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

Coffee Market Report

29 Sep 2015

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market increase their net short sold position within the market by 39.59% over the week of trade leading up to Tuesday 22nd September; to register a net short sold position of 15,737 Lots on the day. This net long that is the equivalent of 2,622,833 bags has most likely been trimmed, over the period of mixed but generally steady trade that has since followed.

The Vietnam Customs Authority have reported that the countries coffee exports of mostly robusta coffees for the month of September may have declined by 7.5% on that of the same month last year, which is in line with market expectations. This brings the cumulative total but with September figures still due to be finalised, for their October 2014 to September 2015 coffee year to exports to 21 million bags, or 22.7% below that of the previous coffee year.

The dip in robusta coffee exports from Vietnam is related to a degree to a continuation of the internal market price resistance against the declining value of the reference prices of the London robusta coffee market. This is proving to be somewhat difficult for forward sold exporters, who are struggling to source coffees at affordable prices and are being pressured into raising export differentials for new business. The longer term nature of the current situation is however difficult to foresee continuing into the new crop as with the internal market farm stocks being held together with the prospect of a new large crop on the horizon, may inspire some more robusta coffee selling from Vietnam by the first quarter of the coming year.

The arbitrage between the markets narrowed yesterday, to register this at 48.93 USc/Lb., while this equates to a 41% price discount for the London robusta coffee market. This arbitrage remains 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 a sizeable 18,889 bags yesterday; to register these stocks at 2,002,066 bags. There was and increase of 2,270 bags in the number of bags pending grading for this exchange; to register these pending grading stocks at 37,239 bags.

The commodity markets were softer yesterday, with many players focused on a fresh round of economic data released by China that was negatively received in the markets, amid concerns for a prospective global slowdown. There are the usual month end data figures that are due to be released by the U.S.A. over this week contributing toward the overall unsettled market sentiment. It was a softer day for the Oil markets, Gold, Silver, Platinum and Palladium, Copper, Sugar, Cocoa, Coffee, Orange Juice, Wheat, Corn, Soybean markets and Cotton steady on the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.26% lower and this Index registered at 388.93. The day starts with the U.S. Dollar trading at 1.518 to Sterling and 1.126 to the Euro, the Brazil Real is trading at 4.105, while North Sea Oil is steady in early trade and is selling at 46.07 per barrel.

The Coffee markets started the day on a hesitant note yesterday, but with the both markets soon losing their way and falling back into negative territory albeit it mildly negative and in light volume. Both markets were steady in the range for long enough to bring a degree of short covering back to the floor, both New York and London regained the earlier losses, back to positive territory, although this was short lived. As the business day kicked off in U.S.A., the weight of the general negativity in the commodities sector took hold with the added impetus of the Brazil Real which slid against the US Dollar during the day. In the absence of buyers, both markets gave way to selling pressure, triggering stops along the way, to quickly set a new floor to the day in both markets. The later session held steady with some recovery noted in both markets but the range was limited through to the end, to see both London robusta and New York arabica, finish the day near to the low, after a moderate volume day, to set the close in negative territory in both markets, as follows:

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

NOV 1548 – 48                             DEC  119.15 – 3.55
JAN 1556 – 47                              MAR 122.45 – 3.45
MAR 1572 – 46                            MAY 124.65 – 3.30
MAY 1593 – 45                            JUL   126.60 – 3.10
JUL 1613 – 44                              SEP   128.35 – 2.90
SEP 1633 – 41                              DEC  130.90 – 2.85
NOV 1651 – 42                            MAR 133.35 – 2.80
JAN 1670 – 42                             MAY 135.15 – 2.85
MAR 1688 – 44                           JUL   137.05 – 2.85