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

 

I. & M. Smith (Pty) Ltd.

Coffee Market Report

06 Nov 2015
The National Coffee Federation in Colombia has announced that the country’s coffee production for the month of October was 267,000 bags or 24.25% higher than the same month last year, at a total of 1,368,000 bags. This is a good start to this new October 2015 to September 2016 coffee year, where production was already 1,209,000 bags or 9.97% higher than the previous 2013 to 2014 coffee year, at a total of 13,333,000 bags.

Similarly the National Coffee Federation in Colombia have announced that the country’s coffee exports for the month of October were 216,000 bags or 22.36% higher than the same month last year, at a total of 1,182,000 bags. This is likewise a good start to the new coffee year, following the impressive 1,327,000 bags or 12.10% surge in exports for the previous coffee year over the performance during the preceding 2013 to 2014 coffee year, with exports during the 2014 to 2015 coffee year having been registered at 12,291,000 bags.

This continued impressive performance in terms of production and exports from Colombia that is continuing into this new coffee year, does much to fill the gap in terms of consumer market fine washed arabica coffee supply, which comes with the price resistant supply from some of the brand name neighbouring producers to the north, such as Guatemala and Costa Rica. However with the drier weather conditions that prevail within Colombia as a result of the El Nino phenomenon in the Pacific there is evidence of a less impressive flowering towards Colombia’s smaller April to August Mitaca crop, which might limit the possibility for Colombia to end this present October 2015 to September 2016 coffee year with further gains over the previous coffee year.

However with forecasts for an overall larger new crop from the Mexico and Central American producer bloc there is nevertheless the potential for rising overall fine washed arabica coffee supply from Central and South America for this new coffee year, which is a factor that might tend to dampen speculative spirits on the longer term with the related New York market. This increase in coffee supply that comes with the new crops from Mexico and Central America, is due to start impacting upon consumer market coffee supply in some volume, by the first quarter of next year.

There have been good rains over the southern coffee districts of South East Brazil over the past week but not as much for the northern coffee districts within South East Brazil, but there have nevertheless been fair general rains. Thus for the present and with further weather fronts and rains being forecasted for South East Brazil for the second half of this month, there is no Brazil weather related positive impact upon the fortunes of the coffee terminal markets.

While in terms of the internal market coffee supply within Brazil, the relatively cash strapped Brazil government who still hold approximately 1.5 million bags of coffee retention stocks, have announced that they shall soon start with regular auctions of these stocks. These coffees will supplement domestic roaster raw material supply, to assist to release more of the relatively modest deficit new crop coffees for the export markets. Thus easing to a small degree internal market coffee supply to the exporters, who are presently encountering a degree of price resistant restraint from the farmers and coffee cooperatives.

The second month arbitrage between the markets broadened yesterday, to register this at 48.55 usc/Lb., while this equates to a 39.07% 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 in more volume upon the fortunes of the London market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 1,620 bags yesterday; to register these stocks at 1,893,932 bags. There was meanwhile a smaller in volume 966 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 30,443 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 333 bags on Wednesday 4th. November; to register these stocks at 3,348,667 bags on the day.

The commodity markets were mixed but many continued to come under a degree of pressure, from the negative impact of the relatively firm U.S. dollar. The Natural Gas, Sugar, Cocoa, New York arabica Coffee and Wheat markets had a day of buoyancy and the London robusta Coffee market was steady, while the Oil, Cotton, Copper, Orange Juice, Corn, Soybean, Gold, Silver and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.56% lower to see this Index registered at 394.76. The day starts with the U.S. Dollar steady and holding onto yesterday’s gains in early trade and trading at 1.520 to Sterling and 1.088 to the Euro, while North Sea Oil is steady in early trade and is selling at 46.90 per barrel.

The London and New York markets started the day yesterday on a softer note, but while the New York market remained under pressure the London market soon started to pick up some support to see the markets enter the afternoon trade either side of par. The New York market did however soon recover and move back, to join the London market on the positive side of par. The New York market shrugged off another short negative bout and with the London market remaining steady and to soon have New York with volume of trade increasing and buy stops coming into play, moving back firmly into positive territory. The New York market did however soon encounter selling pressure at the unexpected highs, to fall back to more modest positive territory, while the London market continued on its modestly positive sideways track of the day. The markets did however start to falter and the London market dipped into negative territory before recovering and ending the day on a barely steady note, with the New York market taking an erratic path ended the day on the positive side of par, but with only 24.1% of the earlier gains of the day intact. This is an uncertain close and with the dollar retaining its muscle might result in little better than a hesitant near to steady start for early trade today against the prices set yesterday, as follows:

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

NOV 1637 + 9                                       DEC    120.90 + 0.40
JAN 1669 – 1                                        MAR    124.25 + 0.35
MAR 1681 + 1                                      MAY    126.35 + 0.40
MAY 1701 + 3                                       JUL     128.35 + 0.35
JUL 1719 + 2                                         SEP     130.30 + 0.35
SEP 1736 + 3                                        DEC     133.20 + 0.45
NOV 1754 + 5                                      MAR    136.00 + 0.50
JAN 1768 + 5                                       MAY    137.95 + 0.75
MAR 1786 + 5                                       JUL     139.85 + 1.20
MAY 1809 + 5                                       SEP     141.70 + 1.70