I. & M. Smith (Pty) Ltd. since 1915
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I. & M. Smith (Pty) Ltd.

Coffee Market Report

02 Mar 2016
The National Coffee Institute in Honduras has reported that the countries coffee exports for the month of February were 65,117 bags or 10.14% higher than the same month last year, at a total of 707,136 bags. This improved performance has contributed to the countries cumulative coffee exports for the first five months of the present October 2015 to September 2016 coffee year to be 8% higher than the same period in the previous coffee year, at a total of 1.71 million bags.

Albeit that there must have been some correction to the past few months figures, as the month by month reports since October 2015 indicate cumulative five months exports of a still much improved coffee export number of 1,674,595 bags. With the National Coffee Institute in Honduras presently forecasting increasing volumes of exports for the months to come and targeting exports for the present coffee year, which shall be approximately 4% higher than the previous coffee year and exceed 5.52 million bags.

The National Export Centre in Nicaragua has reported that the country’s coffee exports for the month of January were 19,465 bags or 21.55% higher the same month in the previous year, at a total of 109,789 bags. This improved performance has contributed to the countries cumulative exports for the first four months of the present October 2015 to September 2016 coffee year to being 9,360 bags or 4.15% higher than the same period in the previous coffee year, at a total of 234,924 bags.

This is a relatively slow start for the country in terms of forecast for exports for the present coffee year to be in excess of 1.7 million bags, but it is more related to the late start to the new crop harvest this year, than to any problems with the new crop. Thus it is most likely and with the forecasts not under question as of yet, that from now on Nicaragua shall be reporting rising month by month export volumes.

The preliminary coffee export figures from Brazil for the month of February have reported the coffee exports for the month were 155,294 bags or 6.18% higher than the same month last year, at a total of 2,668,755 bags. Thus despite the two previous years of deficit coffee crops in Brazil, the liquidation of 2013 coffee stocks and the weak Brazil currency has continued to fuel good volumes of exports for the coffee year so far. However with the stocks now significantly lower, one might expect to see export volumes out of Brazil start to slow over the coming five months.

It is early days in the month so far, but following last month’s 2 million bags of exports of mostly robusta coffees from Vietnam, traders are forecasting exports for the month of March to rise to between 2.5 million and 2.67 million bags. With the country holding substantial new crop stocks within the internal market, the only restraint to even increased volumes of exports, it the internal market price resistance towards the price dictates of the soft London market. While unless the London market recovers from its present levels, this forecast for the March export volumes might prove to be a bit ambitious.

The May on May contracts arbitrage between the London and New York markets broadened yesterday, to register this at 52.29 usc/Lb., while this equates to a 45.57% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, with the good discount most likely due to remain in place for the foreseeable future, in line with steady robusta shipments out of Vietnam.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 6,425 bags yesterday; to register these stocks at 1,539,716 bags. There was meanwhile a smaller in volume 3,840 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 320 bags.

The commodity markets were mixed but with many markets showing concern over reports of the slowing growth in China, but with the overall macro commodity index nevertheless showing buoyancy through the day. The Oil, Natural Gas, Sugar, Copper and Orange Juice markets had a day of buoyancy and the Cotton market was steady, while the Cocoa, Coffee, Wheat, Corn, Soybean, Gold and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.19% higher; to see this Index registered at 369.53. The day starts with the U.S. Dollar steady in early trade and trading at 1.396 to Sterling and 1.086 to the Euro, while North Sea Oil is near to steady in early trade and is selling at 35.60 per barrel.

The London market started the day yesterday on a softer note, but with the New York market showing early buoyancy and with both markets maintaining their mixed either side of par track into the afternoon’s trade, but with the New York starting to come under some pressure and falling below par to join the soft London market, as the afternoon progressed. The London market remained under pressure through the day, but the New York market did encounter some support at the lows and made a partial recovery by the end the day. The London market continued to end the day on a soft note and with 83.7% of the earlier losses of the day intact, while the New York market ended the day on a marginally softer note but having recovered 81.8% of the earlier losses of the day by the close. This overall soft close does little to inspire but with the chance that the softer London market might dull producer selling interest and a firmer Brazil Real at 3.92 to the dollar might bring some supportive sentiment to the New York market, which might see the markets due for a steady to perhaps even buoyant start for early trade today, against the prices set yesterday, as follows:

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

MAR 1342 – 33                                        MAR 112.50 – 0.15
MAY 1377 – 36                                        MAY 114.75 – 0.30
JUL 1406 – 35                                             JUL 116.70 – 0.30
SEP 1433 – 34                                             SEP 118.45 – 0.35
NOV 1455 – 36                                          DEC 120.65 – 0.30
JAN 1476 – 37                                           MAR 122.90 – 0.20
MAR 1496 – 37                                         MAY 124.40 – 0.05
MAY 1520 – 37                                           JUL 125.65 – 0.05
JUL 1540 – 37                                             SEP 126.75 + 0.05
SEP 1566 – 38                                            DEC 128.10 + 0.15