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

Coffee Market Report

13 Jul 2016
The Colombian Coffee Federation have announced that they fear that the countries coffee exports for the month of July might decline by 50% from expectations, to result in exports of only approximately 600,000 bags, due to the ongoing truckers strike. This strike which began over five weeks ago has caused severe disruption to both exports and imports for the country and with the more modest coffee exports expected for this month mostly related to coffees that were already within the ports and able to be shipped, as there are very little in the way of new coffees able to be delivered to the ports. Noting that once the in port coffee stocks are cleared and with little in the way of new deliveries coming to the ports, that coffee exports are due to further slow in volume.

Meanwhile with the new Mitaca crop being harvested the new crop coffees are building up in volume within the warehouses of the coffee mills and starting to cause strain in terms of storage of graded coffees, which are unable to be trucked on for purposes of export. While there is also farm parchment coffee stocks building up within the numerous rural buying stations, which are also struggling to cater for the rising stocks that are likewise lacking transport to the coffee hulling and grading mills.

The Colombian truckers union is standing firm in their demands for higher transport rates, lower fuel costs and lower road tolls, which for the present the government is resisting. With the strike not only impacting upon the exports from the country, but causing a significant build-up of import containers within the ports and with news that already some regular scheduled vessels are looking to bypass the ports, due to the inability to discharge and collect cargos at the congested ports.

This situation of delayed Colombian coffee shipments is becoming quite serious for the main stream consumer markets which are fortunately mostly within their slower low volume summer holiday season, but with the increasing requirement for fill in coffees there shall be a short term draw down of consumer market trade stocks. While even when the strike will be concluded, it is likely that it will still take a few weeks for the stranded import cargos to be cleared and for backlogged coffees to be delivered, containerised and exported, before the country will return to normal export trade conditions.

The leading Brazil arabica coffee cooperative Cooxupe have reported that so far 43.3% of their member farmers have completed their new crop harvest, while with the prevailing dry winter weather conditions now in play the Brazil arabica coffee harvest now heading into its peak and likely to start tailing off during August.

The September to September contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 65.35 usc/Lb., while this equates to a 44.33% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, continues to inspire support for the robusta coffee sector of the industry.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to be unchanged yesterday; to register these stocks at 1,297,892 bags. There was meanwhile a 1,600 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 10,640 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 16,333 bags or 0.65% during the week of trade leading up to Monday 11th. July, to register these stocks at 2,486,667 bags, on the day. These stocks with the premiums that have been paid over the past year by consumer industries for new robusta coffees from origin had been expected to decline in a more rapid manner, but it would seem that the weight of conilon robusta coffees that are more preferred by the North American roasters than the European roasters, is limiting the drawdown of these stocks for the present.

The commodity markets were mixed in trade yesterday, but with the Oil markets having a relatively strong rally for the day and leading the overall macro commodity index into a positive track for the day. The Oil, Natural Gas, Cocoa, Cotton, Copper, Wheat, Corn and Soybean markets had a positive day’s trade, while the Sugar, Coffee, Orange Juice, 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 0.82% higher; to see this Index registered at 433.20. The day starts with the U.S. dollar steady and trading at 1.332 to Sterling and 1.107 to the Euro, while North Sea Oil is steady in early trade and trading at 46.30 per barrel.

The London market and New York markets started the day yesterday with a surprising degree of buoyancy and within an environment of thin and hesitant trade and with both markets picking up value into the early afternoon trade, but to see the markets soon come under pressure and move back south of par as volume picked up. The New York market did however soon attract support and bounce back into positive territory for a brief spell prior to losing its way again and sinking south of par, while the London market remained on a steady sideways track within negative territory. There was however sufficient support at the lows and seemingly no profit taking selling aggression coming into play and to see both markets taking a sideways softer track for the rest of the day, to see the London market end the day on a softer note and with 71.4% of the earlier losses of the day intact, while the New York market ended the day on a likewise softer note and with 77.6% of the earlier losses of the day intact. This relatively modest corrective softer close has seemingly not damaged the positive nature of the charts and might assist to inspire 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.

JUL 1807 – 20                                     JUL 145.95 – 2.00
SEP 1809 – 20                                     SEP 147.40 – 1.90
NOV 1827 – 16                                  DEC 150.25 – 1.90
JAN 1841 – 13                                   MAR 152.95 – 1.85
MAR 1851 – 12                                 MAY 154.50 – 1.85
MAY 1862 – 12                                   JUL 155.75 – 1.85
JUL 1874 – 12                                      SEP 156.85 – 1.90
SEP 1887 – 12                                     DEC 158.55 – 1.90
DEC 1906 – 12                                   MAR 160.00 – 1.85
MAR 1902 – 12                                  MAY 160.80 – 1.85