Coffee Market Report
| The Uganda Coffee Development Authority has reported that the countries coffee exports for the month of December was 117,626 bags or 52.32% higher than the same month in the previous year, at a total of 342,429 bags. This improved performance has contributed to the countries cumulative exports for the first three months of the present October 2015 to September 2016 coffee year to be 141,015 bags or 20.92% higher than same period in the previous coffee year, at a total of 815,208 bags.
In terms of value however the value of the December coffee exports was US$ 3,833,953.00 or 12.89% higher than the same month in the previous year, at a total of US$ 33,584,753.00. This very much expected dip in value relative to volume being related to the relatively soft reference prices of the international coffee exchanges against which coffees are presently being sold, which is however being countered by the corresponding weaker Uganda shilling to bring stability to the farm gate prices for the farmers. But one must keep in mind that there is inflation and while the exchange rate does bring some degree of relief to the farmers, the advantage of this factor is limited and it must be starting to impact upon the profit margins for the Ugandan coffee farmers. The traditionally conservative Government Crop Supply Agency CONAB in Brazil have come forth with their new 2016 crop forecast, with the view that the new crop shall prove to be between 49.13 million to 51.94 million bags. This new crop they say shall be considerably larger than their estimate for last year’s 2015 crop, which they have pegged at a modest 43.2 million bags. In terms of more specific quality they have forecasted that the new Brazil 2016 arabica coffee harvest shall be between 37.74 million and 39.87 million bags and thus, much larger than their figure for the previous 2015 arabica coffee harvest of 32.05 million bags. While they forecast a new 2016 conilon robusta coffee crop that shall be between 11.39 million and 12.08 million bags and therefore, only marginally higher than their figure for the previous 2015 conilon robusta harvest of 11.19 million bags. It is however almost traditional that the CONAB crop and forecast figures are approximately 10% to even as much as 15% below reality and one might say in terms of this forecast, that it tends to support the many private trade, industry and analyst forecasts that have taken a view that the new crop shall be between 56 million and 60 million bags. One might also find questionable in terms of the CONAB report having foreseen a marginal increase in conilon robusta production for 2016, that this is contrary to almost every one of the other respected forecasts, where it has been foreseen that the conilon robusta production in 2016 would dip below last year’s crop, while there would be a sharp increase in the arabica coffee crop for this year. Rather one would comment, the report underpins the general opinion that the new crop shall be something in the order of the 57 million to 58 million bags that has widely been talked about. Meanwhile the respected Brazil analysts Safras E Mercado have reported that Brazil coffee farmers with confidence in a significantly larger new arabica coffee crop, have been more active than usual for this time of the year in selling forward large volumes of their new crop coffees. This news and taking the view that the farmers know best, is further underpinning the reality of a much larger new crop for Brazil this year, albeit that so far the surplus in terms of evidence of Brazil export volumes and consumer demand for Brazil coffees does not indicate that it will be a crop that shall bring forth a large surplus supply. The March on March contracts arbitrage between the markets narrowed yesterday, to register this at 49.64 usc/Lb., while this equates to a 44.48% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, with the good discount most likely due to remain in place for the foreseeable future, in line with steady robusta shipments out of Vietnam. The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 16,981 bags yesterday; to register these stocks at 1,661,779 bags. There was meanwhile a smaller in volume 4,358 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 21,933 bags. The commodity markets mostly followed the aggressive sell off for equities in trade yesterday, which was a day that saw global shares take their largest dip since October 2008. Thus with the logic of fundamentals pushed to the side within the majority of the markets and bearish sentiment the order for the day, the overall macro commodity index took a downside track for the day. The Gold and Silver markets unsurprisingly had a day of buoyancy and the Corn and Platinum markets were steady, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat and Soybean markets had a soft day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.60% lower; to this Index registered at 353.66. The day starts with the U.S. Dollar steady in early trade and trading at 1.418 to Sterling and 1.089 to the Euro, while North Sea Oil is steady in in early trade and is selling at 26.45 per barrel. The London and New York markets started the day yesterday on a softer note and took this negative track into the afternoon trade, when the global commodity and equity sell off started to pick up steam and bring further pressure upon sentiment within the coffee markets, to see stop loss orders coming into play and to accelerated the downside track of the markets and to see the New York market hit two year lows and the London market hit five and half year lows. The London market continued to end the day on a very soft note and with 86.8% of the earlier losses of the day intact, while the New York market ended the day on a likewise very soft note and with 88% of the earlier losses of the day intact. There has however been a corrective bounce within Asian equity markets this morning and one might suspect that following yesterday’s blood bath that the markets might experience some corrective buoyancy for early trade today against the soft prices set yesterday, as follows: LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb. JAN 1318 – 46 MAR 111.60 – 4.05 |
