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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

25 May 2018

The Uganda Coffee Development Authority have reported that the countries coffee exports for the month of April were 30,372 bags or 9.33% lower than the same month last year, at a total of 295,194 bags. This following a good performance in October and November last year, results in the cumulative coffee exports for the first seven months of the present October 2017 to September 2018 coffee year to still be 51,311 bags or 1.99% higher than the same period in the previous coffee year, at a total of 2,630,067 bags.

What is noticeable though and related to the prevailing soft nature of the reference prices of the international coffee markets, is that while the volume of coffee exports from Uganda for the past seven months is higher than the same period in the previous coffee year, that the value of these exports is lower. In this respect the value of Uganda coffee exports for the first seven months of the present October 2017 to September 2018 coffee year is $ 23,653,073.00 or 7.56% lower than over the same period in the previous coffee year, at a total of $ 289,409,881.00.

The dip in terms of Ugandan coffee exports is however meaningless in terms of rising global coffee supply for the short the medium term, which comes with the significantly larger Vietnam new crop and soon to be followed by the significantly larger new Brazil crop. With the latter Brazil crop continuing to influence speculative negative sentiment and assisted to a degree, by the softer nature of the Brazil Real that indicates that despite the soft reference price of the dollar-based coffee terminal markets, that Brazilian farmers shall still be willing sellers of new crop coffees.

Petrobras in Brazil have announced an immediate 10% cut in the price of diesel yesterday, while the Brazil government struck a deal with the countries truckers to suspend their disruptive to trade strike, for fifteen days. This short-term deal having come just in time as with the truckers having set up blockades on approximately 330 important transit routes, the airports and garages around the country were running short of fuel, the supermarkets were running out of produce and the countries exporters were unable to access empty containers.

The question is that with the government having stepped in to finance Petrobras what sort of deal can be made in the coming two weeks, to ensure that the disruptive blockades are not reinstated. One would guess that with the dramatic effect that the past four days had upon the Brazil economy, that the government will somehow solve the problem and satisfy the truckers demands. Good news for the coffee consumer markets, where fears were developing of a disruption of coffee supply from a country that accounts of approximately 30% of market supply.

The Vietnam Coffee and Cocoa Association have forecast that with favourable weather conditions so far for the start of the summer rain season that without any unforeseen weather problems to the fore, that the flowering has been good and is indicating another good crop for the end of the year. Albeit that they say that it is too early to come forth with a reliable new crop forecast.

The U.S.A. is looking towards the Memorial Day long weekend, which shall see the New York market closed on Monday 28th. May. Leaving the London market to trade solo for the start of the coming week.

The July 2018 to July 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 40.94 usc/Lb., while this equates to 33.96% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 275 bags yesterday; to register these stocks at 2,010,686 bags. There were meanwhile 275 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 48,617 bags.

The commodity markets were again mixed in trade yesterday, but with many markets on the back foot and with the overall macro commodity index flat for the day. The Natural Gas, Sugar, Coffee, Cotton, Copper, Wheat, Gold and Silver markets ended the day on a positive note, while the Oil, Cocoa, Orange Juice, Corn and Soybean markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.14% higher; to see this index registered at 441.03. The day starts with the U.S. Dollar steady and trading at 1.337 to Sterling, at 1.171 to the Euro and with the dollar buying 3.649 Brazilian Real, while North Sea Oil is near to steady and is selling at US$ 78.50 per barrel.

The London and New York markets started the day yesterday trading close to par, but with both markets soon attracting support and moving up into positive territory and thus, to take a positive track into the early afternoon trade. As the afternoon progressed the markets added some more value, but with the London market hitting a nearby selling ceiling and to dip back towards par, while the New York market took something of a sideways positive track.

The London market ended the day on a very positive note but with only 28.6% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 72.7% of the earlier gains of the day intact. This close and with some degree of stability seen for the markets yesterday might well assist towards some degree of confidence and assist towards a follow through steady start for early trade today, as follow:


MAY 1730 + 4
JUL 1755 + 4                                                   JUL 120.55 + 1.20
SEP 1744 + 3                                                   SEP  122.80 + 1.15
NOV 1749 + 3                                                 DEC 126.35 + 1.15
JAN 1751 + 3                                                  MAR 129.85 + 1.20
MAR 1759 + 3                                                MAY 132.05 + 1.15
MAY 1767 + 6                                                 JUL 134.05 + 1.10
JUL 1770 + 10                                                 SEP 135.90 + 1.10
SEP 1780 + 10                                                 DEC 138.55 + 1.10
NOV 1791 + 10                                               MAR 141.20 + 1.15