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I. & M. Smith (Pty) Ltd.

Coffee Market Report

25 May 2015

Coffee Market Report

May 25 2015

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non Commercial Speculative sector of this market decrease their net short sold position within the market by 51.15% during the week of trade leading up to Tuesday 19th. May; to register a net short sold position of 6,901 Lots. This net short sold position which is the equivalent of 1,956,403 bags has most likely been significantly increased, over the period of sharply negative trade which ended off the last two days of high volume trade last week.

The Uganda Coffee Development Authority have reported that the countries coffee exports for the month of April were 68,570 bags or 20.61% lower than the same month last year, at a total of 264,065 bags. This dip that follows lower volumes for the previous months this year, contributes to the countries cumulative coffee exports for the first seven months of the present October 2014 to September 2015 coffee year being 238,635 bags or 13.07% lower than the same period in the previous coffee year, at a total of 1,587,240 bags.

The value of the coffee exports from Uganda in April this year was likewise US$ 7,680,567.00 or 18.97% lower than the same month last year, at a total of US$ 32,805,613.00. However with the relatively higher value of exports over the preceding months the value of the cumulative exports for the first seven months of the present October 2014 to September 2015 coffee year are still US$ 19,722,917.00 or 10.5% higher than the same period in the previous coffee year, at a total of US$ 207,480,332.00.

This improved value and despite the lower volumes of coffee that it is related to and in terms of the firmer U.S. dollar that has prevailed in recent months, would indicate that in terms of domestic Ugandan shilling prices that the negative effects of the softer international coffee prices have not been so noticeable. But one would think that unless there shall soon be some degree of recovery for the international coffee prices that is shall soon start to impact negatively upon the Ugandan coffee farming industry, which is presently on a development track towards annual crops that would exceed 4 million bags.

The well respected United States Department of Agriculture Foreign Agricultural Service has forecasted that the Coffee production in Costa Rica which they had revised higher for the present October 2014 to September 2015 coffee year to 1,397,542 million bags, shall possibly decline further for the next October 2015 to September 2016 coffee year due to much dryer El Nino conditions to around 1.35 million bags. This reports figure for the 2014/2015 crop is tending to the low side of many other trade and industry reports that talk closer to 1.5 million bags but it is only marginally different and could well be realistic, but with the El Nino so far only looking to be a relatively mild one, only time shall tell if it shall have such a negative impact upon the next crop.

A Reuters survey over nine Brazil coffee exporters in terms of the size of the carryover coffee stocks that shall be on hand by the end of next month, has seen figures that range between 4.5 million and 11.2 million bags, but with the majority estimating between 5 million and 8 million bags. The carryover stocks shall be the lowest since the 2010/2011 coffee year but in terms of the more recent bout of new crop forecasts that now foresee the presently in progress harvest most likely to well exceed 50 million bags, even the lower levels of carryover coffee stocks estimates would indicate more than adequate coffee for Brazil to maintain steady consumer market supply through to the next 2016 harvest. Thus the survey and its indication of lower stocks, does little to counter the prevailing bearish sentiment within the market.

The arbitrage between the markets has broadened on Friday to register this at 53.20 usc/Lb., while this equates to an attractive 41.91% price discount for the London robusta coffee market. This arbitrage continues to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 2,895 bags on Friday; to register these stocks at 2,151,112 bags. There was meanwhile a smaller in volume 991 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 48,275 bags.

The commodity markets were softer on Friday, as most markets reacted to the renewed speculation over inflation related possibilities of nearby rising dollar interest rates and the resulting firming of the dollar through the day. The Orange Juice market nevertheless had a day of buoyancy and the Cocoa, Gold and Platinum markets were steady for the day, while the Oil, Natural Gas, Sugar, Coffee, Cotton, Copper, Wheat, Corn, Soybean and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.89% lower to see this Index registered at 429.87. The day starts with the U.S. Dollar steady and selling at 1.548 to Sterling and 1.099 to the Euro, while North Sea Oil closed on Friday selling at 63.62 per barrel.

The London and New York markets started the day on Friday on a slow and steady note, with the New York market tending to bounce above par and the London market to stay close to par. This remained the tract into the afternoon trade when the combination of the prevailing bearish sentiment and charts, pre long weekend book squaring and the dollar related softening of the overall macro commodity index started to play a part and both markets headed back into negative territory. The London market continued to end the day on a very negative note and with 98.2% of the losses of the day intact, while the New York market ended the day on a soft note and with 56.6% of the earlier losses of the day intact. The London market shall be closed for the Spring Bank holiday in the UK and the New York market shall be closed for the Memorial Day holiday in the U.S.A., while many of the leading Western European countries are close today for the Whit Monday or Pentecost holiday, but one might not expect too much activity immediately post the long weekend and little better than a steady start for early trade tomorrow against the soft prices set on Friday, as follows:

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

MAY 1589 – 55

JUL 1626 – 56 JUL 126.95 – 1.50

SEP 1651 – 56 SEP 129.80 – 1.45

NOV 1672 – 56 DEC 133.65 – 1.45

JAN 1692 – 56 MAR 137.35 – 1.45

MAR 1715 – 56 MAY 139.55 – 1.45

MAY 1740 – 55 JUL 141.25 – 1.45

JUL 1765 – 51 SEP 142.60 – 1.65

SEP 1790 – 51 DEC 144.85 – 1.70

NOV 1816 – 54 MAR 147.00 – 1.85

 


Coffee Market Report

May 22 2015

The markets took a bearish hit during trade yesterday, with the publication of the latest E D & F Man Volcafe quarterly Coffee Demand and Supply report, which indicated a modest surplus coffee supply for the forthcoming October 2015 to September 2016 coffee year. The report firstly increased its earlier coffee supply for the present October 2014 to September 2015 coffee year by 1.6 million bags to 143.8 million bags, as against an estimated world coffee demand of 150.2 million bags and therefore, a 6.4 million bags deficit for the present coffee year. This figure would be a relatively modest deficit, which shall be easily countered by the significant world coffee stocks and particularly within Brazil, at the start of the present coffee year.

But more bearish a factor in terms of the funds that look to the fore rather than the past, was the estimate that world coffee supply for the coming October 2015 to September 2016 coffee year shall rise to 154.5 million bags and even though they have forecasted a rising world coffee supply to total 153.2 million bags for this coming coffee year, it still indicates a forecasted surplus supply of 1.3 million bags. Thus with the report hitting the commodity press, it proved to take the wind out of the sails of the speculative and technical sectors of the markets for later in the day trade.

In the meantime the new Brazil conilon robusta crop is peaking and the new arabica coffee harvest is starting to come into play, while in terms of weather there have been some incidences of scattered showers over the main arabica coffee districts in south east Brazil. Thus it is very much business as usual and with the main coffee districts having experienced a couple of months of relatively good rains, the ground water retention levels are good and the trees well able to counter the stress of the cool and dry winter harvest season. Thus for the present, there are no fears in place on the longer term prospects for Brazil coffee supply, so long as the next spring and summer rain seasons comes into play for the last quarter of this year and to set the next 2016 crop.

The Brazilian government, who have come under pressure from the coffee farmers lobby in recent weeks, have reversed their decision to allow the countries domestic roasters to import relatively high quality washed arabica coffees from neighbouring Peru. The protests which were supported by the threat of importing coffee pests and diseases that might infest the Brazil coffee farms are perhaps more related to the farmers fearing competition for their monopoly position, in terms of coffee supply to the world’s second largest consumer market industries.

The well respected United States Department of Agriculture Foreign Agricultural Service has forecasted that the Coffee production in Mexico which they had revised lower for the present October 2014 to September 2015 coffee year to 3.3 million bags, shall remain close to this figure for the next October 2015 to September 2016 coffee year. They support this relatively modest figure that falls short of many trade and industry reports that talk in terms of the present coffee years output in Mexico of being in excess of 3.5 million bags, by noting that the countries farmers are still suffering from the Roya or Leaf Rust infestation.

The arbitrage between the markets has narrowed yesterday to register this at 52.16 usc/Lb., while this equates to an attractive 40.61% price discount for the London robusta coffee market. This arbitrage continues to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 18,414 bags yesterday; to register these stocks at 2,148,217 bags. There was meanwhile a smaller in volume 9,959 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 49,266 bags.

The commodity markets were mixed yesterday, but with the softer U.S. dollar assisting to inspire the overall macro commodity index to show a degree of buoyancy through the day. The Oil, Natural Gas, Cocoa, Copper, Orange Juice, Wheat and Corn markets had a day of buoyancy and the Silver market was steady, while the Sugar, Cotton, Soybean, Gold and Platinum markets tended softer and the Coffee markets took a tumble for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.37% higher to see this Index registered at 433.73. The day starts with the U.S. Dollar steady and selling at 1.569 to Sterling and 1.116 to the Euro, while North Sea Oil is tending softer in early trade and is selling at 64.50 per barrel.

The London and New York markets started the day yesterday on a steady note within and environment of thin and lacklustre trade and retaining a sideways track into the afternoon, but as the afternoon progressed and lacking much in the way of industry buying support, the markets started to drift marginally lower. This however all changed post the latest bearish support from E D & F Man Volcafe, which inspired speculative selling and triggered technical and producer sell stops, to see both markets significantly pick up in volume and start to take a sharper downside track for the rest of the day’s trade. The London market ended the day on a soft note and with 71.7% of the losses of the day intact, while the New York market ended the day on a very soft note and with 92.6% of the earlier losses of the day intact. This dismal close and ahead of today being a slow day for many European players who shall already be looking towards Monday’s Whit Monday public holiday, is unlikely to attract much support and one might expect to see little better than a steady start for early trade today against the prices set yesterday, as follows:

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

MAY 1644 – 43

JUL 1682 – 43 JUL 128.45 – 7.55

SEP 1707 – 44 SEP 131.25 – 7.45

NOV 1728 – 43 DEC 135.10 – 7.30

JAN 1748 – 43 MAR 138.80 – 7.30

MAR 1771 – 40 MAY 141.00 – 6.95

MAY 1795 – 38 JUL 142.70 – 6.70

JUL 1816 – 35 SEP 144.25 – 6.40

SEP 1841 – 31 DEC 146.55 – 5.80

NOV 1870 – 15 MAR 148.85 – 5.35

 


Coffee Market Report

May 21 2015

Adding to the host of more positive crop forecasts for the new crop in Brazil this year, which is presently being harvested, was the comment from the vice president of Interagricola in Brazil and a company that is part of the international Ecom coffee trade house. There was no specific number quoted, but they are of the opinion that due to improved weather conditions within Brazil over the past two and half months that the new crop is due to be higher than their 49.75 million bags forecast that they quoted in March this year.

This comment follows the recent forecasts of 50.3 million bags from Mercon, 51.9 million bags from E D & F Man Volcafe and 52.4 million bags from the USDA and by nature, the comment would indicated that Ecom now also foresee a new Brazil crop that is well above 50 million bags. This Ecom comment indicates that once one accepts that Brazil shall not remain an aggressive export seller of their conilon robusta coffees over the medium term, that export and domestic demand for the coming year shall dictate that this new crop shall only be in deficit of two to three million bags. A deficit that shall easily be countered by the carryover stocks that Brazil is taking into this new crop.

The well respected United States Department of Agriculture Foreign Agricultural Service has forecasted that the Coffee production in Colombia for the present October 2014 to September 2015 coffee year shall be 12.5 million bags, which shall rise to 12.7 million bags during the follow on October 2015 to September 2016 coffee year. One might comment that this is a relatively conservative forecast, as there are already many forecasts that are talking Colombian production to soon be in excess of 13 million bags per annum.

The same USDA have forecasted that the coffee production and supply within Guatemala for the present October 2014 to September 2015 coffee year is 3% higher than the previous coffee year at approximately 3.5 million bags, with the prospects for this to rise to 3.6 million bags for the follow on October 2015 to September 2016 coffee year. This recovery in the crop they say, being related to the maturity of the replanted trees and pruned trees, following the devastating Roya or Leaf Rust problems a couple of years ago.

The USDA have however in terms of El Salvador taken something of a negative note in that they have reported that while coffee production for the present coffee year is 24% higher than the previous coffee year at 624,000 bags, that due to continued problems of Roya or Leaf rust and biannual bearing factors, that the follow on October 2015 to September 2016 crop shall be significantly lower at approximately 351,000 bags. These figures in terms of many other private trade and industry forecasts and the fact that El Salvador had already exported 377,725 bags of coffee within the first seven months of the present coffee year, could be seen to be rather conservative. Likewise the forecast for such a dramatic decline for the follow on coffee year and thus it shall need to be a case of wait and see, if the forecasts are perhaps a little too negative in nature.

The USDA have likewise been relatively conservative with their forecast for coffee production in India and have reported that they foresee that the countries coffee production for the forthcoming October 2015 to September 2016 coffee year shall be only marginally higher than production for the present coffee year, at a total of 5.2 million bags. This view towards a similar to larger crop for the coming coffee year in India is one that is commonly shared by many earlier forecasts, which have recently come to the market.

The arbitrage between the markets has narrowed yesterday to register this at 57.76 usc/Lb., while this equates to an attractive 43.47% price discount for the London robusta coffee market. This arbitrage continues to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 20,143 bags on yesterday; to register these stocks at 2,166,631 bags. There was meanwhile a smaller in volume 9,959 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 39,952 bags.

The commodity markets were mixed yesterday, with the firmer U.S. dollar having a negative impact within many markets. Likewise the news that the manufacturing sector in China had contracted for the third straight month and therefore, puts in question the prospects of retaining in excess of 7% growth, on the longer term. The Oil, Orange Juice, Wheat, Gold, Silver and Platinum markets had a day of buoyancy, while the Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Corn and Soybean markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.07% lower to see this Index registered at 432.12. The day starts with the U.S. Dollar steady and selling at 1.554 to Sterling and 1.111 to the Euro, while North Sea Oil is steady in early trade and is selling at 64.00 per barrel.

The London and New York markets started the day yesterday on a steady to softer note within and environment of thin and lacklustre trade and retaining this marginally softer track into the afternoon, when there was a short lived recovery for the New York market that moved back into positive territory and with the London market returning to par. The markets did however soon come under renewed pressure which was not helped by the latest Ecom Brazil news and both markets returned to negative territory. The London market continued to end the day on a soft note and with 92.6% of the losses of the day intact, while the New York market likewise ended the day on a soft note and with 89.5% of the earlier losses of the day intact. This softer close is likely to inspire little better than a near to steady start for early trade today against the prices set yesterday, as follows:

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

MAY 1687 – 22

JUL 1725 – 25 JUL 136.00 – 3.85

SEP 1751 – 25 SEP 138.70 – 3.65

NOV 1771 – 24 DEC 142.40 – 3.45

JAN 1791 – 23 MAR 146.10 – 3.30

MAR 1811 – 24 MAY 147.95 – 3.30

MAY 1833 – 25 JUL 149.40 – 3.30

JUL 1851 – 25 SEP 150.65 – 3.40

SEP 1872 – 25 DEC 152.35 – 3.55

NOV 1885 – 25 MAR 154.20 – 3.40

 


Coffee Market Report

May 20 2015

With the summer rain season having started to come into play in Vietnam and by nature indicating that there should be no fears of weather issues to damage the potential for a larger new robusta coffee crop being harvested in the last quarter of this year, one might speculate that it may start to inspire the price resistant farmers and internal traders to start being more accepting of the reality of the lower prices that are dictated by the reference prices of the London market. Especially so now, as with the new and larger Indonesian crop is starting to come to the market, it shall potentially bring with it competition and force Vietnams farmers to be more aggressive in their selling activities so as to cash in some of their stocks.

The largest coffee cooperative in Brazil and the world Cooxupé have reported that some light harvesting of the new arabica coffee crop, with the harvest expected to pick up steam in June. However based on the minimal so far harvested, they really are not in a position as of yet to start adjudging the cherry to yield outturns from the new crop. This being a critical factor following the unseasonal dry conditions in South East Brazil over January and early February this year, which was a factor that contributed to speculation of severe damage to the new crop.

The forecasts for a dismal new arabica coffee crop for this year, has however been countered in the recent weeks, by a host of new forecasts for a better than initially expected new Brazil arabica coffee crop. It is though only by July this year and with the new arabica crop harvest peaking, that more accurate assessments of the potential of this new arabica coffee crop can come to the market. Albeit that true accuracy is only usually forthcoming on the longer term, but the evidence of the selling and export activity out of Brazil.

The International Coffee Organisation have predicted that mostly due to deficit coffee supply from Brazil this year that global coffee supply for the forthcoming October 2015 to September 2016 coffee year shall likewise result in a deficit of approximately 4 million to 5 million bags, which shall see world coffee stocks reduced within the next coffee year. It is however noted that the International Coffee Organisation is by nature obliged to work with the official crop reports from its member nations which are more often than not conservative in nature and therefore, one might presume that the deficit if any, shall be much more modest that this assessment of longer term coffee supply.

Taking into account the widely accepted lower Brazil conilon robusta coffee crop this year that is contrary to the many private trade and industry forecasts for a larger new Brazil arabica coffee crop, the Brazil Coffee Exporters Association have predicted that the country’s coffee exports for this year shall be 3.5% lower than last year at approximately 35 million bags. This forecast that is generally agreed upon is however of no concern to the consumer markets as the dip is related only to the price competitive opportunist exports of conilon robusta coffees out of Brazil, which shall be easily countered by rising supply from the larger Indonesian robusta coffee crop that is now starting to come to the market, along with large volumes of unsold Vietnam robusta coffee stocks that still remain within farm hands.

The well respected United States Department of Agriculture Foreign Agricultural Service have forecasted that due to improved weather the Ugandan coffee supply for the forthcoming October 2015 to September 2016 coffee year shall increase by over 7%, to 3.8 million bags. While they have forwarded a longer term forecast and with the comment that with the combination of the prevailing Uganda Coffee Development Association and private industry support programs, that the Ugandan annual coffee production shall increase to approximately 4.5 million bags by 2018.

The United States Department of Agriculture Foreign Agricultural Service have also forecasted that the Tanzanian coffee production and coffee supply for the coming October 2015 to September 2016 coffee year shall improve by close to 20%, to 1.2 million bags. While they have forecasted that the neighbouring Kenya coffee supply for this forthcoming coffee year shall remain steady, at approximately 900,000 bags.

The latest statistics from the Cameroun have confirmed a positive month of April for the country, with the robusta coffee exports for the month being 82,550 bags or 188.9% higher than the same month last year, at a total of 126,250 bags. This being matched by the countries arabica coffee exports for the month being 5,450 bags or 140.94% higher than the same month last year, at a total of 9,317 bags.

The arbitrage between the markets has narrowed yesterday to register this at 60.47 usc/Lb., while this equates to an attractive 43.24% price discount for the London robusta coffee market. This arbitrage continues to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 930 bags on yesterday; to register these stocks at 2,186,774 bags. There was meanwhile a larger in volume 4,178 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 29,993 bags.

The commodity markets generally came under some pressure yesterday, with the improved economic data coming forth from the U.S.A. and with the corresponding firming of the U.S. dollar. The Sugar and Orange Juice markets nevertheless had a day of buoyancy, while the Oil, Natural Gas, Cocoa, Coffee, Cocoa, Cotton, Copper, Wheat, Corn, Soybean, Gold, Silver and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.31% lower to see this Index registered at 432.43. The day starts with the U.S. Dollar showing a degree of buoyancy and selling at 1.550 to Sterling and 1.111 to the Euro, while North Sea Oil is steady in early trade and is selling at 63.30 per barrel.

The London and New York markets started the day yesterday on a steady note, with the markets taking a generally slow and quiet sideways track and either side of par into the afternoon trade, but with the New York market starting to come under pressure from producer price fixation selling and heading into negative territory as the afternoon progressed and followed by a slide back to below par, for the London market. This reversal of the fortunes for the markets along with the added negative influences of the softening of the overall macro commodity index set the track for the rest of the day’s trade, with both markets sliding lower as the day progressed. The London market continued to end the day on a soft note and with 79.2% of the losses of the day intact, while the New York market likewise ended the day on a soft note and with 66.7% of the losses of the day intact. This softer close and with the U.S. dollar continuing to show some muscle is likely to inspire little better than a near to steady start for early trade today against the prices set yesterday, as follows:

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

MAY 1709 – 19

JUL 1750 – 19 JUL 139.85 – 3.30

SEP 1776 – 19 SEP 142.35 – 3.30

NOV 1795 – 19 DEC 145.85 – 3.25

JAN 1814 – 18 MAR 149.40 – 3.20

MAR 1835 – 16 MAY 151.25 – 3.05

MAY 1858 – 16 JUL 152.70 – 2.95

JUL 1876 – 19 SEP 154.05 – 2.85

SEP 1897 – 19 DEC 155.90 – 2.75

NOV 1910 – 19 MAR 157.60 – 2.70

 


Coffee Market Report

May 19 2015

The latest Commitment of Traders report from the New York arabica coffee market has seen the shorter term in nature Managed Money fund sector of this market increase their net short sold position within the market by 29.71% over the week of trade leading up to Tuesday 12th. May; to register a net short sold position of 10,077 Lots on the day. Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 1.94%, to register a net long position of 26,429 Lots on the day.

Meanwhile the Non Commercial Speculative sector of this market increased their net short sold position within the market by 17.17% during the week of trade leading up to Tuesday 12th. May; to register a net short sold position of 14,127 Lots, this net short sold position which is the equivalent of 4,004,942 bags has most likely been reduced over the period of mixed but overall generally positive trade that has since followed and likewise, the net short sold position of the Managed Money sector of the market.

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market reduce their net long position within the market by 10.65% over the week of trade leading up to Tuesday 12th. May; to register a net long of 15,945 Lots on the day. This net long that is the equivalent of 2,657,500 bags has most likely been little changed over the period of mixed but overall sideways trade, which has since followed.

The United States Department of Agriculture Foreign Agricultural Service has forecasted that due to favourable weather conditions of late and with the new robusta coffee crop starting to be harvested, that the Indonesian coffee production and supply for the present April 2015 to March 2016 coffee year shall be approximately 24% higher than for the present coffee year. In this respect they forecast that robusta coffee supply shall rise to 9.3 million bags and arabica coffee supply to 1.6 million bags and therefore, an overall crop of 10.9 million bags. This positive crop report is very much in line with many other trade and industry forecasts, which likewise talk in terms of a 20% to 25% increase in Indonesian coffee production.

The report does highlight that in the meantime the Indonesian domestic coffee market is on a steady increase and is going to continue to increase the demands for coffee supply and to a degree dent the export potential, but make the point that the Indonesian domestic coffee industry is also an active importer of low priced coffees and therefore, assists to release more of the countries production for export. Thus the report forecasts that Indonesian coffee exportable production shall rise for this April 2015 to March 2016 coffee year by 2,050,000 bags to total 7.8 million bags, while approximately 400,000 bags shall be imported to supplement the domestic industry demands.

There was a report from the Vietnam News Agency yesterday that quotes the Vietnam Coffee and Cocoa Association as having reported that the countries last harvest was 20% lower than the previous crop, as is evident from the sharp dip in coffee exports for the first four months of this year. This is a dramatically higher dip than has been widely reported by the traditionally more accurate and reliable trade and industry players in Vietnam, who have been talking to date in terms of the crop having only been approximately 5% lower than the last crop. As they do likewise report that the sharp dip in exports is entirely related to internal market price resistance over the past five months, which leaves a very high percentage of the new crop still within the hands of the farmers and internal traders.

The arbitrage between the markets has broadened yesterday to register this at 62.91 usc/Lb., while this equates to an attractive 43.95% price discount for the London robusta coffee market. This arbitrage continues to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 545 bags on yesterday; to register these stocks at 2,185,844 bags. There was meanwhile a larger in volume 4,939 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 34,171 bags.

The commodity markets had another mixed day yesterday, with the starting to steady during the day, following the past week of weakness. The Cocoa, London robusta Coffee, Wheat, Corn, Soybean, Gold, Silver and Platinum markets had a day of buoyancy and the New York arabica Coffee had a Fund inspired very strong day’s trade, while the Oil, Natural Gas, Sugar, Cotton, Copper 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 0.04% lower to see this Index registered at 438.19. The day starts with the U.S. Dollar showing a degree of buoyancy and selling at 1.566 to Sterling and 1.132 to the Euro, while North Sea Oil is steady in early trade and is selling at 65.10 per barrel.

The London and New York markets started the day yesterday on a steady note, with the New York market taking marginally above par track and the London market a marginally below track, into the afternoon trade. The New York market started to attract support as the afternoon progressed and with the Americans coming into work and industry price fixation buying not really encountering much in the way of producer price fixation selling volumes, which was assisted by a quiet start to the week in Brazil and the delayed Ascension Day holiday in Colombia. This started the New York market on a steady upside track and assisting to inspire a move back into positive territory for the London market, while the recovery in New York started to trigger fund and industry buy stops and accentuate the gains in late afternoon trade. The London market ended the day on a positive note and on its highs of the day, while the New York market ended the day on a strong note and with 95.1% of the earlier gains of the day intact. This positive close is likely to inspire a steady start for early trade today against the prices set yesterday, as follows:

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

MAY 1728 + 27 MAY 141.65 + 4.45

JUL 1769 + 25 JUL 143.15 + 4.90

SEP 1795 + 26 SEP 145.65 + 5.00

NOV 1814 + 26 DEC 149.10 + 4.95

JAN 1832 + 26 MAR 152.60 + 4.95

MAR 1851 + 25 MAY 154.30 + 4.75

MAY 1874 + 26 JUL 155.65 + 4.50

JUL 1895 + 25 SEP 156.90 + 4.25

SEP 1916 + 24 DEC 158.65 + 4.25

NOV 1929 + 24 MAR 160.30 + 4.30

 


Coffee Market Report

May 18 2015

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non Commercial Speculative sector of this market increase their net short sold position within the market by 17.17% during the week of trade leading up to Tuesday 12th. May; to register a net short sold position of 14,127 Lots, this net short sold position which is the equivalent of 4,004,942 bags has most likely been reduced over the period of mixed but overall generally positive trade that has since followed.

 

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 168,969 bags or 3.36% during the month of April, to register these stocks at 5,204,078 bags at the end of the month. These stocks do not of course include the in transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is fed by these stocks of 500,000 bags per week, would conservatively have been at least 1 million bags.

 

Therefore if one is to consider the additional unreported stocks and look to end August stocks in North America of at the very least 6.2 million bags, it would have equated to at least a very safe 12.4 weeks of roasting activity and still a safe reserve, in terms of the potential for a continued steady flow of new crop coffees from Mexico, Central America, Colombia, Peru, Vietnam and Indonesia. To soon be followed by the new crop coffees from Brazil, where all the latest forecasts are now pointing towards a much better than had initially been forecasted, new arabica coffee crop.

 

These latest forecasts for the new Brazil crop are now pointing to a new arabica coffee crop of between 35 million and 38 million bags and in terms of a Brazil domestic coffee industry that is based upon the use of approximately 13 million bags of conilon robusta coffees along with 7.5 to 8 million bags of arabica coffees, would indicate that there should be at least 27 million bags of new crop arabica coffees available for the consumer markets. These new crop arabica coffees would be over and above an approximate 4 million to 5 million bags of carry over arabica coffee stocks, which would assist to ensure a steady Brazil arabica coffee supply through to the next 2016 crop.

 

There have already been some scattered rain showers encountered over the main coffee regions in Vietnam over the past few weeks, but now the Vietnam official weather forecasters have predicted that this week shall see the start of the main summer rain season that shall be wide spread over all of the coffee regions. These rains much needed to save costs for the farmers who have over the past few months being making use of pumps to provide supplementary irrigation for their coffee trees, to ensure a good new crop harvest for the last quarter of this year. This new crop that has so far been forecasted by many trade and industry players to be larger new crop of between 28 million and 30 million bags, which shall come into play over and above the potential for good carryover stocks that shall result from the prevailing price resistant activities of the farmers and internal traders, which has slowed the delivery of their new crop coffee stocks to the exporters.

 

The arbitrage between the markets has broadened on Friday to register this at 59.14 usc/Lb., while this equates to an attractive 42.78% price discount for the London robusta coffee market. This arbitrage continues to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

 

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 2,564 bags on Friday; to register these stocks at 2,185,299 bags. There was meanwhile a larger in volume 3,763 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 39,110 bags.

 

The Certified robusta coffee stocks held against the London market were seen to increase by 43,500 bags or 1.49% over the two weeks of trade, leading up to Monday 11th. May: to register these stocks at 2,968,333 bags on the day. This is a sharp rise from a year ago when the stocks were almost completely depleted and they have reached a level last seen in early 2012, but they are still well down from their levels between 2008 and their peak in 2011.

 

The commodity markets had a mixed day on Friday, which was with many European players taking a long weekend break after Thursdays Ascension Day holiday, a relatively quiet day’s trade. The Natural Gas, Sugar, Cocoa, New York arabica Coffee, Cotton, Silver and Platinum markets had a day of buoyancy and the London robusta Coffee and Copper markets were near to steady, while the Oil, Orange Juice, Wheat, Corn, Soybean and Gold markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.13% lower to see this Index registered at 438.36. The day starts with the U.S. Dollar near to steady and selling at 1.573 to Sterling and 1.144 to the Euro, while North Sea Oil is showing some buoyancy in early trade and is selling at 65.40 per barrel.

 

The London and New York markets started the day on Friday on a relatively steady sideways track, but with both markets tending south of par in early afternoon trade and the New York market soon recovering into positive territory, while the London market maintained a softer stance. The New York market continued to hold a positive stance through the day of relatively thin trade, while the London market was likewise lacklustre in nature and traded back up to close to par. The London market ended the day on only a marginally softer note and having recovered 76.9% of the earlier losses of the day by the close, while the New York market ended the day on a modestly positive note and with 44.1% of the earlier gains of the day intact. This relatively steady close along with an only near to steady U.S. dollar and a stronger Brazil real in play, is likely to inspire a cautiously steady thinly traded start for early trade today against the prices set on Friday, as follows:

 

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

 

MAY 1701 – 3 MAY 137.20 + 1.55

JUL 1744 – 3 JUL 138.25 + 0.75

SEP 1769 – 2 SEP 140.65 + 0.70

NOV 1788 – 2 DEC 144.15 + 0.70

JAN 1806 – 2 MAR 147.65 + 0.65

MAR 1826 – 2 MAY 149.55 + 0.55

MAY 1848 – 2 JUL 151.15 + 0.40

JUL 1870 – 2 SEP 152.65 + 0.45

SEP 1892 – 2 DEC 154.40 + 0.55

NOV 1905 – 2 MAR 156.00 + 0.45

 


Coffee Market Report

May 15 2015

The respected Brazilian analysts Safras & Mercado have come forth yesterday with their new Brazil crop forecast at 50.4 million bags. This made up from a new arabica coffee crop of 36.1 million bags and a new conilon robusta crop of 14.3 million bags. This forecast is a little less than the recent United States Department of Agriculture forecast at 52.4 million bags, but is not very different from the recent trade forecasts that have been coming to the market.

This forecast in terms of expectations for less consumer market demand for the conilon robusta coffees for the coming year as consumers switch back to the good stocks of Asian robusta coffee, would indicate a deficit Brazil coffee supply of between 3 million to 4 million bags. One that shall be countered by the carryover stocks that are expected to contribute to steady Brazil coffee supply through to the next 2016 crop, but when the stocks should be mostly depleted and thus dictating that this shall need to be a good crop next year. A factor that shall have the market players keeping a close eye upon the weather conditions in Brazil in the last quarter of this year, which shall influence the prospects of this next crop.

Meanwhile it would seem that the markets have perhaps already discounted the fact that the new Brazil crop shall indeed be in excess of 50 million bags and the bout of reports as such, is having little impact upon the already relatively soft nature of the terminal markets. Noting that the softening of the U.S. dollar that is heading into four month lows, has in terms of producer domestic prices softened farm gate coffee prices and is continuing to inspire a degree of price resistance and generally maintaining harder asking export differentials for new business.

The Vietnam Customs have reported that the countries coffee exports of mostly robusta coffees for the month of April were 20% lower than the previous month, at a total of 1.73 million bags. This modest volume they report has contributed to the country’s coffee exports for the first four months of this year being 40.7% lower than the same period last year, at a total of 7.95 million bags.

This report and following the last harvest that is largely pegged at between 26 million and 27 million bags, is a further confirmation of the fact that farmers and internal traders are still holding on to significant stocks of unsold coffees. These coffees shall eventually have to come to the market as there is medium term pressure coming with the advent of the next new and so far forecasted to be a larger new crop harvest, which shall start in five months’ time.

The National Weather Service’s Climate Prediction Centre in the U.S.A. has forecasted that the mild El Nino phenomenon in the Pacific Ocean shall most likely continue through to close to the end of this year, which will bring with it in terms of coffee, drier weather for the Pacific rim producers Colombia, Peru and Indonesia but that it is not a severe El Nino and should not be damaging for crop potential. It does however traditionally in terms of its further afield influence most usually bring with it increased rainfall for south east Brazil, which is a positive factor for the next spring and summer rain season for the region, which should likewise be positive for the flowering and early development of the next 2016 Brazil coffee crop. Therefore while it is a still a long way to the fore, the early indications are that there should be a good sized new Brazil coffee crop for next year.

The arbitrage between the markets has broadened yesterday to register this at 58.26 usc/Lb., while this equates to an attractive 42.37% price discount for the London robusta coffee market. This arbitrage continues to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 7,845 bags yesterday; to register these stocks at 2,182,735 bags. There was meanwhile a smaller in volume 3,779 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 42,873 bags.

The commodity markets had a mixed day yesterday against a steadier U.S. dollar and with trade often thinned by the absence of many leading players in Western Europe, who were taking the Ascension Day public holiday. The Natural Gas, Cocoa, Coffee, Cotton, Wheat, Corn, Gold, Silver and Platinum markets had a day of buoyancy, while the Oil, Sugar, Copper, Orange Juice and Soybean markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.88% higher to see this Index registered at 438.95. The day starts with the U.S. Dollar steady and selling at 1.576 to Sterling and 1.139 to the Euro, while North Sea Oil is near to steady in early trade and is selling at 64.70 per barrel.

The London and New York markets started the day yesterday in very thin trade on a steady note and followed this track into the afternoon, when the New York market started to come under some pressure and moved back into negative territory. This was however short lived and with the Americans coming into work and bringing a bit more volume into play albeit still relatively thin trade, the New York market recovered into positive territory, which was followed by a more modest recovery for the London market. The New York market maintained its recovery and took something of a sideways track for the rest of the day, while the London market continued on a modest upside track. The London market ended the day on a positive note and closed the day at its high of the day, while the New York market ended the day on a positive note and with 75% of the gains of the day intact. This overall positive close is likely to inspire a steady start for early trade today against the prices set yesterday, as follows:

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

MAY 1704 + 23 MAY 135.65 + 1.25

JUL 1747 + 23 JUL 137.50 + 2.10

SEP 1771 + 23 SEP 139.95 + 2.10

NOV 1790 + 23 DEC 143.45 + 2.05

JAN 1808 + 23 MAR 147.00 + 2.00

MAR 1828 + 23 MAY 149.00 + 1.90

MAY 1850 + 23 JUL 150.75 + 1.85

JUL 1872 + 23 SEP 152.20 + 1.70

SEP 1894 + 23 DEC 153.85 + 1.40

NOV 1907 + 23 MAR 155.55 + 1.20

 


Coffee Market Report

May 14 2015

The National Coffee Council in El Salvador have announced that the countries coffee exports for the month of April which work out at 11,898 bags or 18.44% higher than the same month last year, at a total of 76,418 bags. This improved performance contributes to the countries cumulative coffee exports for the first seven months of the present October 2014 to September 2015 coffee year being 51,768 bags or 15.88% higher than the same period in the previous coffee year, at a total of 377,725 bags.

This cumulative coffee exports figure for El Salvador is however, marginally lower than the cumulative figure announced yesterday and would indicate that there has been some upward adjustments to the earlier month by month figures announced, as the National Coffee Council has now reported a cumulative export volume of 382,885 bags. It is a figure that assists to confirm that the countries coffee production that suffered severely from the devastating problems of Roya of Leaf Rust is on a steady recovery track, with their new crop having been assessed at approximately 800,000 bags and potentially to well exceed this, for the next crop that shall start being harvested at the end of this year.

The Colombian Coffee Federation have reported that their Chief Executive Officer Luis Genaro Munoz has resigned and shall vacate his post with almost immediate effect, by stepping down at the end of this month. There is presently no replacement and the Federations Chief Operating Officer Luis Felipe Acero Lopez shall step in on a temporary basis, to lead the Federation until a new Chief Executive Officer is appointed.

This news is of little consequence in terms of the prevailing activities of the Federation that heads up the world’s third largest coffee producer and the world largest fine washed arabica coffee producer, but has some significance in terms of the reasons why Luis Genaro Munoz has resigned. In this respect the indications are that he was objection to proposals to that Colombia starts to inspire farmers in the lower altitude plains to start farming other varieties of coffees that would by nature of their warmer climate result in higher yielding and lower quality coffees, which would detract from the reputation of the present high grown fine cupping coffees that come from Colombia.

Should these proposals now proceed and if so they would start to impact on the volumes of Colombian coffee supply only in a few years’ time, one would not foresee any problems to the reputation of Colombian coffee, as exporters and consumer market roasters would easily differentiate the different qualities. However it would have a significant impact upon world coffee supply, should Colombia that is already with its high altitude farm rejuvenation program on track towards annual crops of close to 15 million bags, further proceed to expand its coffee farming and hectares into these new lower altitude regions.

The Vietnam state run Agribank has announced that they are prepared to offer soft loans to coffee farmers to assist them to replace aged coffee trees with new trees, at a maximum 7% interest rate and approximately 30% lower than the prevailing interest rates available to the farmers. This announcement related to the assessment that approximately 30% of the country’s coffee trees are now over twenty years old and that to ensure Vietnams longer term consumer market share from annual crops that presently average 28 million bags, they would need to support farmers to maximise longer term yields.

The arbitrage between the markets has broadened yesterday to register this at 57.20 usc/Lb., while this equates to an attractive 42.25% price discount for the London robusta coffee market. This arbitrage continues to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 4,487 bags yesterday; to register these stocks at 2,190,589 bags. There was meanwhile a smaller in volume 2,341 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 39,094 bags.

The commodity markets once again selectively experienced a degree of buoyancy yesterday, in line with the softening U.S. dollar which is reacting to soft economic data and the speculation that there shall not be a nearby rising of the dollar interest rates. The Oil, Natural Gas, Cocoa, Cotton, Corn, Soybean, Gold, Silver and Platinum markets had day of buoyancy and the New York arabica Coffee market was steady, while the Sugar, London robusta Coffee, Copper, Orange Juice and Wheat markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.36% higher to see this Index registered at 435.10. The day starts with the U.S. Dollar tending softer and selling at 1.575 to Sterling and 1.140 to the Euro, while North Sea Oil is tending softer in early trade and is selling at 65.50 per barrel.

The London and New York markets started the day yesterday showing a degree of buoyancy and maintained a relatively positive track into the afternoon trade, when the New York market started to come under pressure and slipped back into negative territory, while the London market remained relatively steady. The New York market started to lose more value as the afternoon progressed and seemingly had it influence upon the London market, which slipped back into modest negative territory. The New York market did however and with the supportive sentiment that came with positive nature of the overall macro commodity index bounce back from its lows and head back on a steady upside track towards par and followed partially, by the London market. The London market ended the day on a marginally softer note and having recovered 53.3% of the earlier losses by the close, while the New York market ended the day on a near to steady note and having recovered 96.1% of the earlier in the day losses by the close. This somewhat positive close is somewhat supportive for sentiment but with most of the leading Western European countries on their Ascension Day holiday today and therefore leading industry buyers off the field of play, one might not expect to see much better than a thinly traded steady start for early trade today against the prices set yesterday, as follows:

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

MAY 1681 – 7 MAY 134.40 – 0.10

JUL 1724 – 7 JUL 135.40 – 0.10

SEP 1748 – 8 SEP 137.85 + 0.05

NOV 1767 – 8 DEC 141.40 + 0.20

JAN 1785 – 8 MAR 145.00 + 0.15

MAR 1805 – 8 MAY 147.10 + 0.15

MAY 1827 – 8 JUL 148.90 + 0.20

JUL 1849 – 8 SEP 150.50 + 0.15

SEP 1871 – 8 DEC 152.45 + 0.25

NOV 1884 – 8 MAR 154.35 + 0.30

 


Coffee Market Report

May 13 2015

Following the report yesterday from the Brazil Government Statistics Agency IBGE that the new Brazil crop shall be a modest 42.4 million bags, the well-respected United States Department of Agriculture Foreign Agriculture Service have come forth with their latest Brazil coffee report and have forecasted that the new crop that is presently starting to be harvested, to be 52.4 million bags. This forecast tops the recent trade house forecasts from Mercon and E D & F Man that have forecasted the new Brazil crop at 50.3 million bags and 51.9 million bags, respectively. While with the official Brazilian forecasts traditionally seen to be overly conservative in nature, one would say that the USDA forecast shall be the one that will have the most influence upon sentiment.

Where this latest USDA forecast significantly differs from all the earlier forecasts that have been coming to the market, is that the relatively impressive overall volume is related to a sharp rise in the arabica coffees that they say is due from this new crop, which they have pegged at 38 million bags. While in terms of the conilon robusta coffee share, they foresee this to be very much in line with many other forecasts at 14.4 million bags.

The significance of this forecast one would say is that it is Brazil arabica coffee production that is critical to consumer market supply, as while the past year and following last year’s good conilon robusta harvest that many had pegged at between 17 million and 18 million bags has assisted to buoy Brazil overall coffee export volumes, the exports of conilon robusta were more price competitive against the Asian robusta coffees advantageous sales than fuelling specific consumer market demand. Whereas the more specific consumer market in terms of quality demand for Brazil coffees is directed towards the countries natural arabica coffees, which are a base coffee for a host of leading brands.

Thus is one is to believe the recent trade and USDA Brazil forecasts and take into account that there are still reasonable levels of carryover stocks of Brazil arabica coffees from last year in hand, it would further indicate that there shall be no shortage of Brazil arabica coffee supply through to the next 2016 crop. Whereas in terms of the indicated smaller supply of conilon robusta coffees from Brazil for the next twelve months, this shall be replaced by Asian robusta coffees within the consumer markets and shall not with the good supply from Asian, dent overall consumer market robusta coffee supply. Thus for the present, the Brazil news is tending to fuel bearish sentiment within the markets.

In terms of the rising support for sustainability certified coffee brands within the main North American and Western European consumer markets which dominate the use of such branding, the 4C Association have reported that close to 10 million bags of 4C certified coffees were shipped to the consumer markets during 2014. This figure would be equate to approximately 15% of Western European and North American coffee demand and with the 4C Certified coffees coming in alongside and in addition to the popular Rainforest Alliance, Utz Certified and Fairtrade certified coffees, it is an indicator of the rising dominance of sustainability certified coffees within the traditional coffee markets. Noting that aside from these more public certified coffees, that there are also the in-house certification brands that are being promoted you leading international brands such as Starbucks and Nespresso and one would suggest that sustainability branding is already starting to dominate shelf space within these main and higher value consumer markets and by nature, shall inspire development 100% sustainability branding of coffee within these markets.

The arbitrage between the markets has broadened yesterday to register this at 56.98 usc/Lb., while this equates to an attractive 42.05% price discount for the London robusta coffee market. This arbitrage continues to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 1,405 bags yesterday; to register these stocks at 2,195,076 bags. There was meanwhile a larger in volume 3,046 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 36,753 bags.

The commodity markets selectively experienced a degree of buoyancy yesterday, in line with the unsteady U.S. dollar. The Oil, Natural Gas, Sugar, Cocoa, New York arabica Coffee, Copper, Wheat, Corn, Gold and Silver markets had a day of buoyancy and the Platinum market was steady, while the London robusta Coffee, Cotton, Orange Juice and Soybean markets bucked the trend and had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.76% higher to see this Index registered at 433.53. The day starts with the U.S. Dollar tending marginally softer and selling at 1.568 to Sterling and 1.126 to the Euro, while North Sea Oil is showing buoyancy in early trade and is selling at 66.05 per barrel.

The London and New York markets started the day yesterday on a steady track and with both markets showing a degree of erratic buoyancy into the afternoons trade, when the New York market added some value, while the London market struggled to remain on par. The New York market came under pressure as the afternoon progressed and both markets moved back into negative territory, but while the New York market and with some assistance from the positive nature of the macro commodity index moved back into positive territory, the London market remained south of par. The London market continued to end the day on a modestly softer note and with 76.5% of the losses of the day intact, while the New York market ended the day on a positive note and with 56.1% of the earlier gains of the day intact. This mixed close is not convincing and one might expect that with the added negative influences of the USDA Brazil crop report, that it might inspire little better than a steady to