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

Coffee Market Report

03 Aug 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 23.28% during the week of trade leading up to Tuesday 28th. July; to register a net short sold position of 29,014 Lots. This net short sold position which is the equivalent of 8,225,340 bags has most likely been since reduced again, over the period of mixed but overall more positive short covering trade which has since followed.

With the month of July passed the Government trade authorities within Indonesia’s main robusta producing island of Sumatra have reported that the islands robusta coffee exports for the month of July were 76,617 bags or 21.88% higher than the same month last year, at a total of 426,824 bags. This improved performance and following the rising robusta export volumes for the previous six months contributes to the cumulative robusta coffee exports from Sumatra for the first ten months of the present October 2014 to September 2015 coffee year to being 795,176 bags or 29.93% higher than the same period in the previous coffee year, at a total of 3,451,727 bags.

All indications are that this improved performance and following an improved new crop that is still in progress in Sumatra, that the robusta coffee exports from this island shall continue to post improved volumes for the rest of this coffee year. These exports can be expected to be further buoyed by the fact that so far this year the price competition from Vietnam has been significantly dulled, but the price inflating internal market price resistance that prevails within this world’s leading robusta coffee producer.

The International Coffee Organisation have reported that the world coffee exports for the month of June were 3.3% lower than the same month last year, at a total of 9.69 million bags. This reports which is hardly surprising following the first six months of this year’s internal market price resistance being shown within the internal market in Vietnam, highlighted that while the arabica coffee exports for the month were only 1.5% lower than the same month last year, the overall robusta coffee exports were 6.1% lower for the month.

The report further highlighted the effects of the restrained price rather than availability of stock export activity out of Vietnam, by noting that while overall cumulative arabica coffee exports for the first nine months of the present October 2014 to September 2015 coffee year were 1.4% lower than the same period in the previous coffee year, the overall cumulative robusta coffee exports for these nine months were 6.2% lower than the same period in the previous coffee year. The combined coffee exports for these nine months which were a 62.56 to 37.44 ratio of arabica and robusta coffee exports, having totalled 83.02 million bags.

The Uganda Coffee Development Authority who had reported that the countries cumulative coffee exports for the first nine months of the present October 2014 to September 2015 coffee year were 263,470 bags or 9.71% lower than the same period in the previous coffee year, at a total of 2,450,040 bags. Have nevertheless reported that the value of these exports were nevertheless US$ 8,981,113.00 or 3.02% higher than the same period in the previous year and when one extrapolates this improved value performance in terms of the firmer value of the U.S. dollar that saw the dollar earing close to 25% more Ugandan shillings nine months after the start of the coffee year, it is evident that in terms of farmer income that dip in volume has not negatively impacted in terms of much improved farm gate income in terms of domestic currency.

The arbitrage between the markets based on the New York December to London November contracts broadened on Friday to register this at 53.43 usc/Lb., while this equates to a 41.58% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, but is perhaps due to widen further in time and when Vietnam stocks start to impact upon the fortunes of the London market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 108 bags on Friday; to register these stocks at 2,102,960 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 10,400 bags.

The commodity markets had a generally lacklustre and soft day on Friday and with the overall macro commodity index coming under pressure for the day, with traders tending to shun the commodity index for the present. The Natural Gas, New York arabica Coffee, Cotton and Gold markets nevertheless had a day of buoyancy and the Silver and Platinum markets were steady, while the Oil, Sugar, Cocoa, London robusta Coffee, Copper, Wheat, 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 0.59% lower to see this Index registered at 400.85. The day starts with the U.S. Dollar near to steady and selling at 1.562 to Sterling and 1.097 to the Euro, while North Sea Oil is tending softer in early trade and is selling at 52.00 per barrel.

The London and New York markets opened the day on Friday with modest buoyancy, with the London market remaining steady and the New York market adding some more value into the afternoon trade. The rally within the New York market did however start to falter as the afternoon progressed and seemingly had a negative effect upon the modestly positive nature of the London market, which slipped back into negative territory. The London market continued to end the day on a softer note and with 62.5% of the losses of the day intact, while the New York market ended the day on a modestly positive note and with only 14.8% of the earlier gains of the day intact. This close and with the New York market barely steady by the close is likely to bring forth some hesitancy and little better than a near to steady start for early trade today against the prices set on Friday, as follows:

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

SEP 1638 – 10                               SEP   125.25 + 0.35
NOV 1655 – 12                            DEC   128.50 + 0.40
JAN 1671 – 12                             MAR  132.00 + 0.45
MAR 1691 – 13                           MAY  134.15 + 0.45
MAY 1713 – 11                             JUL  136.25 + 0.40
JUL 1730 – 13                               SEP  138.25 + 0.30
SEP 1748 – 15                              DEC  141.25 + 0.45
NOV 1770 – 14                            MAR 144.05 + 0.50
JAN 1791 – 15                             MAY 145.80 + 0.55
MAR 1791 Opening                       JUL 147.55 + 0.55