Coffee Market Report
| The latest reports from Vietnam indicate that over 66% of the new crop has been harvested, but with some hiccups in the harvest process over the past few days, due to some scattered rain showers. It is on the cards though that with the harvest peaking that the new robusta coffee crop shall be completed within the next four to five weeks, with most private trade and industry forecasts indicating a new crop of in excess of 28 million bags, of which in excess of 27.5 million bags shall be robusta coffees.
The pressure of new crop stocks and over and above record carryover stocks of in excess of 5 million bags has however yet to impact upon internal market selling activity, with farmers and internal traders continuing to resist the negative influences of the soft reference prices of the London market. The question is though how long this price resistance can continue, as not only do farmers and internal traders need to make space to store the remaining volumes from the harvest, but many need to cash in at least most of their old stocks and some of their new crop coffees, ahead of the expensive week long Tet New Year holiday (Year of the Monkey) season, to be held over the second week of February. Meanwhile the lack of selling aggression out of Vietnam and with the countries robusta coffee exports that are flowing going out of the country at price levels that exceed tenderable parity, the certified robusta coffee stocks of the London market are slowly being eroded. This erosion is however surprisingly slow and one might only suggest that the relatively high percentage of Brazil conilon robusta coffees that are now held within these stocks and are coffees that are not necessarily to the taste of many European roasters, might be the reason that roasters are not taking as much advantage as one would expect from these relatively affordable stocks. There has likewise been a steady erosion in recent months within the certified stocks of the New York arabica coffee market and one that would usually be expected to inspire some degree of speculative support for the market, but the reality that these stocks are not growing due to price resistance being shown by most arabica producers rather than to a shortage of coffee, has negated such sentiment. This price resistance and despite the large volumes of new crop fine washed arabica coffees now available to the market from the new main Colombian, Mexican and Central American crops is expected to continue for the short term, but one might perhaps start to see this resistance start to wane by the second quarter of the coming year and should forecasts for a much larger new Brazil arabica crop start to become reality. But in the meantime there is seemingly little chance that there can be any significant growth within the these stocks, which are likely to remain modest for the short to medium term. The March on March contracts arbitrage between the markets broadened yesterday, to register this at 49.89usc/Lb., while this equates to a 41.87% 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 3,040 bags yesterday; to register these stocks at 1,749,832 bags. There was meanwhile a smaller in volume 800 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 44,298 bags. The Certified Robusta coffee stocks held against the London market were seen to decline by 1,667 bags on Monday 21st. December; to see these stocks registered at 3,312,000 bags. The commodity markets had a mixed but generally marginally softer day yesterday against a degree of stability for the presently robust U.S. dollar and with the overall macro commodity index moving marginally lower during the day, which did little to buoy spirits within many markets. The U.S. Oil, Sugar, Coffee and Orange Juice markets had a day of buoyancy and the Brent Oil was steady, while the Natural Gas, Cocoa, Cotton, Copper, Wheat, 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 0.15% lower to see this Index registered at 373.13. The day starts with the U.S. Dollar steady in early trade and trading at 1.484 to Sterling and 1.094 to the Euro, while North Sea Oil is tending softer in early trade and is selling at 35.30 per barrel. The London and New York markets had a steady start for early trade yesterday, with both markets posting modest gains into the afternoon trade, but within an environment of thin and lacklustre trade for the more volatile New York market. This stability within both markets and with only thin volumes of producer price fixation hedge selling coming the markets, assisted for some degree of buoyancy to be retained and with both markets taking a slow upside track for most of the rest of the day’s trade. The London market continued to end the day on a positive note and with 76% of the earlier gains of the day intact, while the New York market continued to end the day on a positive note and with 84.6% of the earlier gains of the day intact. This overall positive close albeit related to uncertain lacklustre trade within the New York market, might well inspire a degree of hesitant follow through support towards a steady start for early trade today against the prices set yesterday, as follows: LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb. JAN 1491 + 9 MAR 119.15 + 1.65 |
