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

Coffee Market Report

09 Oct 2015
The more detailed coffee export figures for the month of September have been announced by the Brazilian Coffee Exporters Association and they have in this respect confirmed that green coffee exports for the month were 166,529 bags or 6.26% higher than the same month last year, at a total of 2,825,142 bags. Added to this the exports of value added soluble coffee for the month were 74,888 bags or 22.95% lower than the same month last year, at a total of 251,476 bags.

Therefore the combined exports for the month of September were a modest 91,641 bags or 3.07% higher than the same month last year, at a total of 3,076,618 bags. In terms of value however the exports for the month of September were US$ 90,000.00 or a similar 3.01% higher than the same month last year, at US$ 3,080,000.00. One has to comment however that in terms of local currency and with the Brazil Real trading at around 2.34 Real to the dollar as against around 3.85 Real to the dollar in September this year, the value of the exports in local currency terms were 4,861,400 Real or 69.48% higher than the same month last year, at a total of approximately 11,858,000 Real.

This increase in local currency value of coffee exports for the month of September well exceeds the countries still single digit 9.49% inflation and is an indication that despite the negative impact of the relatively soft reference prices of the international coffee markets, that currency has contributed to profitable sales by the Brazil coffee industry. While in terms of coffee exports for the first nine months of this year from Brazil, these are registered at 26.55 million bags. This being 2,9555,555 bags or 12.52% higher than the same nine month period in the previous year, which with such volumes of exports further confirms how a steadily weakening currency has contributed to relatively active selling activity out of Brazil for the year so far.

The cold front entering Brazil this week has brought with it only very modest rains and the follow on cold front due next week is so far forecasted, to not bring with it significant rains. Thus with the flowerings that came with the relatively high rainfall for the month of September, there shall be some concerns over the need for good rains to assist to set these flowerings towards the next 2016 crop. But it is early days and for the present, there are no major concerns being voiced. Especially so as the prevailing El Nino phenomenon in the Pacific, would most usually bring with it increased rainfall for south eastern Brazil.

In terms of the El Nino the monthly report from the U.S. government Climate Prediction Centre has forecasted, that there is a 95% chance that the El Nino shall carry on through to the start of the second quarter of next year. This forecast while raising concerns of drier weather for the Pacifica Rim coffee producers Central America, Colombia, Peru and Indonesia, does indicate little chance of partial drought for Brazil and its developing new 2016 crop over the next six months.

The weather forecasts from Vietnam indicate some light showers but an end to the rain season and drier weather conditions for the second half of this month, which should trigger the start of the new crop harvest and with new crop coffees starting to flow into the coffee mills in Ho Chi Minh City by early next month. Albeit that already there has been some small quantities of new crop coffees being harvested, by farmers who have taken advantage of dry spells over the past couple of weeks.

The second month arbitrage between the markets narrowed yesterday, to register this at 57.90 usc/Lb., while this equates to a 44.80% 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 17,425 bags yesterday; to register these stocks at 1,939,722 bags. There was meanwhile a smaller in volume 9,157 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 51,207 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 9,500 bags on Wednesday, to see these stocks registered at 3,385,333 bags.

The commodity markets were selectively buoyed yesterday by the marginal softening of the U.S. dollar that is losing a little of its lustre, with the speculation that due to low U.S. inflation that there is now little chance of an interest rate hike for the dollar during this year. The Oil, Natural Gas, Sugar, Coffee, Orange Juice and Platinum markets had a day of buoyancy, while the Cocoa, Copper, Wheat, Corn, Soybean, 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 0.27% higher to see this Index registered at 402.80. The day starts with the U.S. Dollar near to steady and trading at 1.538 to Sterling and 1.129 to the Euro, while North Sea Oil is showing buoyancy in early trade and is selling at 53.55 per barrel.

The London and New York markets started the day yesterday on a hesitantly steady note but with both markets taking a dip into negative territory in early afternoon trade, but the dip was short lived and both markets soon bounced back into positive territory as the afternoon progressed. Both markets held on to their gains for the rest of the day, with the markets taking a positive track through to the close. The London market ended the day on a positive note and with 76.7% of the earlier gains of the day intact, while the New York market ended the day on a very positive note and with 89.1% of the earlier gains of the day intact. This overall positive close and with the U.S. dollar marginally weaker for the present, is likely to inspire a steady start for early trade today against the prices set yesterday, as follows:

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

NOV 1582 + 23                                    DEC    128.45 + 2.40
JAN 1596 + 23                                     MAR   131.70 + 2.45
MAR 1611 + 24                                   MAY   133.70 + 2.35
MAY 1631 + 24                                     JUL   135.45 + 2.30
JUL 1651 + 23                                       SEP   137.20 + 2.30
SEP 1671 + 23                                      DEC   139.40 + 2.10
NOV 1691 + 23                                    MAR  141.55 + 2.00
JAN 1711 + 22                                     MAY  143.10 + 2.00
MAR 1729 + 22                                      JUL  144.45 + 1.95
MAY 1745 + 22                                      SEP  145.40 + 1.80