dip in exports from El Salvador was however to have been expected, as aside from the country having been the most severely affected by Roya or Leaf Rust within Central America, many of the country’s dominant commercial farming sector had taken some aggressive steps in terms of pruning of diseased fields, to counter the problem. Thus resulting in a very modest crop from the last October 2013 to March 2014 harvest, which many have estimated to have been between only 500,000 and 700,000 bags.

The fine washed arabica producer bloc of Central America, Dominican Republic, Colombia and Peru but excluding Mexico who have not been contributing export figures over the recent months have reported that their combined exports for the month of April were 4.14% lower than the same month last year, at a total of 2.3 million bags. This figure contributed to the bloc’s cumulative exports for the first seven months of the present October 2013 to September 2014 coffee year and following surging export volumes from Colombia to still be 2.3% higher than the same period in the previous coffee year, at a total of 14.68 million bags. While with a larger new Mitaca crop now starting in Colombia and a larger new crop in Peru, one would expect that this producer bloc’s combined exports shall maintain steady to positive figures for the coming months.

Even though the coffee markets have taken a dip in value over the past couple of weeks and since the official CONAB new crop forecast came out much higher than had been expected, the Agricultural Ministry in Brazil have reported that should the coffee market firm up later in the year again, they would release state retention coffee stocks into the market. This relatively bearish for the market statement is accompanied by a marginally weaker Brazil real that is now trading at 2.237 to the U.S. dollar, which is maintaining active arabica coffee selling within the internal market in Brazil and is contributing to the softer nature of the New York market.

The Vietnam General Statistics Office have reported that the countries coffee exports of mostly robusta coffees for the month of May to have been 19.4% lower than the previous month, at a total of 2,833,333 bags. This figure and following a negative revision for the countries April exports, would indicate that the countries cumulative exports for the first eight months of the present October 2013 to September 2014 coffee year are 15.6% higher than the same period in the previous coffee year, at a total of 21 million bags.

The much respected U.S. Department of Agriculture have forecast that the forthcoming new Vietnam coffee crop shall be buoyed by the combination of favourable weather this year and improved profits to fuel farm inputs, to see the country bring in a bumper crop from the October 2014 to January 2013 harvest. This crop which they foresee to be 29.2 million bags shall be made up by an approximate 96 to 4 ratio of robusta and arabica coffees, which shall ensure a steady supply of robusta coffees for next year and is a report that contributes to a dampening of speculative spirits within the London robusta coffee market. Albeit that the good discounts offered by robusta coffees, will contribute to increased demand.

The arbitrage between the markets narrowed yesterday to register this at 89.99 usc/Lb., while this equates to a very attractive 50.18% price discount for the London robusta coffee market. This arbitrage continuing to inspire consumer market roaster interest in robusta coffees, to assist to take some of the bite out of the rise in arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 2,160 bags yesterday, to register these stocks at 2,559,138 bags. There was meanwhile a smaller in volume 640 bags increase in the number of bags pending grading for the exchange; to register these pending grading stocks at 5,671 bags.

The commodity markets appeared to lose some support in post long weekend holiday trade yesterday, while money was directed towards the buoyant equity markets. The Natural Gas, Cocoa and Copper markets had a day of buoyancy, while the Oil, Sugar, Coffee, Cotton, Orange Juice, Wheat, Corn, Soybean, Gold, Silver, Platinum and Palladium markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.80% lower; to see this Index registered at 550.56. The day starts with the U.S. Dollar near to steady and trading at 1.681 to Sterling and 1.363 to the Euro, while Brent Crude is tending softer in early trade and is selling at $ 109.70 per barrel.

The coffee markets opened the day yesterday taking a softer stance but in lacklustre and thin post long weekend holiday trade, with both markets softening further into the afternoon’s trade. The New York market did however bounce back for a period during the afternoon and with the thin volumes of trade assisting to accentuate the recovery into positive territory, while the London market maintained its softer track. The London market continued to end the day on a soft note and with 95% of the losses of the day intact, while the New York market and with the negative influences of the macro commodity index adding to its demise slipped back from its recovery to end the day on a soft note and with 61.4% of the earlier losses of the day intact. This overall soft close is unlikely to inspire much better than a steady to soft start for early trade today against the prices set yesterday, as follows:

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

MAY 1965 – 34

JUL 1984 – 19 JUL 179.35 – 2.55

SEP 2002 – 15 SEP 181.70 – 2.55

NOV 2014 – 15 DEC 184.90 – 2.60

JAN 2024 – 14 MAR 187.60 – 2.55

MAR 2032 – 15 MAY 188.50 – 2.55

MAY 2041 – 16 JUL 188.50 – 2.55

JUL 2048 – 16 SEP 187.85 – 2.50

SEP 2054 – 18 DEC 187.15 – 2.10

NOV 2063 – 17 MAR 186.35 – 1.75

 


Coffee Market Report

May 26 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 long position within this market by 0.46% in the week of trade leading up to Tuesday 20th. May; to register a net long position of 42,473 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 0.37%, to register a net long on the day of 44,183 Lots.

During this same week of trade the Non Commercial Speculative sector of the market increased their net long position within the market by 5.26%, to register a net long position of 29,131 Lots on the day. This speculative net long position within the New York market which is the equivalent of 8,258,509 bags has most likely been marginally decreased over the following days of mixed but overall softer trade, which has since followed and so too, the net long that was held by the Managed Money Fund sector of the market.

Contrary to earlier estimates that with the new crop already started that Brazils farmer have so far forward sold only 20% of this new crop, a new poll taken from ten leading trade houses has indicated that as much as 39% of the new crop has been sold forward. This figure if correct is significantly higher than is normal for this early in the year and makes one question the farmers belief in a significant decline in the potential for the new crop and the potential for this decline to further buoy the medium to longer term prices, by their willingness to be such ready sellers.

But if this forward sale factor is correct and with farmers already holding good value for a significant percentage of their new crop, it would slow selling activity for the short term and with the resulting low volumes of price fixation hedge selling into the international markets, take some of the negative pressure off these markets. At least until post the forthcoming June and July frost period, which while only a very remote threat, it remains as a factor and one that should it occur, would significantly increase the speculative support for and the value of the reference prices of the New York market. The most likely times for frost to occur being related to the clear sky’s during the days either side of the full moon, which shall occur on 13 TH June and the 12 TH July, this year.

There is of course no doubt that there has been some damage done by the hot and dry weather over January and February, but one might suggest that the evidence of this selling actively is supportive for the less dramatic new crop forecasts as still being as much as close to 50 million bags, rather than some of the emotive reports that peg it as being less than 45 million bags. Therefore for the present, one might be looking to a deficit new crop of approximately 4 million bags, as against carryover stocks of close to 12 million bags, which would guarantee a steady supply of Brail coffees into the next 2015 crop.

The National Cocoa and Coffee Board of the Cameroun have reported that the countries robusta coffee exports for the month of April were 12,017 bags or 21.57% lower than the same month last year, at a total of 43,700 bags. This contributes to the countries cumulative robusta coffee exports for the first five months of their December 2013 to November 2014 robusta coffee year being 12,150 bags or 11.92% lower than the same period in the previous robusta coffee year, at a total of 89,783 bags. Meanwhile the Board has reported in terms of the countries smaller arabica coffee crop which works on a more conventional October to September coffee year, that exports of arabica coffee for the first seven months of this coffee year are 8,900 bags or 56.39% lower than the same period in the previous arabica coffee year, at a total of a very modest 6,883 bags.

The arbitrage between the markets broadened on Friday to register this at 91.05 usc/Lb., while this equates to a very attractive 50.06% price discount for the London robusta coffee market. This arbitrage continuing to inspire consumer market roaster interest in robusta coffees, to assist to take some of the bite out of the rise in arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 2,315 bags on Friday, to register these stocks at 2,561,298 bags. There was meanwhile a similar in volume 2,565 bags decrease in the number of bags pending grading for the exchange; to register these pending grading stocks at 5,031 bags.

The commodity markets ahead of the long weekend with the U.S.A. closed today for their Memorial Day holiday and the U.K. closed today for their Spring Bank Holiday were relatively quiet and lacklustre on Friday. The Oil, Natural Gas, Cocoa, New York arabica Coffee, Copper and Corn markets showed some buoyancy, while the Sugar, London robusta Coffee, Cotton, Orange Juice, Wheat, Soybean, Gold, Silver, Platinum and Palladium markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.20% lower; to see this Index registered at 554.99. The day starts with the U.S. Dollar near to steady and trading at 1.684 to Sterling and 1.363 to the Euro, while Brent Crude is steady at $ 110.00 per barrel.

The coffee markets opened the day on Friday on a steady note and with a degree of buoyancy coming into play for the New York market, while the London market came under price fixation selling pressure. The London market continued to end the slow and lacklustre days trade on a soft note and with 80% of the losses of the day intact, while the New York market following an overall positive days trade came under pressure late in the day and shed 81% of its earlier gains but to nevertheless end the day on a modestly positive note. There shall be no trade for the markets today and one would think that unless there is some striking news forthcoming today which is unlikely, that the markets shall start the day tomorrow on a cautiously steady note against the pre long weekend prices set on Friday, as follows:

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

MAY 1999 – 2

JUL 2003 – 16 JUL 181.90 + 0.55

SEP 2017 – 15 SEP 184.25 + 0.55

NOV 2029 – 15 DEC 187.50 + 0.50

JAN 2038 – 16 MAR 190.15 + 0.55

MAR 2047 – 15 MAY 191.05 + 0.35

MAY 2057 – 13 JUL 191.05 unch

JUL 2064 – 13 SEP 190.35 – 0.05

SEP 2072 – 13 DEC 189.25 unch

NOV 2080 – 17 MAR 188.10 + 0.10

 


Coffee Market Report

May 23 2014

The United States Department of Agriculture have come forth with their latest review and forecast for the coffee crop in Guatemala. They have subsequently reviewed their earlier forecast for this October 2013 to September 2014 crop to be slightly lower, at 3.419,0000 bags from a prior estimate at 3.88 million bags. Following the outbreak of roya, many producers have heavily pruned back their trees. The USDA estimate that around 10% of the area planted to coffee has seen severe pruning, and some replanting activity.

The concerted efforts by Guatemala stakeholders, and technical assistance provided by the Guatemalan Coffee Association to assist producers to improve crop techniques has all contributed toward limiting the damage that has been caused by the roya outbreak. The USDA attaché has in this latest forecast estimated production for this crop year to fall by 19% on that of the previous crop year. The forecast for Guatemala coffee production for the coming October 2014 to September 2015 crop year is for production to register a modest recovery against this year’s crop and an estimate for the new crop to come from October this year, to reach an estimated 3,615,000 bags.

While the new and somewhat contentious arabica crop harvest is starting up in Brazil, the peak harvest period is still to come and so too, the anticipated reports of outturn against the new crop deliveries. One might expect that this will continue to be a focal subject, as the harvest predictions continue to debate over the potential size of this crop which has suffered through an extraordinary weather anomaly. The weather heading into the weekend is forecast to remain mild and dry, with a cold front expected to move into the coffee growing areas next week. In the meantime the internal market is muted and sales slower with a softer reference price in the New York market and a steady Brazil Real which is trading at 2.214 to the US Dollar today.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 6,329 bags yesterday, to register these stocks at 2,558,983 bags. There was no change to the number of bags pending grading for the exchange; to register these pending grading stocks at 7,596 bags.

It was a mixed day on the commodity markets yesterday and the leading Oil markets turning lower during the course of the day. Overall it was a day of mixed results and a positive day for Coffee, Cocoa, Copper, Orange Juice, Corn, Soybean, Gold, Silver, Platinum and Palladium, although a negative day for Sugar, Cotton and Wheat. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.09% lower; to see this Index registered at 556.128. The day starts with the U.S. Dollar trading at 1.6864 to Sterling and 1.365 to the Euro, while Brent Crude is steady in early trade and is selling at $ 110.67 per barrel.

The coffee markets will be closed on Monday with holidays in both London and New York on the day. The markets opened with a degree of follow through selling activity yesterday and both markets opened on a lower note. The initial flurry of activity settled within a new lower range in both markets and the morning session in both London and New York took on a lower intensity, in lighter volume and London in particular remained steady through to the afternoon and within a narrow range. The New York arabica faltered later in the morning and encountered a degree of long liquidation in relatively thin volume. The lows were though quickly taken up by underlying buyer support and some industry fixation activity, to prop up the market which seemed to reinvigorate confidence in upward momentum as the session progressed. The positive tone taken on by New York similarly leant a boost to the idling London market and late in the session both markets recovered back to positive territory, although this was not quite sustained to the last minutes of the day. Both markets moved toward the close with some buoyancy, and settled in London on a mildly positive note, while New York clambered back from the lows of the day, to settle hardly changed on the close, to set the prices yesterday, as follows:

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

MAY 2001 + 9
JUL 2019 + 7 JUL 181.35 – 0.05
SEP 2032 + 8 SEP 183.70 Unch
NOV 2044 + 8 DEC 187.00 + 0.05
JAN 2054 + 9 MAR 189.60 + 0.10
MAR 2062 + 10 MAY 190.70 + 0.20
MAY 2070 + 11 JUL 191.05 + 0.30
JUL 2067 + 12 SEP 190.40 + 0.30
SEP 2085 + 12 DEC 189.25 + 0.30
NOV 2097 + 8 MAR 188.00 + 0.25

 


Coffee Market Report

May 22 2014

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 501 bags yesterday, to register these stocks at 2,565,312 bags. There was a 2,960 bags increase in the number of bags pending grading for the exchange; to register these pending grading stocks at 7,596 bags.

The commodity markets maintained an overall steady track during trade yesterday, with positive signs of improvement in China’s manufacturing and factory sector providing some buoyancy to the day. The Oil markets were steady, along with the Copper, Corn and Gold markets, while a positive close for Cocoa, Cotton Orange Juice, Soybean, Platinum and Palladium and a softer close on the day for Coffee, Wheat and Silver markets. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.04% lower; to see this Index registered at 556.602. The day starts with the U.S. Dollar trading at 1.6889 to Sterling and 1.366 to the Euro, while Brent Crude is steady in early trade and is selling at $ 111.24 per barrel.

It was a quiet start to the day in the coffee markets yesterday; both opening the day on a hesitantly steady note and with early volume muted, both markets turned mildly softer through the morning session. The New York market however gradually posted a recovery to opening levels although the regained territory quickly met with sellers waiting at the top. This applied some pressure to the market removing the newly built confidence in momentum and a lower afternoon session ensued in New York, with spread activity adding to the relatively modest volume on the day. It was a generally lacklustre day in London in the absence of producer activity and this sector seemingly withdrawn from this prevailing lower market. London did however recover briefly in the afternoon’s trade, but with both markets again coming under pressure and dipping quickly lower again, toward the end of the day. The New York market finished near to the low on the day, while London managed to regain marginal ground by the end of the day, to see the markets close on a softer note and both in negative territory, against the prices set yesterday, as follows:

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

MAY 1992 – 49
JUL 2012 – 24 JUL 181.40 – 4.30
SEP 2024 – 24 SEP 183.70 – 4.25
NOV 2036 – 24 DEC 186.95 – 4.25
JAN 2045 – 25 MAR 189.50 – 4.25
MAR 2052 – 26 MAY 190.50 – 4.35
MAY 2059 – 26 JUL 190.75 – 4.45
JUL 2065 – 28 SEP 190.10 – 4.50
SEP 2073 – 28 DEC 188.95 – 4.70
NOV 2089 – 28 MAR 187.75 – 4.90

 


Coffee Market Report

May 21 2014

With the questionable in size new Brazil crop now being harvested there is likewise forward selling of this new crop coming into play, with estimates that approximately 20% of this new crop had already been sold by the end of April. Sales have however slowed over the past week, as with the reference prices of the New York market having softened while the Brazil real remains at a steady 2.21 to the U.S. dollar, many arabica coffee farmers have not been inspired to be aggressive new crop sellers. But despite the recent dip in the value of the international coffee markets, there remains sufficient selling activity out of Brazil, to ensure a steady supply of Brazil coffee to the consumer markets, for the foreseeable future.

The United States Department of Agriculture are coming forth with a host of further crop forecasts and following the forecasts for Brazil, Colombia, Peru and Ethiopia, have forecast that the next Mexican harvest that starts coming into play at the end of this year, shall be 2.63% higher than the recently completed new crop, to total 3.9 million bags. This forecast that has pegged the new crop that is now in play at 3.8 million bags is however questioned by many market players, who have assessed the latest new crop as being in excess of 4 million bags. It is nevertheless a forecast that does confirm the perception that with the influences of improved profits from the prevailing market prices, that it shall assist farmers to increase inputs and chemical controls, so as to ensure a larger overall new crop from the producer bloc of Mexico and Central America for their October 2014 to March 2015 harvest.

The USDA have also come forth with forecasts for El Salvador and Costa Rica and have forecast a 33% increase for the next crop from El Salvador, which they have pegged at a still relatively modest crop of 675,000 bags. While despite the reluctance of the Coffee Institute to start talking new crop figures, the USDA have forecasted a 3.2% decline from the last crop and a new crop to start coming in at the end of this year, which shall be a relatively modest 1,380,000 bags.

The USDA have contradicted the relatively positive new crop forecast from the Indonesian Coffee Exporters and Industry Association who have been talking in terms of a figure of 11.67 million bags, in that the USDA forecast this new crop to be a modest 8.9 million bags. This is a marked difference but there have been many other private trade forecasts that have likewise been talking in terms of a new crop that shall be less than 10 million bags and therefore, it remains a case of having to wait until the end of the year to see what the evidence of coffee sales and exports shall indicate.

One might comment that it is actually very difficult to actually assess the Indonesian coffee crop, as there is so much in the way of informal and unquantifiable trade that carries on within this country with a growing domestic market for coffee. One might however and especially with the rising domestic market demand factor in play, be safe to presume that there shall be a tightening export coffee supply from Indonesia for the rest of this year and the first half of next year.

The prospects for relatively modest robusta coffee export volumes from Indonesia for the foreseeable future are however of no real concern to the consumer markets, so long as Vietnam continues to bring in their large crops and with forecasts so far, for another large new crop to start being harvested in October. The dip in the value of the London robusta coffee market has however resulted in a degree of price resistance and slowed internal market selling activity of the past crop stocks in Vietnam, which is putting some pressure on exporters to pay up to cover coffees necessary to fulfil forward sales commitments.

The arbitrage between the markets broadened yesterday to register this at 93.35 usc/Lb., while this equates to a very attractive 50.27% price discount for the London robusta coffee market. This arbitrage continuing to inspire consumer market roaster interest in robusta coffees, to assist to take some of the bite out of the rise in arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 496 bags yesterday, to register these stocks at 2,565,813 bags. There was meanwhile a larger in volume 960 bags increase in the number of bags pending grading for the exchange; to register these pending grading stocks at 4,695 bags.

The commodity markets again had a mixed day yesterday and with most markets remaining within a narrow trading range, but registered and overall positive day. The Oil, Cocoa, New York arabica Coffee, Cotton, Corn, Soybean, Gold, Silver and Palladium markets were steady to buoyant, while the Natural Gas, London robusta Coffee, Sugar, Copper, Orange Juice, Wheat and Platinum markets tended easier for the day. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.02% higher; to see this Index registered at 556.82. The day starts with the U.S. Dollar near to steady and trading at 1.684 to Sterling and 1.370 to the Euro, while Brent Crude is showing buoyancy in early trade and is selling at $ 111.10 per barrel.

The London market opened the day tending softer in thin trade, while the New York market showed modest buoyancy in likewise thin trade. The London market did however recover in the afternoon’s trade, but with both markets again coming under pressure and dipping back into negative territory as the afternoon progressed, but with the New York market finding support at the lows and recovering late in the day. The London market continued to end the day on a near to steady note and having recovered 92.9% of the earlier losses of the day by the close, while the New York market ended the day on a positive note and with 79.5% of the gains of the day intact. This could be seen to be an overall positive close and one that might assist to influence a steady start for early trade today against the prices set yesterday, as follows:

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

MAY 2041 – 1

JUL 2036 – 1 JUL 185.70 + 2.20

SEP 2049 – 2 SEP 187.95 + 2.20

NOV 2060 – 4 DEC 191.20 + 2.35

JAN 2070 – 4 MAR 193.75 + 2.45

MAR 2078 – 4 MAY 194.85 + 2.45

MAY 2085 – 4 JUL 195.20 + 2.55

JUL 2093 – 2 SEP 194.60 + 2.20

SEP 2101 – 2 DEC 193.65 + 2.00

NOV 2117 unch MAR 192.65 + 1.80

 


Coffee Market Report

May 20 2014

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 4.05% in the week of trade leading up to Tuesday 13th. May; to register a net long position of 29,142 Lots on the day. This speculative net long position within the London market which is the equivalent of 4,857,000 bags has most likely been further reduced, over the following days of mixed but overall negative trade which has since followed.

The National Export Association of Nicaragua have reported that the countries coffee exports for the month of April were 72,136 bags or 26.87% lower than the same month last year, at a total of 196,303 bags. This lower volume has contributed to the countries cumulative exports for the first seven months of the present October 2013 to September 2014 coffee year having been 360,199 bags or 33.14% lower than the same period in the previous coffee year, at a total of 726,805 bags.

This is a rather dramatic dip in export performance for the first seven months of this year, but it has been accentuated by the fact that the country exported approximately 300,000 bags of carryover stocks from the past crop during October and November 2012, which inflated the previous coffee years export data. While in terms of the dip in exports for the month of April this year, this is not only related to what is no doubt a Roya affected lower new crop, but is also related to a degree of price resistance from the consumer markets for Central American coffees, where exporters have been demanding positive differentials against the already firm price levels of the reference prices of the New York market.

The Ugandan Coffee Development Authority has reported that the country’s exports for the month of April were 35% higher than the same month last year, to total 336,676 bags. These exports that are made up from a 68.91 to 31.09 mix of robusta and arabica coffees contribute to an export performance of 3.85 million bags over the past twelve months, which might support the forecasts that are in the market for Uganda to soon crack the 4 million bags coffee exports per annum mark and shall in this respect, remain the second largest producer in Africa but with a modest domestic consumption, the largest exporter in Africa.

Meanwhile in terms of African production the United States Department of Agriculture have forecasted that the Ethiopian coffee production for the present 2013 to 2014 coffee year shall remain the similar to the past coffee year at 6.35 million bags, but shall most likely rise marginally for the next October 2014 to September 2015 coffee year. However with a vibrant domestic consumption in Ethiopia these crops do not indicate and export potential of much more than 3.3 million bags per annum, which is a figure that this latest forecasts would suggest shall remain in place for both the present and the forthcoming coffee year.

The United States Department of Agriculture who contributed to last week’s negative turn in market sentiment with a forecast that despite the damage the new Brazil crop would be approximately 49.5 million bags have come forth with a forecast that the new Peru crop of mostly fine washed arabica coffees which has started, shall be 15% higher than the past crop, at a total of 4.5 million bags.

The USDA have likewise forecasted that the Colombian coffee production shall increase for the next October 2014 to September 2015 coffee year, to total 11.9 million bags of fine washed arabica coffee, which is perhaps a conservative number as already there are many talking a growth to well in excess of 12 million bags for the next coffee year. Thus adding to the perception that the tighter washed arabica coffee supply that came with Roya in Mexico and Central America, shall not continue as aside from these forecasts for rising supply of these coffees from the main South American producers, the forecasts are for overall larger new crops from Mexico and Central America for the next harvest that starts in the last quarter of this year.

The arbitrage between the markets narrowed on Friday to register this at 91.10 usc/Lb., while this equates to a very attractive 49.65% price discount for the London robusta coffee market. This arbitrage continuing to inspire consumer market roaster interest in robusta coffees, to assist to take some of the bite out of the rise in arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 2,895 bags yesterday, to register these stocks at 2,566,309 bags. There was meanwhile a similar in volume 2,880 bags decrease in the number of bags pending grading for the exchange; to register these pending grading stocks at 3,735 bags.

The commodity markets again had a mixed day yesterday, but registered and overall positive day. The Oil, Natural Gas, Cocoa and Copper, Orange Juice, Soybean, Gold, Silver, Platinum and Palladium markets were steady to buoyant for the day, while the Sugar, Coffee, Cotton, Wheat and Corn markets had a softer day. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.44% higher; to see this Index registered at 556.73. The day starts with the U.S. Dollar steady and trading at 1.681 to Sterling and 1.371 to the Euro, while Brent Crude is steady in early trade and is selling at $ 110.65 per barrel.

The London and New York markets both opened the day on cautious steady note in thin trade yesterday and within an environment of thin trade and showed some degree of modest buoyancy into the afternoons trade, but with the speculative sector of the markets seemingly suffering from exhaustion and losing some degree of confidence while the industry is a slow buyer and awaiting new lows, the markets faltered later in the day and drifted lower in value. The London market ended the day on a softer note but having recovered 69% of the earlier losses of the day, while the New York market ended the day on a soft note and with 75.6% of the earlier losses of the day intact. This overall soft close is unlikely to inspire and one might expect to see little better than a steady close for early trade today against the prices set yesterday, as follows:

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

MAY 2042 – 9 MAY 180.15 – 2.35

JUL 2037 – 9 JUL 183.50 – 1.55

SEP 2051 – 9 SEP 185.75 – 1.55

NOV 2064 – 7 DEC 188.85 – 1.55

JAN 2074 – 7 MAR 191.30 – 1.55

MAR 2082 – 6 MAY 192.40 – 1.35

MAY 2089 – 6 JUL 192.65 – 1.20

JUL 2095 – 7 SEP 192.40 – 1.20

SEP 2103 – 5 DEC 191.65 – 1.25

NOV 2117 unch MAR 190.85 – 1.25

 


Coffee Market Report

May 19 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 long position within this market by 5.57% in the week of trade leading up to Tuesday 13th. May; to register a net long position of 42,668 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 1.05%, to register a net long on the day of 44,345 Lots.

During this same week of trade the Non Commercial Speculative sector of the market decreased their net long position within the market by 9.5%, to register a net long position of 27,675 Lots on the day. This speculative net long position within the New York market which is the equivalent of 7,845,740 bags has most likely been marginally decreased over the following days of mixed but overall softer trade, which has since followed and so too, the net long that was held by the Managed Money Fund sector of the market.

The Green Coffee Association in the U.S.A. has reported that the nations port warehouse stocks increased by a sizeable 279,187 bags or 5.63% during the month of April to register these stocks at the end of the month at 5,237,598 bags. These stocks that fuel green coffee demand in not only the U.S.A., but the entire North American market would at face value and with an approximate coffee demand of approximately 480,000 bags per month, equate to approximately 10.9 weeks of roasting activity.

However the stocks do not include the bulk container transit coffees, the onsite roaster inventory stocks and the coffee stocks held within non reporting warehouses in both the U.S.A. and Canada and these would have been at least another 1 million bags. Therefore in terms of North American coffee supply the end March stocks would have safely exceeded 13 weeks of roasting activity, which is a relatively safe volume of nearby coffee supply.

While even if one is to deduct the partially aged stocks held within the U.S.A. based warehouse of the New York exchange, the coffee stocks at the end of April were the equivalent of in excess of 11.5 weeks of roaster demand. This good cover is ahead of the slower summer roasting season and is to a degree, a modestly bearish factor for the New York market. Albeit that it is a factor that is well shadowed by the ongoing concerns over the new Brazil crop, even though CONAB pulled the wind out of the sales of the speculative bulls last week, with its much higher than any had expected, new crop forecast. But perhaps with the softer nature of the reference prices of the New York market that has since followed both of these CONAB and U.S. month end stocks reports, one might soon expect to see some contradictory lower new Brazil crop reports start coming out of Brazil.

The National Coffee Institute in Honduras have announced that due to the more attractive prices being paid for the brand name origin Guatemala for new crop coffees, that the incidences of coffee smuggling from Honduras into their neighbouring country are on the increase. While this is to a lesser degree and by the dictates of geographical logistics also happening into neighbouring Nicaragua, albeit that this latter country does not offer the same premiums as the high flying Guatemalan name and image.

These advantageous price activities which the National Coffee Institute of Honduras have estimated, has already resulted in approximately 380,000 bags of new crop coffees being smuggled out of the country, they estimate shall reduce their earlier export forecast by 7% of the present October 2013 to September 2014 coffee year and thus, a new forecast of approximately 4.2 million bags. This if true, would result in a marginally lower export performance than the 4.34 million bags exported over the previous 2012 to 2013 coffee year.

The arbitrage between the markets narrowed on Friday to register this at 92.24 usc/Lb., while this equates to a very attractive 49.85% price discount for the London robusta coffee market. This arbitrage continuing to inspire consumer market roaster interest in robusta coffees, to assist to take some of the bite out of the rise in arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,100 bags on Frida