Coffee Market Report
| The Brazil weather news for the week remains conducive to good prospects for the next 2016 crop, with now regular rains being experienced for the majority of the main coffee districts and likewise, good rains being forecasted for the foreseeable future. But there is an exception in terms of the northern areas of Espirito Santo and over Bahia, where the rains so far have been modest. But with rains forecasted for both of these districts for this weekend and thereon, to eliminate any short term concerns within the market.
The well-respected Brazilian coffee analysts Safras e Mercado, have reported that approximately 63% of this new crop has already been sold by the farmers and cooperatives, as at the end of October. This they say is ahead of the more usual 57% factor for the same time of the year, but one might suggest that with farm sales including both past crop stocks and new crop coffees, it must be difficult to easily asses how much of the selling is related to the stocks and new crop coffees. It is nevertheless evident from reports this week that despite the relatively soft nature of reference prices of the international terminal markets, that Brazils internal market selling activity was not restrained this week. But while the internal market selling to the short sold exporters is active, the reports are that new export sales have been lacklustre for the week. The latest update from the U.S. Government Climate Prediction Centre weather forecasters has indicated that the prevailing El Nino phenomenon shall peak over the next couple of months and shall start to taper off during to start to see the Pacific ocean conditions back to neutral during the second quarter of year. But while this El Nino with historical evidence of its influence upon climate conditions for individual coffee producers in hand is of some concern, there have yet to be any strong scare stories coming to the markets. There have been forecasts from some problems for Indonesia and for the middle year Mitaca crop in Colombia, but not to a degree that is has influenced any panic market reaction. Brazil off the field of play yesterday so to speak in terms of fundamental news and with the factor of deficit supply post the new Brazil crop foreseen to be more than easily covered on the medium term by more than adequate world stocks and the El Nino factor likewise not generating any excitement, the coffee markets remain with the negative influences of the strong dollar and the negative nature of the overall macro commodity index. This scenario is presently fuelling bearish sentiment within the markets and by nature, restraining consumer industry buying activity, which further contributes along with producer price resistance, to the soft nature of the markets. The second month arbitrage between the markets narrowed yesterday, to register this at 45.77 usc/Lb., while this equates to a 38.54% 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 decrease by 9,015 bags yesterday; to register these stocks at 1,872,072 bags. There was meanwhile a smaller in volume 2,493 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 29,464 bags. The Certified Robusta coffee stocks held against the London exchange were unchanged on Wednesday 11th. November; to see these stocks registered at 3,340,000 bags on the day. The commodity markets were mixed in trade yesterday, but while many players are now awaiting the latest U.S. employment data due out later today, the prospects for a U.S. dollar rate hike in December now being seen to be more likely than not has dampened spirits and the overall macro commodity index took a marginally softer track for the day. The Natural Gas, Sugar, Cocoa, Orange Juice, Wheat, Corn and Soybean markets nevertheless had a day of buoyancy, while the Oil, Coffee, Cotton, Copper, 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 0.24% lower to see this Index registered at 387.03. The day starts with the U.S. Dollar steady in early trade and trading at 1.521 to Sterling and 1.078 to the Euro, while North Sea Oil is tending softer in early trade and is selling at 42.75 per barrel. The London and New York markets started the day on a steady note, but this was short lived and both markets soon moved back into negative territory and taking a marginally lower than par track into the afternoon trade. This soft stance and with little in the way of industry buying activity under the markets saw selling pressure pick up in the afternoon and with sell stops being triggered, both markets moved further south and to set an erratic but soft sideways track for the rest of the day’s trade. The London market continued to end the day on a soft note and with 95.8% of the earlier losses of the day intact, while the New York market ended the day on a likewise soft note and with 82.4% of the earlier losses of the day intact. This soft close and with the lack of supportive fundamental news while the charts are pointing south, is unlikely to inspire anything better than a 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 1575 – 23 DEC 115.30 – 1.50 |
