Meanwhile within Vietnam where farmers and internal traders are still sitting upon significantly high stock levels and continue to show price resistance to the negative dictates of the London robusta coffee market, the slow consumer market demand is not assisting exporters to pay up for new stocks and the internal market activity is slow. Thus week by week and with the new crop harvest and potentially a larger new crop due to start in October, the farmers and internal traders are running out of time to off load stocks and continue to threaten a flood of robusta coffee stocks to start impacting upon the market over the next two months. This is a fundamental factor that does not inspire confidence in the fortunes of the London robusta coffee market, for the medium term.

There is of course in terms of the coffee producers some degree of relief from the prevailing low coffee prices that are being dictated by the coffee terminal markets, but this has not been the case for the Vietnam coffee farmers, where unlike the other leading producers, the Vietnam Dong has remained relatively steady with the U.S. Dollar. In this respect over the last ten and half months and while the Colombian coffee producers have seen that they are earning 44.5% more Pesos to the dollar and the Brazilian coffee farmers are earning 41.48% more Reais to the dollar, the Vietnam farmers are only earning a very modest 3.04% more Dong to the dollar.

Thus the muscle of the U.S. dollar while saving the day for the largest and third largest coffee exporters in terms of Brazil and Colombia respectively, has done nothing to assist the second largest coffee exporter and in terms of domestic currency reward for their coffee production, these are proving to be dismal days for the Vietnam coffee farmers. Especially so as in terms of costs, the Vietnam coffee industry which is based on high yields that are related to relatively sophisticated high levels of farm inputs, is experiencing internal market prices that are falling critically close to the cost of production for many farmers.

One might in this aspect query that unless there is change to the value of the reference prices of the London market for the coming year and with the combination of both the existing stocks and the new crop coffees chasing the market, what influence in might have on the farm inputs and investments by Vietnam coffee farmers towards the follow on 2016/2017 crop that is due to be harvested during the last quarter of 2016. Might some of the farmers involved in the replanting programs to replace aged coffee trees, be rather inspired to consider alternative crops to coffee and if so what impact it might have on the longer term robusta coffee supply to the consumer markets from this leading exporter.

The arbitrage between the markets narrowed yesterday to register this at 50.47 usc/Lb., while this equates to a 40.07% price discount for the London robusta coffee market. This arbitrage remaining relatively 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 1,600 bags on yesterday; to register these stocks at 2,138,172 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 2,880 bags.

The commodity markets while mixed tended to steady yesterday, with the halt in the rise of the value of the U.S. dollar. This saw the overall macro commodity index that had been faltering over the past few days, take a more steady and sideways track for the day. The Oil, Natural Gas, Orange Juice, Corn, Soybean and Silver markets had a day of mostly modest buoyancy, while the Sugar, Cocoa, Coffee, Cotton, Copper, Wheat, Gold and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.05% higher; to see this Index registered at 411.84. The day starts with the U.S. Dollar near to steady and trading at 1.561 to Sterling and 1.096 to the Euro, while North Sea Oil is tending marginally softer in early trade and is selling at 55.60 per barrel.

The London and New York markets started the day yesterday on a near to steady note, but with the markets struggling to remain close to par in thin and lacklustre trade. This did little to inspire confidence and despite a general lack of producer selling activity over the markets, they both lost some more weight into the afternoon trade and fell back to take an erratic sideways and softer track for the rest of the day’s trade. The London market continued to end the day on a soft note and with 93.3% of the earlier losses of the day intact, while the New York market likewise ended the day on a soft note and with 85.7% of the earlier losses of the day intact. This soft close does little to inspire and with the charts and technical trade tending to look south, one might expect little better than a steady to marginally softer start for early trade today against the soft prices set yesterday, as follows:

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

JUL 1801 – 12                              JUL 123.85 – 2.00
SEP 1664 – 14                              SEP 125.95 – 1.50
NOV 1679 – 14                           DEC 129.55 – 1.45
JAN 1696 – 13                            MAR 133.25 – 1.45
MAR 1715 – 13                          MAY 135.50 – 1.45
MAY 1738 – 13                            JUL 137.70 – 1.40
JUL 1759 – 14                              SEP 139.85 – 1.35
SEP 1777 – 14                             DEC 142.80 – 1.40
NOV 1799 – 14                           MAR 145.60 – 1.40
JAN 1821 – 14                            MAY 147.15 – 1.40