The Brazil Exporters Association Cecafe have estimated that Brazil shall export between 33 million to 34 million bags of coffee for this calendar year, which shall be significantly lower than the exports they estimate at 37 million bags for 2015. This export volume which is an estimate that is based on the combination of green coffees, value added soluble coffees at their green bean equivalent and value added roast and ground coffees at their green bean equivalent, needs to be added to an approximate 21 million bags of domestic consumption for this year.
Thus, if one is to look to the numerous forecasts for Brazil having brought in a new crop of approximately 55 million bags of coffee this year, the combination of estimated coffee exports and domestic consumption if similar levels of exports were to carry on into mid-next year, would point to a very limited rebuilding of coffee stocks ahead of next year’s new crop. But one might suggest that the early in this year there were still some volumes of conilon robusta coffee exports taking place which have since dried up and that perhaps overall exports related to this year’s crop, might be closer to 32 million bags and combined with the domestic industry demand of 21 million bags, a coffee absorption of approximately 53 million bags.
If this estimated coffee absorption figure of 53 million bags is correct and with Brazil most likely having had a modest carry over stock that might have been close to 3 million bags into this year’s crop, it would indicate that there is a potential for a carryover stock of approximately 5 million bags into the next year’s new crop harvest. Not a significant number in terms of Brazils overall dominance in global coffee supply, but a number so long as there are not going to be any further weather related problems to counter the potential of the 2017 crop potential that one would guess to be well in excess of say 53 million bags, to guarantee Brazil coffee supply through to their follow on 2018 crop.
The Philippines who forty years ago were a coffee exporter albeit relatively modest within the world coffee supply, continue to voice concerns that the country is a now a significant coffee importer. Thus, there is keen interest in the Second National Coffee Congress that shall be held from today through to Friday this week in Baguio City and with an estimated 800 local industry player delegates due to attend, as they bid to inspire a revival of the country’s coffee farming industry. Especially so as the conference shall include speakers from the world’s two most successful coffee producing nations Brazil and Vietnam, who can be expected to be inspirational in with their input and qualified guidance.
One might comment that with the Asian countries already accounting for close to 30% of world coffee production and most certainly contributing much towards global consumption growth, that there is the potential for the Asian countries to continue to improve upon their share of global coffee production. This shall of course take time, but with programs in place to significantly improve farming techniques and yields in Indonesia and further programs to encourage coffee farming in Myanmar, Laos, Philippines and along with a growing coffee farming industry in South East China, there is a vibrancy in Asian coffee farming development. These developments assisted by the example of the successes within Vietnam, which should assist to inspire the longer-term potential for Asian coffee production and the regions market share of global supply.
The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 67.09 usc/Lb., while this equates to a 41.45% price discount for the London robusta coffee market. This arbitrage remains an attractive factor for the roasters who have considered robusta coffees to be an opportunist discount component, within their mostly arabica coffee blends.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 235 bags yesterday; to register these stocks at 1,256,611 bags. There was meanwhile a smaller in volume 140 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 15,483 bags.
The Certified Robusta coffee stocks held against the New York exchange were seen to increase by 13,720 bags or 0.71% over the week of trade leading up to Monday 21st. November, to register these stocks at 2,302,833 bags, on the day.
The commodity markets had a mixed day yesterday, with the overall macro commodity index tending to drift south through the day. The Natural Gas, Cocoa, London robusta Coffee, Copper, Wheat, Corn, Soybean, Gold and Silver markets had a day of buoyancy and the Cotton market was steady, while the Oil, Sugar, New York arabica Coffee and Orange Juice markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.06% higher; to see this Index registered at 420.75. The day starts with the U.S. dollar near to steady and trading at 1.241 to Sterling and 1.063 to the Euro, while North Sea Oil is steady and is selling at 46.45 per barrel.
The London market started the day yesterday with early buoyancy, while the New York suffered from some corrective selling and on a marginally softer note. This softness within the New York market was however short lived and the market soon recovered to see both markets enter the afternoons trade on a positive note. The New York market however faltered and while the London market was maintaining a modestly positive sideways track above par, the New York market maintained an erratic sideways track mostly to the south of par. The day progressed with the London market maintaining its modest positive stance, while the New York market took an erratic downside track to the close. The London market ended the day on a positive note and with 69.6% of the earlier gains of the day intact, while the New York market ended the day on a soft note and with 76.3% of the earlier losses of the day intact. This mixed close provides likewise mixed signals but with the technical picture of the market looking soft, one might not expect much excitement for early trade today. However, with tomorrows Thanksgiving holiday for the New York market to the fore and the prospects for many to take a bridging long weekend holiday, there might be some book squaring activity due for the New York market against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
NOV 2126 + 14 DEC 157.25 – 1.40
JAN 2099 + 16 MAR 161.85 – 1.45
MAR 2089 + 13 MAY 164.20 – 1.40
MAY 2095 + 13 JUL 166.30 – 1.35
JUL 2101 + 12 SEP 168.15 – 1.45
SEP 2107 + 13 DEC 170.70 – 1.45
NOV 2113 + 13 MAR 173.05 – 1.40
JAN 2121 + 13 MAY 174.15 – 1.50
MAR 2135 + 13 JUL 175.15 – 1.35
MAY 2151 + 13 SEP 176.05 – 1.30