Coffee Market Report
| The National Coffee Growers Federation of Colombia had reported a good October 2014 to September 2015 coffee year and with production for the period registered at 13,333,000 bags had initially indicated that these production levels are likely to be maintained, for this new October 2015 to September 2016 coffee year. However they have followed up with statement that the prevailing El Nino phenomenon might actually start to impact and that the longer term effects of the drier weather that comes with this phenomenon shall start to impact upon production during the coming year.
One cannot ignore the effects of the El Nino phenomenon and its impact upon longer term production in Central America, Colombia, Peru and Indonesia, but with the new crop for Central America already related to well-developed cherries, it is more what might happen in the coming year for Colombia, Peru and Indonesia that is a concern. Albeit the on the longer term and if the El Nino brings with it significantly drier weather for Central America, it may well impact upon the next October 2016 to March 2017 harvest for this region. Thus it is a factor that shall without doubt; continue to be highlighted within the coffee press for some months to come and if there is more obvious reality to the problem, it could be a factor to trigger the funds to start liquidating their short positions with the markets and to inspire a significant rally within the markets. Aside from the El Nino story there remains little in the way of striking fundamental news coming to the coffee markets for the present, with the more prominent and volatile New York market rather being directed by the overall fund assessment of the commodity markets in general. There is however aside from the renewed fund interest in commodities some degree of support coming from the modest recovery of the Brazil Real relative to the U.S. dollar, which has seen the real that had fallen to over 4 to the dollar now trading at 3.88 to the dollar, which has an impact upon selling volumes from Brazil. It is similarly the case within most of the leading producer countries, where the marginally weaker U.S. dollar and related to the still relatively soft reference prices of the coffee futures markets, is tending to inspire a degree of internal market price resistance and by nature, reducing the volumes of price fixation hedge selling within the markets. This scenario is marginally supportive for the markets but with the physical coffee trade a relatively small player as against the activities of the speculative and fund sector of the markets, one might not expect the slowing of producer selling to have too much in the way of impact upon market direction. 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 15,067 bags yesterday; to register these stocks at 1,957,147 bags. There was meanwhile a smaller in volume 2,805 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 42,050 bags. The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 167 bags on Tuesday, to see these stocks registered at 3,375,833 bags. The commodity markets lost some of their new found lustre yesterday and most markets encountered erratic but mostly sideways trade for the day, with the exception of short covering with the soft sugar markets, which was the player of the day. The Natural Gas, Sugar, Copper, Orange Juice, Soybean and Silver markets ended the day on the plus side of par, while the Oil, Gold and Platinum markets were relatively steady and the Cocoa, Coffee, Cotton, Wheat and Corn markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.01% lower to see this Index registered at 401.72. The day starts with the U.S. Dollar near to steady and trading at 1.531 to Sterling and 1.125 to the Euro, while North Sea Oil is steady is tending softer in early trade and is selling at 51.20 per barrel. The London and New York markets started the day yesterday on a softer note and both market remained in negative territory and against thin and lacklustre trade into the afternoon, when the New York market started to pick up support and moved back into positive territory and followed by a positive move within the London market. This was however short lived and both markets once again came under pressure and with sell stops being triggered, moved back into negative territory. The markets did however as the day progressed, bounce back off the lows and to limit the losses and to take a negative sideways track towards the close of the day. The London market ended the day on a soft note and with 67.2% of the losses of the day intact, while the New York market ended the day on a soft note and with 56.5% of the earlier losses of the day intact. This close does little to inspire but one might think that with the bounce back from the lows yesterday, that the markets may well see some degree of buoyancy for early trade today against the prices set yesterday, as follows: LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb. NOV 1559 – 41 DEC 126.05 – 2.05 |
