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I. & M. Smith (Pty) Ltd.

Coffee Market Report

28 Apr 2014

Coffee Market Report

April 28 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 long position within this market by 2.26% in the week of trade leading up to Tuesday 22nd. April; to register a net long position of 41,144 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 1.85%, to register a net long on the day of 44,844 Lots.

During this same week of trade the Non Commercial Speculative sector of the market increased their net long position within the market by 1.82%, to register a net long position of 28,014 Lots on the day. This speculative net long position within the New York market which is the equivalent of 7,941,845 bags has most likely been little changed to perhaps marginally decrease over the following days of mixed trade, which has since followed and so too, the net long that was held by the Managed Money Fund sector of the market.

It would seem in this respect that the speculative longs which are presently relatively extensive are taking something of a breather, as there is a great degree of uncertainty over the extent of the damage that has been caused to the new Brazil crop, over the dry and hot weather during the first two months of this year. Particularly so as the follow on fair rains in March and relatively good rains in April over the main arabica coffee districts in Brazil, have seemingly dampened some speculative spirits. Albeit that there remains no doubt, that there has been irreversible damage caused to the prospects of this new crop.

The National Export Association in Nicaragua have reported that the country’s coffee exports for the month of March were 13,270 bags or 7.36% higher than the same month last year, at a total of 193,447 bags. This improved performance however, which follows likewise improved export volumes in February, follows a slow start over the first four months of the October 2013 to September 2014 coffee year and therefore, the cumulative exports for the first six months of the coffee year are still 288,695 bags or 35.27% lower than the same period in the previous coffee year, at a total of 530,501 bags.

One might comment however in terms of the much lower export performance from Nicaragua for the present coffee year so far, is that these figures are compared to the 2012 to 2013 coffee year which experienced over October and November 2012 an extremely high volume of exports that were related to carryover stocks from the prior 2011/2012 crop. These stocks were held back for not only market resistance purposes, but in anticipation of premium supportive prices from the Venezuelan state controlled food commodities authorities, which were finally not forthcoming and therefore at a guess, the stocks accounted for approximately 80% of the Nicaraguan exports over the first two months of the previous 2012/2013 coffee year, which likewise accentuated the country’s export performance of 1,927,788 during this previous coffee year.

The annual Speciality Coffee Association of America which focused this year Peru as its fine washed arabica coffee origin, has not brought forth much in the way of news in terms of production forecasts from the Central Americans and Mexico, who always focus upon this annual event. This would seemingly indicate that so far the fears of further damage to the regional coffee crops from the issues of Roya or Leaf Rust are on the wane and that the subject is presently, having little further influence upon market sentiment.

There was however quite some discussion upon the growth of certified coffees in terms of the traditional markets and likewise the main producer blocs, with Utz Certified, Rainforest Alliance and 4 C’s all reporting significant growth in the world production and therefore market share of supply, that now fly’s under one or the other of these certified banners. These aside from the vintage Fairtrade coffee supply, which continues to attract some traditional support and combined these banners are becoming normal rather than unique, within the main North American and Western European markets.

The arbitrage between the markets, but with the London market narrowed on Friday to 109.48 usc/Lb., but nevertheless equates to a still very attractive 52.89% 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 heldagainst the New York exchange were seen to decrease by 2,400 bags on Friday, to register these stocks at 2,573,785 bags. There was meanwhile a smaller in volume 3,025 bags increase in the number of bags pending grading for the exchange; to register these pending grading stocks at 22,393 bags.

The commodity markets had another mixed day but overall slow day on Friday, with the Sugar, Cotton, Copper, Wheat, Corn, Soybeans, Gold, Platinum and Palladium markets showing buoyancy and the Oil, Natural Gas, Cocoa, London robusta Coffee, Cocoa, Orange Juice and Silver markets having a softer day, while the New York arabica Coffee market ended off with relatively sharp profit taking losses. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.15% lower; to see this Index registered at 567.26. The day starts with the U.S. Dollar near to steady at 1.685 to Sterling and 1.387 to the Euro, while Brent Crude is showing early buoyancy and is selling at $ 110.40 per barrel.

The London market started the day on Friday on a steady note and showing some degree of buoyancy, while the New York market started the day on a modestly softer note. The London market started to falter in line with the softer stance in the New York market and while London did experience a short lived pip back up into positive territory, both markets maintained a softer stance for the afternoon’s trade. The London market continued to end the day on a softer note but having recovered 50% of its earlier losses of the day by the close, while the New York market ended the day with a sharp speculative profit taking dip in the closing hour and on a soft note with 74.6% of the losses of the day intact. This overall soft close is not constructive for market sentiment but one would think was more end of a short week speculative book squaring and that in this respect the markets are more likely due for 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.

MAY 2136 – 16 MAY 204.75 – 7.70

JUL 2150 – 16 JUL 207.00 – 7.80

SEP 2157 – 15 SEP 209.05 – 7.80

NOV 2162 – 15 DEC 211.45 – 7.80

JAN 2167 – 15 MAR 213.80 – 7.85

MAR 2174 – 16 MAY 214.40 – 7.85

MAY 2181 – 17 JUL 214.00 – 7.80

JUL 2288 – 17 SEP 212.95 – 7.90

SEP 2291 – 17 DEC 211.80 – 7.90

NOV 2291 – 17 MAR 210.70 – 7.80

 


Coffee Market Report

April 25 2014

With export registrations in hand the authorities in Vietnam have estimated that the country’s exports for the month of April shall be 98.6% higher than the same month last year, to total 3.67 million bags. This figure would indicate that the cumulative exports for the first seven months of the October 2013 to September 2014 coffee year shall exceed by 6.1% the exports over the same period in the previous coffee year, to total in excess of 17.33 million bags.

However with an export estimate for the present coffee year in excess of 25 million bags and only five months left in the year, there is no sign of let up in the significant volumes of mostly robusta coffees that shall be exported from Vietnam. Especially so as the surging prices of arabica coffees over the past five months, has inspired many price competitive consumer market brands to look to increased usage of robusta coffee to maintain their market share.

Maintaining the bullish spirit in the arabica coffee market was a report from the futures specialist Sterling Smith who has estimated the new Brazil crop shall be 44.25 million bags and therefore, well below the usually conservative Brazil Industry estimate of 47 million bags. This report further inspires investment by the speculative sector of the New York market, with the London market following this trend.

Meanwhile and contrary to the prospects of a dismal crop and tightening Brazil arabica coffee supply, the internal market in Brazil remains active and with farmers ready sellers of their substantial stocks of past crop arabica coffees, which makes one question the extent of the damage that has been caused by the hot and dry conditions for the first two months of the year. Thus while there is no doubt that these conditions did do some damage to the new crop potential, one would suggest that the farmers who know best how much damage, really do not believe in the severity of this damage that is being voiced by some market players.

The Speciality sector of the North American market is presently meeting for their annual SCAA event and with Peru the selected origin to be promoted, but with no doubt much discussion and debate over the issues of Roya for the Central American producer bloc. Likewise one would expect much debate over the potential damage that shall be experienced for the potential of the new Brazil crop, but for the present the discussions are more speculative and inspirational for the bulls in the market than being related to severe tightening supply.

In reality there is presently no shortage of coffee and likewise no shortage for at least the next twelve months and really in terms of longer term consumer market supply, the pivotal point shall be the prospects for the next 2015 Brazil crop and this shall be related to the spring and summer rain season over October 2014 to March 2015 and still a long way off. It is however in terms of the early forecasts for an El Nino phenomenon that would usually bring good rains to south central Brazil looking to be a good season and therefore if one is to hazard and early guess, one might foresee that the markets are due to lose some steam by the last quarter of the year. However in the meantime and with the added value factor of the Brazil winter frost season to the fore, one has to believe in the present buoyancy for the coffee markets.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,100 bags yesterday, to register these stocks at 2,576,185 bags. There was meanwhile a larger in volume 4,165 bags increase in the number of bags pending grading for the exchange; to register these pending grading stocks at 19,368 bags.

The commodity markets had another mixed day yesterday, with the Oil, Natural Gas, New York arabica Coffee, Copper, Orange Juice, Wheat, Soybean, Gold, Silver, platinum and Palladium markets experiencing buoyancy, while the London robusta Coffee market was close to steady and the Cocoa, Sugar, Cotton and Corn 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% lower; to see this Index registered at 568.08. The day starts with the U.S. Dollar steady at 1.680 to Sterling and 1.383 to the Euro, while Brent Crude is near to steay in early trade and is selling at $ 109.80 per barrel.

The London market started the day yesterday on a steady to soft note, but with negative pressure impacting upon the markets. Both the markets did however show some stability as the day progressed and traded erratically either side of par, to take something of a sideways track through the day and with the prevailing positive trend being maintained. The London market continued to end the day near to steady and having recovered 87.9% of the earlier losses of the day, while the New York market ended the day on a positive note but with only 34% of the gains of the day intact. While the arbitrage between the markets yesterday broadened to 116.55 usc/Lb. and therefore, equates to a very attractive 54.26% price discount for the London robusta coffee market. This positive but overall steady close might suggest some degree of confidence in the markets and one might expect to see a steady start for early trade today, against the prices set yesterday, as follows:

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

MAY 2152 unch MAY 212.45 + 0.10

JUL 2166 – 4 JUL 214.80 + 0.85

SEP 2172 – 4 SEP 216.85 + 0.90

NOV 2177 – 2 DEC 219.25 + 1.10

JAN 2182 – 2 MAR 221.65 + 1.35

MAR 2190 unch MAY 222.25 + 1.40

MAY 2198 unch JUL 221.80 + 1.35

JUL 2205 unch SEP 220.85 + 1.30

SEP 2208 unch DEC 219.70 + 1.20

NOV 2208 unch MAR 218.50 + 1.15

 


Coffee Market Report

April 24 2014

There was a very positive and confident report from the Vietnam Coffee and Cocoa Association yesterday, who forecast that the country shall export 25 million bags of mostly robusta coffee during this year, at a value of approximately 3 billion U.S. dollars. While the association talked in terms of the issues of the drought earlier in the year in Brazil of longer term tightness in world coffee supply, which would buoy prices and the fortunes of their coffee industry.

Meanwhile drought is no longer an issue for Brazil, with overall good April rains for most of the coffee districts and with the possibility of a mild El Nino coming into play for the second half of the year in the Pacific ocean and its resulting influence for increased rains for south and central Brazil, it would indicate a good spring and summer rain season for the main coffee districts. This one would expect shall assist to trigger a good flowering towards the follow on 2015 crop, which one would think shall be a relatively good crop. One that shall be further supported by the now more affordable in terms of coffee prices and farm profits, by good levels of farm inputs.

The spring and early summer rain season is starting in Central America and the flowerings towards the next October 2014 to March 2015 crop, which shall likewise be supported by profitable sales from the recently completed harvest and good levels of farm inputs. Thus so far the forthcoming new crop is looking to much improved over the 2013/2014 crop that suffered from both the devastating effects of Roya or Leaf Rust and the lower levels of farm inputs, which came with the dismal prices and lack of profits during last year.

It is still early days in terms of Mexican and Central American coffee production to forecast the next crop, but potentially following the recently completed combined crop of approximately 16 million bags, one would think that it could once again be close to 17.5 million bags. This added to the potential for the coming year of a Colombian crop of close to 12 million bags, should see regional fine washed arabica coffee production rise towards the 29.5 million bags level and thus, exceed the levels of coffee from the region of the past two years.

Making note that with the recent rally in prices that has been influenced by the weather problems encountered in Brazil and the inability of many main stream roasters to absorb the resulting higher fine washed arabica prices in their blends, that there has been a softening in demand for these coffees. This would therefore suggest that on the longer term, there shall be something of an oversupply of mild coffees coming into play, which shall by the coming year have an effect upon the premiums that these coffees presently attract, relative the natural arabica coffee prices.

The struggling Cameroun coffee industry has reported that robusta coffee exports for the month of March were 12,667 bags or 43.8% lower than the same month last year, at a total of 16,250 bags. This contributed to the cumulative robusta coffee exports for the first four months of their December 2013 to November 2014 robusta coffee year being 16,800 bags or 36.35% lower than the same period in the previous coffee year, at a total of 29,417 bags.

Meanwhile the Cameroun’s arabica coffee exports for the month of March were registered at 1,400 bags, which with the arabica coffee year related to the more conventional October 2013 to September 2014 coffee year, sees the countries arabica coffee exports for the first six months of the present coffee year being 10,367 bags or 77.46% lower than the same period in the previous coffee year, at a total of 3,017 bags.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,600 bags yesterday, to register these stocks at 2,577,285 bags. There was meanwhile a similar in volume 1,905 bags increase in the number of bags pending grading for the exchange; to register these pending grading stocks at 15,203 bags.

The commodity markets are seemingly shrugging off the negative influences of slowing manufacturing activity in China, as they gain confidence from the steady growth in North America and were overall steady in trade yesterday. The Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, Gold and Silver markets showed buoyancy, while the Oil, Soybeans, 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 0.48% higher; to see this Index registered at 568.19. The day starts with the U.S. Dollar steady at 1.678 to Sterling and 1.381 to the Euro, while Brent Crude is showing buoyancy in early trade and is selling at $ 109.00 per barrel.

The London market started the day yesterday on a steady note, while the New York market attracted some negative pressure in early trade, but soon recovered and both markets showed good buoyancy into the afternoon’s trade. This remained the track for the day but with markets losing some of their muscle as the day progressed and with the London market ending the day on a positive note and with only 34.1% of the gains of the day intact, while the New York market ended the day on a likewise positive note, but again with only 9.8% of the gains of the day intact. While the arbitrage between the markets yesterday remained steady at 115.52 usc/Lb. and therefore, equates to a very attractive 53.99% price discount for the London robusta coffee market. This positive but overall rather flat close might not be inspirational for sentiment and one might thus expect to see a steady to softer start for early trade today, against the prices set yesterday, as follows:

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

MAY 2152 + 6 MAY 212.35 + 0.55

JUL 2170 + 14 JUL 213.95 + 0.55

SEP 2176 + 16 SEP 215.95 + 0.55

NOV 2179 + 16 DEC 218.15 + 0.65

JAN 2184 + 16 MAR 220.30 + 0.90

MAR 2190 + 16 MAY 220.85 + 0.80

MAY 2198 + 17 JUL 220.45 + 0.70

JUL 2205 + 19 SEP 219.55 + 0.65

SEP 2208 + 22 DEC 218.50 + 0.70

NOV 2208 + 26 MAR 217.35 + 0.60

 


Coffee Market Report

April 23 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 26.79% in the week of trade leading up to Tuesday 15th. April; to register a net long position of 30,461 Lots on the day. This speculative net long position within the London market which is the equivalent of 5,076,833 bags has most likely been further buoyed, over the following days of mixed trade but finally positive trade, which has since followed.

With the buoyancy of the reference prices of the London market in play, the post Easter holiday trading activity for Vietnam coffees is expected to become relatively active. Especially so as with still significant stocks of unsold coffees lying with farm and internal traders hands within the country, there is encouragement to look to cash in these coffees.

Meanwhile to further assist in the uptake and buying interest in Vietnam coffee stocks is the fact that the London market against which trade stocks are hedged, has turned back into a normal price structure following many months of inverted structure. This will assist the consumer market traders to buy in and look to the longer term premium priced contracts, to assist in the finance of their carry of their stocks.

Whether this potential for increased selling volumes out of Vietnam shall have a short to medium term impact upon the now very much depleted certified robusta coffee stocks held against the London market that are now down to an insignificant 231,000 bags is however questionable, as the sharp rise in the arabica coffee prices that cannot be easily followed by price sensitive consumer brands, shall encourage an increase in robusta coffee percentages within many blends. Thus while one can expect that the certified robusta coffee stocks shall soon start to recover, one would think that this shall be a very slow recovery for the coming months.

While with the potential for the consumer market industry players to perhaps replace overall between 2 million to 4 million bags of arabica coffees with robusta coffees over the coming year, it does reduce some of the negative effects for the potential of a deficit new Brazil arabica coffee crop this year. A deficit that is in reality not yet seen to be one to cause any shortage in supply, as this deficit is still foreseen to be adequately covered by the substantial carry over arabica coffee stocks in Brazil.

Yesterday was all about Brazil and what one has to see to have been an overreaction to the forecast by Volcafe for the new Brazil crop to be 45.5 million bags, which is a 10% cut from their previous downgraded forecast. This latest forecast having triggered speculative buying, which in turn triggered buy stops and a surging rally for the New York market. One that was not followed with the same aggression, by the less volatile and more fundamental in nature London market. This rather emotive trade forecast one has to note is even 1.5 million bags lower than the traditionally conservative Brazil Coffee Industry Association forecast from two weeks ago and in this respect, one might question such a low crop figure.

In terms of weather and with the majority of the main coffee districts in Brazil having already exceeded their five year average rainfall for the month of April, there is a new cold front entering from the south of Brazil, which is likely to bring more rain to the coffee districts during the course of this week. This will further assist to build up the ground water retention levels ahead of the forthcoming dry and cold winter season, which shall take some of the stress away from the trees over the harvest period.

The arbitrage between the markets, but with the London market closed for the day broadened yesterday to 115.61 usc/Lb. and therefore, equates to a very attractive 54.17% 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 6,265 bags yesterday, to register these stocks at 2,578,885 bags. There was meanwhile a smaller in volume 2,775 bags decrease in the number of bags pending grading for the exchange; to register these pending grading stocks at 13,298 bags.

The commodity markets were mixed in trade yesterday, but overall steady in nature. The Cocoa, Sugar, London robusta Coffee, Cotton, Copper, Gold and Silver markets were positive and the New York arabica Coffee market showed remarkable muscle for the day, while the Oil markets were steady and the Natural Gas, Corn, Wheat, Soybean, Platinum and Palladium markets tended easier for the day. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.64% higher; to see this Index registered at 565.48. The day starts with the U.S. Dollar steady at 1.682 to Sterling and 1.383 to the Euro, while Brent Crude is tending softer in early trade and is selling at $ 108.90 per barrel.

The London market started the day yesterday on a steady note, while the New York market showed modest buoyancy from the start. The New York market started to attract further speculative support and to build on its gains into the afternoon trade and with the London market following suit in a more modest manner. The New York market triggered buy stops to accelerate the gains and to hit new two year highs, but did come under a profit taking and price fixation pressure to shed a good percentage of the gains, before bouncing back by the close. The London market came under pressure later in the day and while it ended the day on a positive note, it was only with 39.4% of the gains of the day intact, while the New York market ended the day on a very positive note and with 86.1% of the gains of the day intact. This strong close is supportive for sentiment, but with the fundamentals behind the rally yesterday somewhat questionable, one might expect to see some degree of profit taking coming into play for early trade today in New York, against the prices set yesterday, as follows:

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

MAY 2146 + 28 MAY 211.80 + 15.10

JUL 2156 + 20 JUL 213.40 + 14.20

SEP 2160 + 23 SEP 215.40 + 14.15

NOV 2163 + 23 DEC 217.50 + 13.70

JAN 2168 + 24 MAR 219.40 + 13.45

MAR 2174 + 23 MAY 220.05 + 13.25

MAY 2181 + 22 JUL 219.75 + 13.05

JUL 2186 + 23 SEP 218.90 + 12.95

SEP 2186 + 23 DEC 217.80 + 12.65

NOV 2182 + 19 MAR 216.75 + 12.40

 


Coffee Market Report

April 22 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 long position within this market by 1.73% in the week of trade leading up to Tuesday 15th. April; to register a net long position of 40,233 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 0.91%, to register a net long on the day of 45,689 Lots.

During this same week of trade the Non Commercial Speculative sector of the market increased their net long position within the market by 4.44%, to register a net long position of 27,514 Lots on the day. This speculative net long position within the New York market which is the equivalent of 7,800,097 bags has most likely been marginally increased over the following days of overall positive trade, which has since followed and so too, the net long that was held by the Managed Money Fund sector of the market.

With most of the dominant Latin American producer bloc and so too the dominant European consumer market on holiday yesterday, there has been little in the way of coffee market news coming to the markets, which remain focused upon the issue of the probable dismal new crop from Brazil this year. With this factor presently the only directional news for the markets, as it would appear that for the rest of the producers it is business as usual and with nothing dramatic to report, in terms of medium to longer term production and supply.

Meanwhile in terms of the Brazil new crop news, there are some arabica coffee districts reporting losses from the original crop forecasts of 15% to 20% of their late last year estimates, while others talk losses as high as 35% of original potential. One might comment that with the Brazil arabica crop initially having been forecasted at approximately 40 million bags and therefore 71% of the overall new crop, these early reports that indicate an approximate 25% loss factor.

This 25% loss factor would extrapolate to a potential loss factor of 10 million bags, which would reduce the overall crop to around 46.5 million bags. Thus with an overall domestic market and export market demand of approximately 54 million bags per annum, a deficit crop of 7.5 million bags which shall absorb 70% of the carryover stocks into this new crop, over the second half of this year and the first half of next year. A factor that shall really only become a problem, should climatic conditions cause any concerns for the follow on 2015 crop, which presuming a frost free winter over the Brazil coffee districts, shall turn focus towards the spring and summer rainfall reports during the last quarter of this year.

The arbitrage between the markets, but with the London market closed for the day narrowed yesterday to 102.31 usc/Lb. and therefore, equated to a very attractive 51.36% 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 1,130 bags yesterday, to register these stocks at 2,585,150 bags. There was meanwhile a larger in volume 4,793 bags decrease in the number of bags pending grading for the exchange; to register these pending grading stocks at 16,073 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 74,500 bags or 24.39% over the two weeks of trade leading up to Monday 14th. April: to see these stocks were registered at a minimal 231,000 bags. The decline in these stocks has to be seen to be supportive for sentiment for the London market, which retains it’s well discounted to the New York market buoyancy and makes robusta coffees an attractive buy to the consumer market industries.

The commodity markets were with the impact of the holidays keeping trade thin, mixed but tending softer yesterday. The Natural Gas and Sugar markets showed buoyancy and the Oil, Coffee, Cocoa, New York arabica Coffee, Cotton, Orange Juice, Wheat, Corn, Soybean, Gold, Silver, Platinum and Palladium markets were softer for the day. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.84% lower; to see this Index registered at 561.85. The day starts with the U.S. Dollar steady at 1.679 to Sterling and 1.379 to the Euro, while Brent Crude is near to steady and is selling at $ 109.50 per barrel.

The London market remained on holiday yesterday to leave the day for a late start for solo trade for the New York market, which opened with follow through buoyancy from the rather dramatic rally that ended off the previous week on Thursday and adding 1.80 usc/Lb. in value. This buoyancy was however soon under threat and the market dipped back into negative territory and despite a short bounce back into positive territory, drifted lower and set a sideways track in relatively thin trade for the rest of the day. The New York market thus carried on to end the day on a soft note and with 83% of the losses of the day intact, but nevertheless showing good value for the producers. It is difficult to foresee following this close the direction for the markets, which might with the news of the falling London stocks reduce the negative pressure upon sentiment for the London market that would be expected from yesterday’s softer close in New York and thus might suggest a cautiously steady start for early trade today against the prices set in London on Thursday and New York yesterday, as follows:

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

MAY 2118 + 54 MAY 196.70 – 4.50

JUL 2136 + 54 JUL 199.20 – 4.90

SEP 2137 + 50 SEP 201.25 – 4.95

NOV 2140 + 50 DEC 203.80 – 4.90

JAN 2144 + 53 MAR 205.95 – 4.90

MAR 2151 + 60 MAY 206.80 – 4.90

MAY 2159 + 66 JUL 206.70 – 4.80

JUL 2163 + 66 SEP 205.95 – 4.75

SEP 2163 + 66 DEC 205.15 – 4.25

NOV 2163 + 66 MAR 204.35 – 4.30

 


Coffee Market Report

April 18 2014

The cold front that has been in play over the main coffee districts in Brazil is reported to be losing its intensity, but has in the meantime brought much relief to farmers in the main arabica coffee districts of Minas Gerais and so too, to neighbouring Sao Paulo state. With farmers mostly having already received their five year average rainfall for the month and some even reporting rainfall that has exceeded their five year averages, by 8% to 35% of these averages.

While these rains are of course too late to reverse any damage done by the hot and dry conditions during the first two months of this year and at a time when the new crop cherries were in their development stage, they shall do much to assist in the recovery of the depleted ground water retention levels. Thus to assist to carry the coffee trees through the cold and dry winter harvest season, while providing moist conditions for the trees, which shall make them more resistant to the negative effects of any mild frosts.

Meanwhile with the hot and dry weather having accelerated growth in some districts and already some early harvesting of arabica coffees having taken place, there are reports of dismal green bean returns from these coffees. These reports are somewhat supportive for market sentiment, but one must caution that they are related to extremely low volumes and are not guarantee of similar losses in yield potential from the immature cherries still to ripen and having had the support of reasonable rains over March and again during this month.

There is nevertheless no doubt that the potential for a much smaller than forecasted last year new Brazil arabica coffee crop for this year, that it shall continue to buoy sentiment and prices within the New York market for at least the next three months. Following this it shall be difficult to predict, as there is no certainty as to what new crop yields shall be reported by the tail end of the harvest in August and in this respect, how accurate might these reports be, as there shall always be the temptation to forward price supportive market manipulative low yield reports. Therefore, one must presume that the markets shall maintain a positive stance for the medium to long term.

There is in the meantime very little news coming forth from Mexico and Central America, where farmers are riding the positive nature of the reference prices of the New York market, to take good profits out of their new crop coffee stocks. These profits to do much to assist the farmers to invest in both fertilisers and Roya or Leaf Rust fighting chemical controls, towards the development of what can be expected to be larger new crops from their next October 2014 to March 2015 harvest.

These improved crops in terms of the losses due for the new Brazil arabica crop, to assist to fill the overall world demand for arabica coffees. Especially so as even with the predicable losses for the Brazil new arabica crop, the country has more than sufficient stocks to cover for this deficit through to their next 2015 crop. This factor and should there be good spring and summer rains coming in later in the year for Brazil to improve the prospects for the next 2015 Brazil crop, may have a negative influence upon the fortunes for the market for the last quarter of the year, but the question is where shall the market be by the third quarter of the year and one might suggest that even with improved crop prospects, the market shall retain good value for coffee farmers for the foreseeable future.

The arbitrage between the markets broadened yesterday to 107.21 usc/Lb. and therefore, equated to a very attractive 52.53% 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 6,476 bags yesterday, to register these stocks at 2,584,020 bags. There was meanwhile a smaller in volume 1,991 bags decrease in the number of bags pending grading for the exchange; to register these pending grading stocks at 20,866 bags.

The commodity markets were mixed but overall steady in pre long weekend trade yesterday with the Oil, Natural Gas, Cocoa, Copper, Wheat and Silver markets having a day of buoyancy and the Coffee markets ending the week on a very strong note, while the Sugar, Cotton, Orange Juice, Corn, Wheat, Soybeans, Gold, Platinum and Palladium markets tended easier for the day. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.57% higher; to see this Index registered at 566.61. The U.S. Dollar is steady at 1.678 to Sterling and 1.382 to the Euro, while Brent Crude is offered at $ 109.30 per barrel.

The London market started the day yesterday on a softer note and with producer price fixation selling putting some pressure upon the market, while the New York market stated the day with cautious buoyancy. The New York market started to attract support into the afternoon’s trade and with limited volumes of producer price fixation selling coming into play over the market, started to extend its gains and finally to have some influence upon a recovery for the London market. The New York market started to trigger buy stops which triggered a strong rally and with the London market following suit, to see both markets recover from their recent dip in value. The London market and with the prices quoted reflecting the last trades rather than the sett levels, ended the day on a strong note and with 93.1% of the gains of the day intact, while the New York market ended the day on a very strong note and with 97.4% of the gains of the day intact. The London market shall be closed on Monday while the New York market shall have a shortened day’s trade and we would expect that this latter market trading solo and with very few players about, shall register a slow and steady day against the prices set yesterday, as follows:

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

MAY 2119 + 55 MAY 201.20 + 15.25

JUL 2136 + 54 JUL 204.10 + 15.25

SEP 2138 + 51 SEP 206.20 + 15.25

NOV 2139 + 49 DEC 208.70 + 15.20

JAN 2146 + 55 MAR 210.85 + 15.25

MAR 2152 + 61 MAY 211.70 + 15.20

MAY 2160 + 67 JUL 211.50 + 15.05

JUL 2164 + 67 SEP 210.70 + 14.95

SEP 2164 + 67 DEC 209.40 + 14.50

NOV 2164 + 67 MAR 208.65 + 14.40

 


Coffee Market Report

April 17 2014

The Green Coffee Association in the U.S.A. has reported that the nations port warehouse stocks increased by a sizeable 132,307 bags or 2.74% during the month of March to register these stocks at the end of the month at 4,958,411 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 10.3 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 12.5 weeks of roasting activity, which is a relatively safe volume of nearby coffee supply.

Albeit that the end March stocks included 667,518 bags of mostly aged arabica coffee certified stocks that were held within the U.S.A. based approved warehouses of the New York exchange, which would mostly not participate in North American roaster off take. Thus the reality was that the North American coffee stocks at the end of the month still were the equivalent of in excess of 11 weeks of roasting activity, which is a very safe number in terms of the flow of new crop South American and Asian coffees that are now coming to the market.

Brazil’s largest coffee cooperative Cooxupe have reported that the early harvested cherries are indicating losses from the forecasted crop that exceed 30%, but this is based on very small volumes and does not reflect any reality in terms of the main harvest. One might comment that it is particularly so as it was the cherries related to early flowering that were most vulnerable to the hot and dry weather in January and August, which were more filled out at the time of this problem and therefore, more likely to suffer damage.

In the meantime the latest rainfall reports have confirmed that some districts within the main arabica coffee state of Minas Gerais and after only two weeks, have already received 20% in excess of their five year average rainfall for this month, while most other districts in Minas Gerais are close to matching their five year monthly averages. These good reports are somewhat in the shade in terms of the coffee farms in South East Sao Paulo state, where rainfall levels are already 47% above the five year average for the month.

These figures are tending to dampen some speculative spirits, but the reality remains that the damage has been done and really the only positive factor about good April rains is that they shall assist to relieve stress on the trees and furthermore, make them less vulnerable to any light winter time frosts. But it does in terms of these factors, limit the potential follow through negative effects of the hot and dry weather and the potential low ground water retention levels, in terms of the follow on 2015 Brazil crop.

The Colombian coffee farmers and despite much improved financial returns for their coffees, are still determined to join the general farmer protests that are planned for the 28th. April. These protests demanding more state support for the countries agricultural sector, but with the short term nature of these protests having no impact upon speculative sentiment in terms of security of Colombian coffee supply.

The arbitrage between the markets narrowed yesterday to 94.41 usc/Lb. and therefore, equated to a still very attractive 49.99% 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 483 bags yesterday, to register these stocks at 2,577,544 bags. There was meanwhile a marginally larger in volume 899 bags decrease in the number of bags pending grading for the exchange; to register these pending grading stocks at 22,857 bags.

The commodity markets were steady in trade yesterday with the Oil, Natural Gas, Sugar, Cotton, Copper, Orange Juice, Corn, Wheat, Soybean, Gold, Silver and Palladium markets showing some buoyancy and the Cocoa and Platinum markets tending easier, while the Coffee markets had another very soft day’s trade. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.09% higher; to see this Index registered at 563.39. The day starts with a relatively steady U.S. Dollar trading at 1.683 to Sterling and 1.384 to the Euro, while Brent Crude is showing some degree of buoyancy in early trade and is selling at $ 109.65 per barrel.

The London market started the day yesterday with immediate losses against speculative and producer price fixation hedge selling following the previous days collapse in the New York market, but with the New York market attracting good support and posting a positive stance. The London market continued on its negative track into the afternoon and despite the positive nature of the volatile New York market, which had posted gains of 7.45 usc/Lb. and was looking to show some muscle. These gains in New York were however short lived and the market faltered in early afternoon trade and with speculative profit taking and producer price fixation selling coming into play to trigger a sharp reversal that was accentuated by triggering sell stops, to accelerate the losses. The London market continued on its soft track and ended the day on a soft note and with 80.3% of the losses of the day intact, while the New York market likewise ended the day on a soft note and with 94.7% of the losses of the day intact. This soft close and with both markets closed tomorrow and the London market closed again on Monday while the New York market shall have a shortened solo day on Monday, is hardly likely to inspire players, but one might expect to see some restraint ahead of the holidays and a relatively steady start for early trade today against the prices set yesterday, as follows:

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

MAY 2064 – 57 MAY 185.95 – 6.20

JUL 2082 – 46 JUL 188.85 – 6.20

SEP 2087 – 41 SEP 190.95 – 6.15

NOV 2090 – 38 DEC 193.50 – 6.15

JAN 2091 – 35 MAR 195.60 – 6.30

MAR 2091 – 34 MAY 196.50 – 6.25

MAY 2093 – 36 JUL 196.45 – 6.20

JUL 2097 – 39 SEP 195.75 – 5.95

SEP 2097 – 38 DEC 194.90 – 5.75

NOV 2097 – 38 MAR 194.25 – 5.55

 


Coffee Market Report

April 16 2014

The Vietnam Customs have reported that the countries coffee exports for the month of March was in fact far in excess of forecasts and was 51.4% higher than the same month last year, at a very impressive total of 4,638,333 bags. This total would therefore indicate that the countries coffee exports for the first six month of the present October 2013 to September 2014 coffee now total 11,963,333 bags, which in terms of the expectations of the Vietnam Coffee and Cocoa Association for exports of 25 million bags during this coffee year, would indicate the potential for a further 13 million bags to be exported during the last six months of this coffee year.

One might however note that Vietnam was estimated to have brought in a new crop of approximately 28 million bags and added to this, was an approximate 2.5 million bags of carryover stocks and thus indicating a coffee supply of approximately 30.5 million bags of mostly robusta coffees. Therefore if one is to go with an export figure of only 25 million bags for the present coffee year and deduct an additional 1.8 million bags for domestic consumption, one would still be left with carryover stocks into the new crop of a significant 3.7 million bags.

There is however a possibility that with the price structure moving out of its past few months of inverted profile and now assisting the international trade to finance the carry of medium term stocks, that it shall inspire increased trade house buying interest in robusta coffee stocks. Thus one might see exports from Vietnam over the last six months of this coffee year increase and thus reduce the levels of carryover stocks into the next harvest that weather conditions permitting, is due to start in during October.

The New York market registered a sharp negative technical correction yesterday and one might expect that unless there is a very swift positive correction coming into play, that this might inspire some increase in selling activity of coffee stocks out of Mexico, Central America and Brazil, which would contribute to an increase in price fixation hedge selling pressure over this market. This selling activity to be accompanied by new crop selling activity from Peru and from the new mid-year Mitaca crop from Colombia, which are starting to come into play.

The issue of the Brazil weather effected new crop does however remain and no matter how much more active producer price fixation hedge selling into the New York market might be, one would expect that the underlying fund and speculative support shall come forth to absorb such activity and for the present, one has to believe that the market shall manage to maintain its 185 usc/Lb. to 205 usc/Lb. trading range. With perhaps some dismal early crop outturn reports due to start coming from Brazil’s arabica coffee districts over May and June, to further inspire some degree of positive speculative sentiment and therefore, maintaining the prevailing volatility of this market that is more likely to see 220 usc/Lb. in the medium term, than to fall back to levels around 160 usc/Lb.

The arbitrage between the markets narrowed yesterday to 98.53 usc/Lb. and therefore, equated to a still very attractive 50.52% 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 9,113 bags yesterday, to register these stocks at 2,578,027 bags. There was meanwhile a smaller in volume 2,520 bags decrease in the number of bags pending grading for the exchange; to register these pending grading stocks at 23,756 bags.

The commodity markets tended softer yesterday, despite the good economic figures coming through from the U.S.A. and the better than expected latest growth figures from China, as focus remains on the fact that while the GNP figures from China were better than expected, they remain well below the target. The Orange Juice, Wheat, Corn and Soybean markets had a positive days trade and the Sugar market was steady, while the Oil, Natural Gas, Cocoa, London robusta Coffee, Cotton, Copper, Gold, Silver, Platinum and Palladium markets had a softer day’s trade and the New York arabica Coffee market suffered from a sharp reversal in fortune. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.71% lower; to see this Index registered at 562.87. The day starts with a relatively steady U.S. Dollar trading at 1.672 to Sterling and 1.382 to the Euro, while Brent Crude is showing some degree of buoyancy in early trade and is selling at $ 109.30 per barrel.

The London and New York markets both started the day on a positive note yesterday, with both markets retaining their buoyancy into the afternoon’s trade. The New York market and with the negative influences of the macro commodity index coming into play start to falter later in the afternoon and fell back below par, to trigger speculative profit taking and producer price fixation sell stops, which accelerated the losses and having some degree of influence upon the London market that fell back into modest negative territory. The London market continued to end the day on a softer note and with 42.9% of the losses of the day intact, while the New York market ended the day on a very soft note and with 95.7% of the losses of the day intact. This somewhat unexpected soft close is unlikely to inspire confidence and one might expect to see some follow through producer price fixation selling activity coming into play, to contribute to a steady to soft start for the markets today, against the prices set yesterday, as follows:

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

MAY 2121 – 11 MAY 192.15 – 12.70

JUL 2128 – 6 JUL 195.05 – 12.35

SEP 2128 – 4 SEP 197.10 – 12.40

NOV 2128 – 4 DEC 199.65 – 12.40

JAN 2126 – 4 MAR 201.90 – 12.30

MAR 2125 – 5 MAY 202.75 – 12.00

MAY 2129 – 8 JUL 202.65 – 11.65

JUL 2136 – 9 SEP 201.70 – 11.40

SEP 2137 – 9 DEC 200.65 – 11.35

NOV 2137 – 9 MAR 199.80 – 11.15

 


Coffee Market Report

April 15 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 11.75% in the week of trade leading up to Tuesday 8TH. April; to register a net long position of 24,025 Lots on the day. This speculative net long position within the London market which is the equivalent of 4,004,167 bags has most likely been little changed over the following days of mixed trade, which has since followed.

In terms of activity within the robusta coffee market and with the good discounts that these coffees offer against the buoyant and volatile arabica coffee market, the Vietnam Coffee and Cocoa Association have forecasted that the country shall export approximately 5.63% more coffee during the present October 2013 to September 2014 coffee year, with exports targeted at approximately 25 million bags. This would in terms of the country’s exports of approximately 11 million bags over the first six months of the present coffee year, indicate that there is a probability for very active export selling due for the last six months of this coffee year.

Such selling activity out of Vietnam would result in steady price fixation hedge selling for the London market, which might well once these sales are joined by new crop selling activity out of Indonesia assist to create something of a ceiling for the market. But with the discount for robusta coffees relative to the arabica coffee market having widened and with consumer roasters fighting to maintain market share within the competitive retail markets, the increasing demand for robusta coffees shall most certainly assist to absorb the increasing robusta coffee supply and dull the negative effects of rising volumes coming to the market.

This is aside from the very volatile New York market in play and one that is influenced by the weather issues in Brazil, which is adding value the coffee market in general and is likely to retain buoyancy for the markets for the coming months. At least until the new Brazil harvest is completed, the frost season is over and there is some perspective of the quality of the new rain season that shall dictate the prospects for the next 2015 Brazil crop, which shall have to be a large one if the coffee industry is to feel secure with the longer term supply.

The news of fair rains in Brazil for the weekend and the start of this week and with many farms within the main arabica coffee state of Minas Gerais having already been in receipt of close to their five year average rainfall for the month of April, tended to dampen some speculative spirits and impact negatively upon the New York market for early trade yesterday. This was however short lived as the reality is that it is rather like closing the stable door after the horse has bolted, in that the damage caused by the hot and dry weather during the important cherry development period in the first two months of the year is irreversible.

The autumn rains are however positive in terms of assisting in the recovery of ground water retention levels ahead of the dry and cold winter harvest season, which shall in turn assist in the maintenance of the trees ahead of the post-harvest spring and summer rainfall season at the end of the year and the related flowering for the next crop. Making note that the size of this next Brazil crop being a far more critical factor for the market, which anticipates the liquidation of most of the coffee stocks in Brazil over the next ten to twelve months.

The arbitrage between the markets widened yesterday to 110.60 usc/Lb. and therefore, equated to a very attractive 53.33% 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 2,195 bags yesterday, to register these stocks at 2,587,140 bags. There was meanwhile a smaller in volume 1,371 bags increase in the number of bags pending grading for the exchange; to register these pending grading stocks at 26,276 bags.

The commodity markets tended to steady in trade yesterday, with many markets showing buoyancy as the day progressed. The Oil, Cocoa, New York arabica Coffee, Cotton, Wheat, Corn, Soybean, Gold, Silver and Palladium markets had a day of buoyancy and the Copper market was steady, while the Natural Gas, London robusta Coffee, Sugar, Orange Juice 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 0.57% higher; to see this Index registered at 566.90. The day starts with a marginally stronger U.S. Dollar trading at 1.671 to Sterling and 1.381 to the Euro, while Brent Crude is tending marginally softer in early trade and is selling at $ 108.15 per barrel.

The London and New York markets both started the day tending softer yesterday, with the London market attracting producer price fixation selling pressure to maintain downside pressure upon the markets, but with both markets gaining underlying support on the dips, from roaster buying. The markets entered the afternoon on a negative sideways track, but with the New York market gaining support from the positive nature of the macro commodity index and from speculative and fund buying as the afternoon progressed to trigger buy stops and move swiftly back into positive territory and followed briefly, but a recovery for the London market. This latter London market however could not sustain its recovery and slid back through par at the end of the day to end on a softer note, but nevertheless having recovered 75.8% of the earlier losses of the day by the close, while the New York market ended the day on a positive note and with 86.5% of the gains of the day intact. The positive nature of the close in the more volatile New York market is perhaps supportive for sentiment and one might expect to see a steady to buoyant start for early trade today against the prices set yesterday, as follows:

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

MAY 2132 – 9 MAY 204.85 + 3.65

JUL 2134 – 8 JUL 207.40 + 3.85

SEP 2132 – 6 SEP 209.50 + 3.90

NOV 2132 – 4 DEC 212.05 + 3.95

JAN 2130 – 3 MAR 214.20 + 3.95

MAR 2130 – 2 MAY 214.75 + 4.00

MAY 2137 unch JUL 214.30 + 4.00

JUL 2145 – 3 SEP 213.10 + 4.10

SEP 2146 + 1 DEC 212.00 + 4.20

NOV 2146 + 1 MAR 210.95 + 4.00

 


Coffee Market Report

April 14 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 4.58% in the week of trade leading up to Tuesday 8th. April; to register a net long position of 39,548 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 46,109 Lots.

During this same week of trade the Non Commercial Speculative sector of the market decreased their net long position within the market by 6.24%, to register a net long position of 26,344 Lots on the day. This speculative net long position within the New York market which is the equivalent of 7,468,407 bags has most likely been marginally increased over the following days of overall positive trade, which has since followed and so too, the net long that was held by the Managed Money Fund sector of the market.

The Uganda Coffee Development Authority has reported that the countries coffee exports for the month of March was 37,133 bags or 11.93% higher than the same month last year, to total 348,423 bags. What was noticeable though in terms of these numbers is that despite the higher value of the market over the past four months, that the value of these exports was only 2.37% higher than the same month last year, at a total of 38.9 million U.S. dollars. The very modest increase in the value of these exports and despite the more impressive rise in volume, does seeming indicate that a good percentage of these exports were related to price fixed forward contracts that had been concluded earlier in the previous year.

With the prevailing buoyancy of the reference prices of the New York market and the uncertainty as to the extent of the damage that has been done by the hot and dry weather over the first two months of the year, the Brazilian farmers are suggesting to their government that they should take this opportunity to liquidate the state retention coffee stocks of approximately 1.6 million bags of arabica coffees. Such an action in terms of the potential losses to the size of the new crop would not really be seen to be a strong negative factor of the market, but would assist to stabilise internal market prices for the countries domestic roasting industry.

The Braz