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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

25 May 2017

In the latest round of reports released of annual coffee crop reviews, the Unites States Department of Agriculture Foreign Agricultural Service have published their latest annual crop forecast report on the Ethiopia coffee crop for the coffee marketing year October 2017 to September 2018. This next crop which is exclusively arabica coffee is forecast to remain steady at 6.54 million bags, of which exports are forecast to hold steady at 3.31 million bags and local coffee consumption, the highest of all coffee consumer countries in Africa, is set to remain stable at an estimated 3.24 million bags.

The Brazilian analyst Safras & Mercado who have estimated that the new Brazil crop is due to come in at 51.1 million bags and made up by 39.6 million bags of arabica coffee and 11.5 million bags of conilon robusta coffee; have reported that the harvest of both conilon robusta which is well underway, and arabica coffee areas harvest started; to have cumulatively reached 11% of total area completed at 16th May, compared with 10% a year earlier.

Within the report Safras & Mercado have made reference to the harvest advancing despite widespread rainfall that has been experienced in recent weeks. The latest short term weather forecasts indicate that the main Brazil arabica coffee districts are due for overcast but temperate weather over the coming weeks, with overnight temperatures comfortably in the double digits Celsius, thus far all indicators are for conducive weather for coffee ripening and harvest, to continue without interruption.

The July to July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 42.14 usc/Lb., while this equates to 32.78% price discount for the London robusta coffee market. This relatively low arbitrage, may start to become an attractive factor for the many price sensitive roast and ground 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 increase by 2,741 bags yesterday; to register these stocks at 1,458,091 bags. There were similarly 2,085 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 57,911 bags.

It was a mixed day for commodity markets yesterday, the news of a credit downgrade assigned to China’s sovereign debt from A1 to Aa3 by an internationally renowned rating agency, rippled through the markets in early Asian trade to post a recovery during the early session. As the day progressed the markets turned attention to the US Federal Reserve latest meetings for signs of prospective interest rate hikes to come, while the U.S. Dollar lost some ground on the day. It was a lower day in the Energy sector, Oil markets lower, as was the Sugar markets, Cocoa, Coffee, Copper, Soybean, Gold and Palladium lower on the day. Orange Juice held steady, Cotton, Corn, Silver and Platinum positive on the close. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.58% lower, to see this Index registered at 409.56. The day starts with the U.S. Dollar steady and trading at 1.298 to Sterling and at 1.123 to the Euro, while North Sea Oil is steady in early trade and is selling at $ 53.50 per barrel.

The London and New York markets started the day with a degree of buoyancy, initially taking a mildly positive track in light volume yesterday. In almost a mirror reflection as activity picked up pace toward midsession, both markets slipped to below par and held a relatively tight range of trade for a couple of hours leading into the start of the business day in the Americas. The New York market attracted some fresh underlying buyer support to the floor while London slipped into lower territory, with one sell feeding into another and in the absence of volume underlying buyer activity to prop up the floor in this latter market, on the day. The upbeat midsession and buoyancy in New York gradually lost momentum into the afternoon with the additional weight of speculative chart based moves to trigger sells stops on the way. The trading range in New York was relatively tight throughout at 2.70 usc/Lb., between high and low on the prompt month despite fair volume, with a late in the day slight recovery off of the day low. The softer afternoon track for London robusta market met initially with underlying support to hold the afternoon session in a similar narrow range which slipped lower toward the end of the day and set a close in this market on the low of the day. The markets finished the day on a softer note, with many market participant countries having a full or semi national holiday today, as today marks both Ascension Day and the start of Ramadhan, the markets set on the close yesterday, as follows:


MAY    1877 – 31
JUL      1905 – 31                        JUL  128.55 – 1.70
SEP      1924 – 31                        SEP  130.95 – 1.70
NOV     1931 – 31                       DEC  134.50 – 1.65
JAN      1929 – 31                        MAR 137.95 – 1.60
MAR    1922 – 32                        MAY 140.20 – 1.60
MAY    1922 – 29                        JUL   142.40 – 1.55
JUL      1940 – 29                        SEP   144.40 – 1.50
SEP      1948 – 29                        DEC  146.65 – 1.40
NOV    1955 – 29                        MAR 149.20 – 1.45