Coffee Market Report

The Brazilian analysts Safras & Mercado who have forecast the new Brazil coffee crop at 58.9 million bags have estimated that so far 75% of the new crop has been harvested, which they relate to approximately 27.6 million bags of arabica coffees and to approximately 16.5 million bags of conilon coffees. Their expectation being that the new crop shall finally be made up from approximately 40.6 million bags of arabica coffees and from approximately 18.3 million bags of conilon robusta coffees, with the latter conilon robusta coffee crop coming near to completion.

Meanwhile with the U.S. dollar that the International Monetary Fund have speculated is significantly over valued losing some weight, it is impacting upon firming value of the Brazil Real, which is tending to dampen export selling activity and internal market new crop sales within Brazil. It is however the slow summer holiday season for the main northern hemisphere consumer markets for Brazil coffees and following the past few months of relatively high volumes of Brazil coffee exports, there is presently no tightness of supply for these coffees.

There remains some modest degree of speculative caution over the prospects for the cold weather to continue over the weekend for the southern coffee districts in Brazil, but with the coming week forecast to bring with it warmer weather, one would think that the frost threat factor shall shortly become history and focus shall start to be upon the start of the new rain spring and summer rain season that is due to start in about nine to ten weeks’ time.

Weather conditions within the main central highlands coffee districts in Vietnam remain normal and with the new crop cherries benefiting from regular rains, which is indicating that another large new crop is due to start being harvested in approximately thirteen to fourteen weeks’ time. Meanwhile with internal market farm and internal trade stocks of the past harvest now depleted and with the price dictates of the soft London terminal market having an influence, the mills and exporters in Ho Chi Minh City continue to experience price resistance in terms of their ability to cover forward contracts and to support new business and asking export differentials remain firm.

The September to September contracts arbitrage between the London and New York markets broadened yesterday, to register this at 43.87 usc/Lb., while this equates to 40.4% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 825 bags yesterday; to register these stocks at 2,363,140 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 32,376 bags.

The commodity markets were mostly lacklustre and softer in trade yesterday, to see the overall macro commodity index tending softer for the day. The Cocoa, Coffee, Gold and Silver markets ended the day on a positive note and the Copper market was steady for the day, while the Oil, Natural Gas, Sugar, Cotton, Orange Juice, Wheat, Corn and Soybean markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.75% lower; to see this index registered at 395.48. The day starts with the U.S. Dollar steady and trading at 1.253 to Sterling, at 1.125 to the Euro and with the US Dollar buying 3.719 Brazilian Real.

The London and New York markets started the day yesterday trading on a modestly negative note and with both markets taking a softer track, into the early afternoon trade. As the afternoon progressed both markets started to pick up support, to add some value and to return to par and thereon, to move into modest positive territory. With the return to a positive track within the markets and against relatively modest trading volumes, assisting the London market to maintain a steady stance and the New York market to add some more value, towards a positive end for the day.

The London market ended the day on a modestly positive note and with 48.9% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 85.7% of the earlier gains of the day intact. This positive close and with the Brazil Real a little firmer and ahead of a cold weekend for Brazil, might assist towards some degree of confidence and to assist the markets to remain steady for early trade today, against the prices set yesterday, as follows:

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

JUL 1393 + 2                                               JUL 107.15 + 1.20
SEP 1427 + 4                                              SEP 108.60 + 1.20
NOV 1456 + 4                                             DEC 112.45 + 1.25
JAN 1482 + 4                                              MAR 116.15 + 1.30
MAR 1507 + 5                                             MAY 118.40 + 1.25
MAY 1530 + 5                                              JUL 120.40 + 1.30
JUL 1552 + 5                                               SEP 122.35 + 1.30
SEP 1575 + 5                                                DEC 125.20 + 1.30
NOV 1592 + 5                                               MAR 128.05 + 1.30
JAN 1608 + 5                                                MAY 129.90 + 1.30