Coffee Market Report

November 04 2013

The delayed reports from the U.S. Commodity Futures Trading Commission that had been stalled by the recent U.S. Government shutdown remain in catch up mode and are getting closer to the mark, with the report on Friday that confirmed that during the week of trade leading up to Tuesday 22 nd. October, the Speculative sector of the market extended their net short position within this market by 17.86%, to register a net short sole position of 32,244 Lots. This net short position, which is the equivalent of 9,141,031 bags, has most likely been further extended during a period of overall softer trade, which has since followed.

The preliminary export figures for the month of October have been reported from Brazil, with coffee exports for the month recorded at 9.36% higher than the same month last year, at a total of 2.92 million bags. This figure is a little light against some earlier forecasts, but there have been slower exports during much of last month, as a reaction by the internal market to the recovery of the local currency that had added to the negative nature of the reference prices of the New York arabica coffee market upon domestic prices.

The Brazil real that had during the month of October recovered to 2.17 to the dollar has however over the past couple of days slipped back to 2.25 to the dollar in line with a firming dollar, which might well encourage some increase in selling activity out of Brazil for this week. This with the corresponding price fixation hedge selling activity that would result over the New York market is likely to create something of a ceiling for this market that started to stabilise in late trade on Friday, to perhaps influence a slow and hesitant risk on start for trade today.

In reaction to the prevailing softer prices within the internal market in Vietnam, there are once again discussions between the official Vietnam Coffee and Cocoa Association and the Vietnam Ministry of Agriculture, to find a way to finance the holding of 5 million bags of new crop stocks for a period of six months. This program they foresee might assist to buoy short term prices within the internal market that have slipped to three year lows, but one might question how realistic this might be.

The country has entered a new crop of approximately 1 million bags of arabica coffees and in excess of 25 million bags of robusta coffees, with a carryover stock of 2.5 million bags of robusta coffees. This with the domestic demand for approximately 1.7 million bags, would leave approximately 26.8 million bags available for export between October 2013 and September 2014 and even with the prospects for a repeat 2.5 million bags of carryover stocks into the next 2014/2015 coffee year, an average of 2.025 million bags in exports per month.

Therefore the carry of 5 million bags of financed coffees for six months that are only the equivalent of 2.47 months of exports, would be no more effective than some cheap finance for a small percentage of the stocks that shall have to anyhow be carried and awaiting consumer market demand. Thus we would comment that such a program shall do little to change the present scenario of farmers now experiencing low profits from new crop sales and by nature, having to sell increased volumes to finance their farms.

The International Coffee Organisation have reported that global coffee exports for the month of September were 4.62% lower than the same month last year, at a total of 7.85 million bags. This did not however detract from the cumulative exports for the October 2012 to September 2013 coffee year being 2.3% higher than the previous 2012/2013 coffee year, at a total of 110.18 million bags.

These exports recorded by the ICO were related to a 68.48 million bags of arabica coffee and 41.7 million bags of robusta coffees, with the growth in arabica coffee exports being 2.41%, while the growth in robusta coffee exports was 2.11%, which would indicate that despite the increasing usage of robusta coffees within blends within the consumer markets, that the lower arabica coffee prices are tending to steady the demand for these relatively higher value coffees.

It must be noted however that during this past coffee year that while the certified arabica coffee stocks held against the New York exchange increased by 596,636 bags, the certified robusta coffee stocks held against the London exchange, declined by 1,165,000 bags. These latter certified robusta stocks having been absorbed by consumer market roasters, to fill in for the price resistant slowing of sales from Vietnam and in reality the growth In consumer market usage in terms of basic varietals, was relatively even.

The Certified washed Arabica coffee stocks held against the New York market were seen to increase by 3,210 bags on Friday, to register these stocks at 2,715,535 bags. There was meanwhile a larger 7,206 bags decrease in the number of bags that were pending grading for the exchange; to register these pending grading stocks at 10,824 bags.

The commodity markets once again came under pressure from the improved manufacturing data news from the U.S.A. on Friday, which brought forth speculation that it might inspire the U.S. Federal Reserve Bank to once again consider the tapering of the economic stimulus program when it meets at the end of the month. This had its effect on buoying the U.S. dollar, which impacted negatively upon the majority of the markets. The Coffee, Orange Juice, Wheat, Platinum and Palladium markets had a day of buoyancy, while the Sugar, Cocoa, Cotton, Copper, Corn, Soybean, Gold and Silver markets had a softer day and the Oil and Natural Gas markets had a particularly soft day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.33% lower, to see Index registered at 506.43. The day starts with a steady U.S. dollar trading at 1.593 to Sterling and 1.348 to the Euro, while Brent Crude is tending softer in early trade and is selling at $ 105.10 per barrel.

The New York market started the day on Friday on a steady note, but this was short lived and the market soon started to slip and followed by a softer start for the London market, but with the thinly traded New York market attracting support and a late morning recovery. Both markets did however come under pressure in the afternoon’s trade and with the negative influences of the macro commodity index coming into play, but with weekend short covering coming forth later in the day to buoy the markets. The London market continued to end the day on a buoyant note and with 87.5% of the earlier gains intact and followed by a modestly buoyant close for the New York market, with only 23% of the earlier gains of the day intact. This hesitantly steady close but with a stronger U.S. dollar in play, is unlikely to inspire little better than a steady start for the markets in early trade today against the prices set on Friday, as follows:

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

NOV 1475 + 15 DEC 105.55 + 0.15

JAN 1489 + 7 MAR 108.60 + 0.05

MAR 1483 + 6 MAY 110.85 + 0.15

MAY 1480 – 1 JUL 113.10 + 0.15

JUL 1486 – 5 SEP 115.35 + 0.20

SEP 1495 – 6 DEC 118.40 + 0.20

NOV 1505 – 7 MAR 121.40 + 0.30

JAN 1517 – 7 MAY 123.25 + 0.35

MAR 1524 – 7 JUL 125.10 + 0.40

MAY 1524 – 7 SEP 126.80 + 0.30

Coffee Market Report

November 01 2013

The Robusta coffee exports from Indonesia’s leading coffee producing island of Sumatra were seen increase by 169,679 bags or 29.87% during the month of October, with these exports registered at 737,702 bags. This sees the islands cumulative robusta coffee exports for the first ten months of this 2013 calendar year already 1,405,172 bags or 42.71% higher than the total exports in the previous year, at 4695,537 bags.

Thus with the expectations of exports of at least 800,000 bags over November and December, one might expect that Sumatra shall register robusta coffee exports of approximately 5.5 million bags during 2013. This more active robusta coffee export performance from Indonesia does not help the Vietnamese, whose price resistant actions to try to pressure internal market prices higher that have resulted in lower volumes coming to the consumer markets, have been countered by the rising volumes out of Indonesia.

Despite the lower reference prices of the declining value of the New York arabica coffee market and while the cooperatives in Brazil have been showing some degree of price resistance, the private farmers remain active sellers and exporters are not having to struggle to cover their short forward contract sales. It is rather the lacklustre buying interest that prevails within the consumer markets that is retarding exporter selling activity of arabica from Brazil at present, but there are significant forward contract commitments that are being filled and Brazil arabica coffees are flowing freely into the consumer markets.

Meanwhile the October coffee exports from Brazil have yet to be announced, but early indications is that there might have been close to 3 million bags exported from Brazil over the past month, which has contributed to the well-stocked muscle being shown by the consumer market buyers towards producers in general. This is likewise retarding consumer market buying activity within the futures markets and thus Brazil along with the active selling out of the larger new main crop in Colombia, is assisting to dampen market spirits. To soon be followed by the rising volumes of selling activity that are due from the new crops out of Vietnam, Mexico and Central America.

There is however in terms of the Central Americans a degree of price resistance in play, in terms of forward selling of their new crop coffees and for the present the forward sales volumes of the new crop are much lower than is traditionally the case for this time of the year. This is a factor that is reducing the volumes of price fixation hedge selling over the New York market, but with the Brazilians and Colombians more active, is not contributing to any support for the market.

The problems of Roya or Leaf Rust are meanwhile coming back into play in Central America and it is making it difficult for accurate forecasts for the regional new crop, which has been widely accepted to be a potentially lower crop. But the decline which many say might be as much as 3 million bags remains of little concern to the consumer markets for the present, as they look rather to the prevailing overall world surplus coffee supply and for the present the bears are firmly within the driver’s seat of the markets.

The Certified washed Arabica coffee stocks held against the New York market were seen to increase by 674 bags yesterday, to register these stocks at 2,712,325 bags. There was meanwhile a larger 4,399 bags decrease in the number of bags that were pending grading for the exchange; to register these pending grading stocks at 18,030 bags.

The Certified Robusta coffee stocks held against the London Exchange were seen to decline by 52,167 bags or 5.57% in the two weeks of trade leading up to Monday 28th. October, to see these stocks registered at a relatively modest 883,667 bags. There is however a larger new Vietnam crop on the horizon and despite early price resistance on the part of the farmers in the internal market for the present, one might expect that they shall eventually have to bite the bullet and sell coffees to exporters at market related prices and thus, the potential to see these stocks start to rise again by the end of the first quarter of 2014.

The commodity markets came under pressure from the news of lower inflation within the Euro zone and rising unemployment that resulted in speculation of the possibility for a further lowering of the European Central Bank’s interest rate, which resulted in the firming U.S. dollar. This saw the majority of the markets slipping back through the day’s trade, with month end speculative profit taking also coming into play. The Sugar, Cocoa and Orange Juice markets showed buoyancy and the Oil, Natural Gas, Cotton, Copper, Corn and Soybean markets tended easier, while the Coffee, Wheat, Gold, Silver, Platinum and Palladium market experienced a soft days trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.89% lower, to see Index registered at 508.11. The day starts with a steady U.S. dollar trading at 1.602 to Sterling and 1.355 to the Euro, while Brent Crude is relatively steady in early trade and is selling at $ 108.45 per barrel.

The New York market started the day yesterday with some cautious buoyancy and followed by a similar start for the London market, but with both markets tending to soften into the afternoons trade. The more volatile and speculative New York market started to come under pressure in line with the negative nature of the macro commodity index and seemingly had its influence upon the London market, which took a similar negative track. The London market ended the day on a soft note and closed on the low of the day and followed by a soft close for the New York market that retained 90.6% of the earlier losses of the day. This soft close might however inspire some roaster price fixation support to steady the markets for early trade today against the soft prices set yesterday, as follows:

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

NOV 1460 – 28 DEC 105.40 – 1.45

JAN 1482 – 27 MAR 108.55 – 1.40

MAR 1477 – 30 MAY 110.70 – 1.50

MAY 1481 – 34 JUL 112.95 – 1.50

JUL 1491 – 34 SEP 115.15 – 1.60

SEP 1501 – 33 DEC 118.20 – 1.60

NOV 1512 – 31 MAR 121.10 – 1.60

JAN 1524 – 30 MAY 122.90 – 1.55

MAR 1531 – 1 JUL 124.70 – 1.35

MAY 1531 – 1 SEP 126.50 – 1.20

Coffee Market Report

October 31 2013

The much delayed U.S. Commodity Futures Trading commission reports that were stalled due to the U.S. Government shut down are not starting to come to the markets but with quite some catch up reporting still to come, with these reports having once again started however on Friday last week. In this respect they have reported yesterday that the Non Commercial Speculative sector of the market reduced their net short sold position within the market by 14.6% in the week of trade leading up to Tuesday 15th. October, to see a net short sold position of 27,356 Contracts, on the day.

This speculative net short sold position which is the equivalent of 7,755,305 bags has most probably been significantly increased over the past couple of weeks, in line with the 9.60 usc/Lb. or 8.24% decline in the value of the market, which included fund and speculative short sales. While market players shall be quite eager to see the reports from the Commodity Futures Trading Commission catch up and clarify the positions held within this market by the Managed money funds and the Non Commercial Speculative sector, as at Tuesday 29 th. October, against the new four and half year lows in prices to which the market has since fallen.

The Ivory Coast have reported that their exports of robusta coffees for the last October 2012 to September 2013 coffee year were 218,583 bags or 14.17% lower than their exports for the previous 2011 to 2012 coffee year, at a total of 1,323,750 bags. This is a dismal performance against even the more conservative forecasts, which had indicated expectations of exports to exceed 1.54 million bags. But one might presume that with the coffee and cocoa crops intermingled, that the relatively high cocoa prices that have been experienced over the past year, has distracted farmers from their coffee trees and that a relatively high percentage of the coffee trees have not been correctly maintained or harvested.

One might further speculate that with the soft nature of the prevailing robusta coffee prices that this scenario of low maintenance of coffee trees in the Ivory coast and likewise within the Cameroun, where there is a traditional cocoa farming industry, that it is unlikely that the robusta coffee crops from this region shall soon recover. This shall continue to marginalise West Africa as a robusta coffee producer bloc, with the consumer markets continuing to focus upon the Asian producers and to a smaller scale Uganda, and the low percentage of the large Brazil conilon robusta crop that is not used in the domestic market and exported, for their longer term supply.

There has been a Reuters poll taken from ten international coffee trade houses that has indicated that with the lower value of the reference prices of the New York arabica coffee market of late and with the surplus of overall arabica coffee supply, that there shall be a move back to the use of more arabica coffees within consumer market blends. This mover however is not foreseen to be potentially as large as the swing over the past six years from arabica to the lower priced robusta coffees, as the latter robusta coffees still offer a very good discount to all but the lower quality arabica coffees.

This can be illustrated by the fact that the London robusta coffee market as of yesterdays close, still offers a 38.41 usc/Lb. or 35.95% price discount to the New York arabica coffee market and with accountants running most businesses, there remains no financial incentive on the part of the price sensitive major brands, to make radical changes to their already acceptable robusta coffees within their blends. Thus while the poll is talking about a switch of approximately 3 to 4 million bags out of a total world domestic and consumer market consumption of 140 million bags and including higher percentages of low grade Brazil arabica coffees as a replacement to relatively good value conilon robusta coffees, the switch is unlikely to be noticeable within the main consumer markets.

The Certified washed Arabica coffee stocks held against the New York market were seen to decline by 14,148 bags yesterday, to register these stocks at 2,711,651 bags. There was meanwhile a smaller 2,880 bags increase in the number of bags that were pending grading for the exchange; to register these pending grading stocks at 22,429 bags.

The commodity markets tended to show buoyancy on the news that the Federal Reserve Bank in the U.S.A. was indeed going to retain the existing price stimulus program at its full value yesterday; this was rather muted by the earlier expectations that this would be the case. The Brent Oil, Cocoa, London Robusta Coffee, Copper, Orange Juice, Soybean, Silver, Platinum and Palladium markets showed buoyancy and the New York arabica Coffee was steady, while the U.S. Oil, Natural Gas, Cotton, Wheat, Corn and Gold markets had a softer days trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.14% higher, to see Index registered at 512.68. The day starts with a steady U.S. dollar trading at 1.602 to Sterling and 1.370 to the Euro, while Brent Crude is tending softer in early trade and is selling at $ 108.75 per barrel.

The New York market started the day yesterday with some cautious buoyancy and followed by a similar start for the London market, but with both markets taking a short dip lower, before the New York market recovered and left the London market trading erratically either side of the line. The London market continued within a narrow trading range on a sideways track to end the day with a degree of buoyancy and with 71.4% of the modest earlier gains of the day intact, while the New York market that came under pressure for the end of the day ended off the day on a hesitantly steady note. This close provides little indication of any direction and one might expect only a steady start for early trade today against the prices set yesterday, as follows:

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

NOV 1488 + 2 DEC 106.85 – 0.10

JAN 1509 + 5 MAR 109.95 + 0.05

MAR 1507 + 8 MAY 112.20 + 0.10

MAY 1515 + 9 JUL 114.45 + 0.10

JUL 1525 + 8 SEP 116.75 + 0.25

SEP 1534 + 6 DEC 119.80 + 0.30

NOV 1543 + 5 MAR 122.70 + 0.30

JAN 1554 + 1 MAY 124.45 + 0.35

MAR 1532 + 1 JUL 126.05 + 0.25

MAY 1532 + 1 SEP 127.70 + 0.20

Coffee Market Report

October 30 2013

The much delayed U.S. Commodity Futures Trading commission reports that were stalled due to the U.S. Government shut down are not starting to come to the markets but with quite some catch up reporting still to come, with these reports having once again started however last on Friday and with the report that was due for publication on Friday 4th. October. This has now been followed by the report that was due for publication on the 11th. October announced yesterday.

This latest Commitment of Traders report from the washed arabica coffee New York market has seen the shorter term in nature Managed Money Fund sector of the market decrease their net short sold position within this market by 5.56% in the week of trade leading up to Tuesday 8th. October, to see this short sold position registered at 22,960 Lots, on the day. Over the same period the longer term in nature and steadier Index Fund sector of this market increased their net long position within the market by 0.31%, to register a net long on the day of 57,428 Lots.

During this same week of trade the Non Commercial Speculative sector of the market decreased their net short sold position within the market by 3.95%, to register a net short sold position of 32,069 Lots on the day. This speculative net short position within the New York market which is the equivalent of a substantial 9,091,419 bags has most likely been further increased over the period of overall softer trade that this market has experienced for the two and half weeks that have since followed and so too, the net short position held by the Managed Money Fund sector of this market.

The month of October is nearly over and while there is no doubt that the Brazil main coffee districts have all been in receipt of adequate and mostly near perfect rainfall for the month to support good flowerings and to build up ground water retention levels to set the flowering towards the next 2014 new crop, the majority of the coffee districts have so far reported rainfall that is below their five year average levels. The states of Parana and Cacoal have however reported rainfall well above their five year average and Sao Paulo is very much on par, while the dominant coffee producing state of Minas Gerais with three days to go has mostly reported rainfall that is a quite acceptable 24% below their five year average and it is only Zona da Mata mineira to the South East of Minas Gerais is still 44% below their average. The rainfall levels in Bahia have also been relatively modest and presently are 47% below the five year average, but not too low to cause any concern.

The question really is what the rainfall shall be for the coming four summer months and there shall be a close watch on the weather reports for the month of November over the main Brazil coffee states, as producers in general look for any hiccups in the Brazil rainfall for reason to break out of the presently bearish nature of the markets. There have been some statements that November might prove to be a drier than normal month, but so far there have been no defining weather forecasts for any problems to the Brazil weather and the prospects for a large new crop for the coming year and the markets remain devoid of any significant supportive news.

In fact the markets remain devoid of any news at all from any of the main coffee producer blocs, where the signs are for generally normal conditions and it is only within the Central American bloc where the negative effects of Roya or Leaf Rust are due to impact negatively upon the volume of their new crops that are now starting, that there is hint of market support. But with the overall surplus supply due from the rest of the producers for the coming year, this latter factor has already been discounted and the markets retain their soft and lacklustre stance for the present.

There is however always a threat in that when everyone is bearish and this is very much the case for the present, that the markets can snap back on any unforeseen reported supportive factor and with the producers stepping back, to see a sharp speculative corrective buy stop rally come into play. This might however with considerable volumes of producer price fixation selling hanging over the markets is limited to a relatively nearby ceiling, unless the fundamental reasons for correction are substantial.

The Certified washed Arabica coffee stocks held against the New York market were seen to decline by 775 bags yesterday, to register these stocks at 2,725,799 bags. There was meanwhile a larger 2,749 bags increase in the number of bags that were pending grading for the exchange; to register these pending grading stocks at 19,549 bags.

The commodity markets tended to the softer side yesterday, with the U.S. dollar showing some corrective buoyancy to dampen spirits within many markets. The London robusta Coffee, Copper, Wheat, Corn and Soybean markets had a day of buoyancy, while the Oil, Natural Gas, Sugar, Cocoa, New York arabica Coffee, Cotton, Orange Juice, Gold, Silver, Platinum and Palladium markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.45% lower, to see Index registered at 511.97. The day starts with a steady U.S. dollar trading at 1.604 to Sterling and 1.374 to the Euro, while Brent Crude is tending softer in early trade and is selling at $ 107.70 per barrel.

The New York market started the day yesterday on a hesitant note and trading either side of the previous days close, with thin volumes accentuating moves either side of the line, while the London market had a steadier start with a degree of buoyancy in play. The afternoon and once the Americans entered the field of play, saw the New York market that was influenced by the negative nature of the macro commodity index start to take a negative track, with the London market following suit. The London market did however recover and ended the day on a positive track and having retained 36.4% of the earlier gains of the day, while the New York market ended the day on a soft note and with 63.2% of the earlier losses of the day intact. This mixed close was more range bound in nature and one that might inspire a hesitantly steady start for early trade today against the prices set yesterday, as follows:

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

NOV 1486 – 13 DEC 106.95 – 0.60

JAN 1504 + 4 MAR 109.90 – 0.75

MAR 1499 + 8 MAY 112.10 – 0.85

MAY 1506 + 9 JUL 114.35 – 0.95

JUL 1517 + 8 SEP 116.50 – 1.05

SEP 1528 + 9 DEC 119.50 – 1.10

NOV 1538 + 10 MAR 122.40 – 1.05

JAN 1553 + 9 MAY 124.10 – 1.00

MAR 1531 + 9 JUL 125.80 – 0.80

MAY 1531 + 9 SEP 127.50 – 0.70

Coffee Market Report

October 29 2013

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market sharply increase their net short sold position within this market by 7,447 Lots or 1,538.64% in the week of trade leading up to Tuesday 22nd. October, to register a net short sold position of 7,931 Lots. This net short position which is the equivalent of 1,321,833 bags has more than likely been further extended, over the period of overall negative trade, which has since followed.

Meanwhile the new robusta crop harvest in Vietnam is picking up in volume and farm stocks are increasing, but with domestic Vietnam Dong prices now approximately 23% lower than what farmers were used to seeing for their past crop coffees, there remains hesitancy in selling. This decline in value for the new crop coffees and despite some support in terms of devaluation against the U.S. dollar over the past few years still results in three year lows in value for the farmers for their robusta coffees, which is now becoming a matter of grave concern for the farmers in general.

The problem is that with the combination of general inflation and the devaluation that has accentuated the inflation in imported inputs for the farms, the reversal to three year lows in terms of Vietnam Dong prices is far more critical. Over the past three years the unit cost of production and despite the countries overall impressive yields per hectare, has risen dramatically and with the softening of the reference prices of the London market there are now prospects for some farmers to struggle to break even with their new crop sales.

This situation is unless there is some unforeseen reason for the markets to soon recover, going to extrapolate into a severe problem for the farmers as they head towards the Tet New Year holidays that shall in 2014 be a relatively early holiday, as it falls between the 30th. January to the 4th. February, as it takes the country into the new year of the Horse. It is traditional for coffee farmers in Vietnam to look to sell a good percentage of their new crop coffees early in the season to cover the combination of their harvesting costs and the finance for this most important of their annual holiday seasons, but with the declining profit margins from early crop sales of this new crop, they shall have to dispose of much higher percentages of this new crop, so as to cover these costs.

Thus one might speculate that despite the prevailing price resistance on the part of farmers towards the prices offered by the countries coffee mills and exporters as dictated by the lower international market value, that the farmers cannot hold out for too much longer. This is likely to result in increasing volumes of internal market coffee sales and with the resulting exporter price fixation hedge selling of stocks, that it shall impact negatively upon the already soft nature of the London robusta coffee market.

The London robusta coffee market meanwhile offers a 39.51 usc/Lb. or significant 36.74% price discount to the New York arabica coffee market, which is an encouragement for price sensitive consumer roasters to look to increase their percentages of robusta coffees within their blends. There is however with the consumer markets presently now absorbing as much as 45% robusta coffees into their blends, some limit as to how much more relative robusta coffee demand can increase and thus, one cannot foresee the discount in price being sufficient to dramatically increase short term demand and to be a supportive factor for the London market.

Thus one might foresee with the prospects for increasing selling volumes out of Vietnam and followed by the new Indian robusta coffee crop in the first quarter of 2014, that the presently declining certified robusta coffee stocks held against the London market that are presently at 935,833 bags, starting to attract new coffees to these stocks. Such a development would be a further bearish factor for sentiment within the London market and the threat might already be of some added influence, in the negative track that the speculative sector is now taking towards this market.

The Certified washed Arabica coffee stocks held against the New York market were seen to decline by 825 bags yesterday, to register these stocks at 2,726,574 bags. There was meanwhile a larger 3,410 bags increase in the number of bags that were pending grading for the exchange; to register these pending grading stocks at 16,800 bags.

The commodity markets have seen spirits dampened by lower than expected new U.S.A. housing data and accompanied by softer growth figures from this leading economy, which do however further support the reasons for the Federal Reserve Bank to continue with the full economic stimulus program. There was a further negative influence for many markets, with the U.S. dollar regaining a little muscle. The Oil market did however gain some support from the hiccup in export volumes from Libya, while the Natural Gas market took a dip against mild early winter forecasts for the U.S.A. The Oil, Gold, Platinum and Palladium markets had a day of buoyancy, while the Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.49% lower, to see Index registered at 514.30. The day starts with a degree of buoyancy for the U.S. dollar trading at 1.611 to Sterling and 1.378 to the Euro, while Brent Crude is near to steady in early trade and is selling at $ 108.95 per barrel.

The New York market started the day yesterday near to steady and followed by a similar stance being taken within the London market, but this was short lived and both markets soon started to lose their way into the afternoon’s trade. The New York market did however pick up some early afternoon profit taking and roaster price fixation support and a very brief positive correction but to once again come under selling pressure and to head back into negative territory, with sell stops impacting upon both markets. The London market continued to end the day on a soft note and with 69% of the day’s losses intact, while the New York market ended on a similarly soft note and with 70.4% of the losses of the day intact. This overall soft close would have made many lose heart and one might expect to see little better than a steady to soft start for early trade today against the prices set yesterday, as follows:

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

NOV 1499 – 60 DEC 107.55 – 1.55

JAN 1500 – 38 MAR 110.65 – 1.65

MAR 1491 – 37 MAY 112.95 – 1.65

MAY 1497 – 39 JUL 115.30 – 1.60

JUL 1509 – 39 SEP 117.55 – 1.60

SEP 1519 – 38 DEC 120.60 – 1.55

NOV 1528 – 41 MAR 123.45 – 1.50

JAN 1544 – 41 MAY 125.10 – 1.50

MAR 1522 – 41 JUL 126.60 – 1.50

MAY 1522 – 41 SEP 128.20 – 1.40

Coffee Market Report

October 28 2013

This latest Commitment of Traders report from the washed arabica coffee New York market has seen the shorter term in nature Managed Money Fund sector of the market increase their net short sold position within this market by 1.99% in the week of trade leading up to Tuesday 1st October, to see this short sold position registered at 24,312 Lots, on the day. Over the same period the longer term in nature and steadier Index Fund sector of this market decreased their net long position within the market by 0.3%, to register a net long on the day of 57,253 Lots.

During this same week of trade the Non Commercial Speculative sector of the market increased their net short sold position within the market by 1.55%, to register a net short sold position of 33,388 Lots on the day. This speculative net short position within the New York market which is the equivalent of a substantial 9,465,350 bags has most likely been further increased over the period of overall softer trade that this market has experienced for the three and half weeks that have since followed and so too, the net short position held by the Managed Money Fund sector of this market.

The Vietnam Government Statistical Department have with coffee export registrations for the month in hand, estimated that the countries coffee exports of mostly robusta coffees during the month of October shall be 36.5% lower than the same month last year, a total of only 1,083,333 bags. This dip in exports is however not in any way related to tight supply, but is rather related to the prevailing price resistance within the internal market in Vietnam, which has slowed trading activity out of this leading robusta coffee producer.

The same office has also revised down by 9.21% their figure for the countries coffee exports in September; to now record these exports at 1,059,167 bags. This lower figure contributes to the countries cumulative coffee exports for the just completed October 2012 to September 2013 coffee year to be 11.25% lower than the previous coffee year, at a total of 23.67 million bags. This lower performance is however not only related to the fact that the last crop was a lower crop, but has also been influenced to a degree, by the price resistance to the declining reference prices of the London robusta coffee market, which sees farmers holding carryover stocks in excess of 2.5 million bags of coffee, into the start this month of what is expected to be a significantly larger new crop.

Meanwhile with the new crop in Vietnam now in full swing and due to start peaking during the second half of November and into the first half of December, the internal market coffee stocks are starting to build substantially and one might question how long the present price resistance can prevail. This factor is casting something of a dark cloud over speculative sentiment within the London robusta coffee market, which continues to come under pressure and take the market back to three year and four month lows on Friday.

This decline in the value of the London robusta coffee market is not as dramatic yet as has been the dip in value for the New York arabica coffee market, which hit four and half year lows on Friday and with nothing in the way of supportive news presently forthcoming, to buoy sentiment within this market. With the acceptation perhaps of the stalling in the growth of the certified stocks of this exchange over the past couple of months, but this is seen to be more related to price resistance rather than tight supply and has not proved to be sufficient reason for a change in overall sentiment.

The Certified washed Arabica coffee stocks held against the New York market were seen to decline by 5,342 bags on Friday, to register these stocks at 2,727,399 bags. There was meanwhile a larger 6,140 bags increase in the number of bags that were pending grading for the exchange; to register these pending grading stocks at 13,390 bags.

The commodity markets have already discounted the expectations of the U.S. Federal Reserve Bank deciding to continue with the 80 billion dollar a month economic stimulus plan, when they meet in the coming couple of days. However there is some degree of support coming forth for sentiment, with the perception that selectively many of the European countries shall follow the U.S. with a modest recovery from the recent recession, for the coming year. The U.S. Oil, Natural Gas, Sugar, Cocoa, Copper, Corn, Gold and Palladium markets had a day of buoyancy on Friday, while the Brent Oil, Coffee, Cotton, Orange Juice, Wheat, Soybean, 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 0.06% higher, to see Index registered at 516.82. The day starts with a relatively steady but nevertheless still soft U.S. dollar trading at 1.617 to Sterling and 1.380 to the Euro, while Brent Crude is once again tending softer in early trade and is selling at $ 105.90 per barrel.

The New York market started the day on Friday with some early buoyancy and followed by a softer start for the London market, but with London recovering and seeing both markets head into the afternoon on a hesitantly positive track. This buoyancy was however short lived and as volumes started to pick up both markets lost their way and headed back into negative territory and with sell stops being triggered, to accentuate the losses. The London market continued to end the day on a soft note and with 95.7% of the earlier losses of the day intact, while the New York market ended the day on a similarly soft note and with 80% of the earlier losses of the day intact. This soft close does little to inspire confidence and one might not expect little better than a steady start for early trade today against the prices set on Friday, as follows:

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

NOV 1559 – 40 DEC 109.10 – 1.20

JAN 1538 – 44 MAR 112.30 – 1.25

MAR 1528 – 41 MAY 114.60 – 1.30

MAY 1536 – 40 JUL 116.90 – 1.30

JUL 1548 – 39 SEP 119.15 – 1.30

SEP 1557 – 38 DEC 122.15 – 1.30

NOV 1569 – 33 MAR 124.95 – 1.30

JAN 1585 – 23 MAY 126.60 – 1.30

MAR 1563 – 23 JUL 128.10 – 1.30

MAY 1563 – 23 SEP 129.60 – 1.30

Coffee Market Report

October 25 2013

The weather conditions in Brazil have so far been very friendly towards the setting of the flowerings for the next crop that shall start being harvested in the northern districts in April next year for the conilon robusta coffees and June for the central and southern districts, for the arabica coffees. There is however some concerns that with thin profit margins for many farmers selling their coffee stocks from the recently completed new crop, that they might not finance the usual levels of fertilizers to support the development of the new crop.

Despite this factor however, the forecasts are for the next years Brazil crop coming in at least at 55 million bags, while there remain some more positive forecasts for a new crop as high as 60 million bags. This new crop to be further supported by the prospects for a carryover stock of between 5 and 7 million bags of coffee stocks, which would indicate a 60 to possibly in excess of 65 million bags of coffee supply from Brazil, through to the follow on biennially bearing lower new crop in 2015.

The higher estimates for the combination of domestic and export demand for Brazil coffee indicate an annual consumption of 53 million bags and therefore, the prospects for this potential surplus coffee supply through to the third quarter of 2015 remains a medium term bearish factor for the international coffee markets. This situation is being further compounded by the lack of threatening weather factors for any of the other main coffee producing regions and aside from the factors of Roya or Leaf rust in Mexico and Central America, there really is nothing in the way of news to support coffee prices.

Meanwhile the lower altitude regions of Central America are already starting their new crop harvest and to be followed by the higher altitude regions by the second half of next month, to join the already in progress new main crop harvest of fine washed arabica coffees in Colombia. These coffees to be soon joined by the start of the new arabica coffee harvest in India and Indonesia, which shall support a steady supply of fresh arabica coffees for the consumer markets for the longer term and by nature along with good longer term Brazilian supply, to cap any chance for recovery for the soft New York market.

Meanwhile the New York market that has due to the recent shutdown of government departments lacked any statistical data related to the commitment of traders positions, is very much in the doldrums and with overall bearish sentiment in play, now trading at four and half month lows. The question is however is where is the potential bottom to the market as while the reference prices of the New York market might indicate loss making prices for many arabica coffee farmers, the funds are the masters of the market and they are never influenced by the factor of unprofitable production.

It is becoming a similar problem for the London robusta coffee market, which presently offers a 38.54 usc/Lb. or 34.94% price discount to the New York arabica coffee market and therefore remains encouraging for roaster support for the use of higher percentages of robusta coffees in their blends. As despite the perspective for rising robusta coffee demand, the general opinion that Vietnam has started bringing in a significantly larger new robusta coffee crop of in excess of 26 million bags and potentially followed next year by larger new robusta coffee crops from Indonesia, India and Uganda, is dampening speculative spirits within the London market.

The Certified washed Arabica coffee stocks held against the New York market were seen to decline by 5,875 bags yesterday, to register these stocks at 2,732,741 bags. There was meanwhile a larger 2,360 bags increase in the number of bags that were pending grading for the exchange; to register these pending grading stocks at 7,250 bags.

The commodity markets are hesitant for the present, with the concerns that China might tighten up on credit, in order to counter the prospects of inflation. While soft economic forecasts for the leading consume economies in North America and Europe impact upon the prospects for a recovery in demand, well into the coming year. The U.S. Oil, Orange Juice, Gold and Silver markets nevertheless showed some buoyancy in yesterday’s trade, while the Natural Gas, Coffee, Platinum and Palladium markets were near to steady and the Brent Oil, Sugar, Cocoa, Cotton, Copper, Wheat, Corn and Soybean markets had a softer days trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.03% lower, to see Index registered at 516.51. The day starts with a relatively steady but nevertheless soft U.S. dollar trading at 1.621 to Sterling and 1.382 to the Euro, while Brent Crude is once again tending softer in early trade and is selling at $ 106.40 per barrel.

The New York market started the day yesterday with some hesitant buoyancy in thin trade and followed by similar buoyancy for the London market, with both markets heading into the afternoons trade on a modestly positive track. The New York market however once the Americans entered the field of play started to come under some pressure, with producer price fixation hedge selling starting to impact negatively upon the market and finally being joined by pressure upon the London market, which also drifted back into negative territory. The London market continued to end the day on a softer note, but having recovered 83.3% of the earlier losses by the close and followed by a similar marginally softer close for the New York market, which had recovered 76.2% of the earlier losses by the close. This near to steady close for both the markets might be supportive for some roaster price fixation buying ahead of the weekend and one might expect to see a degree of buoyancy coming into play for early trade today against the prices set yesterday, as follows:

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

NOV 1599 – 14 DEC 110.30 – 0.25

JAN 1582 – 4 MAR 113.55 – 0.20

MAR 1569 – 1 MAY 115.90 – 0.15

MAY 1576 – 1 JUL 118.20 – 0.15

JUL 1587 – 2 SEP 120.45 – 0.10

SEP 1595 – 5 DEC 123.45 – 0.15

NOV 1602 – 6 MAR 126.25 – 0.15

JAN 1608 – 6 MAY 127.90 – 0.15

MAR 1586 – 6 JUL 129.40 – 0.15

MAY 1586 – 6 SEP 130.90 – 0.15

Coffee Market Report

October 24 2013

The trade in arabica coffees is looking to be near to stalled and is proving to be very much a waiting game, with the relatively well stocked consumer roasters stepping back and looking to the declining reference prices of the New York market that has hit four and half year lows, as they await some sign of the market hitting a low, while producers are largely showing price resistance and holding out for improved positive price differentials against the market for new business. This is particularly the case for the Mexicans and Central Americans, who are reluctant to follow the market for forward sales of their pending new crop coffees but in the meantime, the Colombians are stepping in and doing steady business.

There is in the meantime a little more activity in terms of the robusta coffee sales within the consumer markets, as roasters have been tending to be more hand to mouth in their robusta purchases and therefore, are supportive of steady purchases. There is however with the prospects of surging volumes of new crop Vietnam coffees soon to come to the market, some degree of price resistance on the part of the consumer markets and the volumes of trade remain for the time of the year, relatively thin.

The consumer roasters for the present hold all of the cards as with the perspective of a large new crop that shall come in over three months in Vietnam but only be shipped over twelve months and while farmers shall lack the same degree of profits from their recent and coming sales to finance the carry stocks, the roasters know that it is the producers who shall finally have to bite the bullet and accept the reality of the softer market prices. This is to a degree a similar situation in terms of the Mexican and Central American washed arabica coffee producers who shall harvest a new crop over five months and export over twelve and with this in mind, the consumer market roasters can afford to play the waiting game.

Meanwhile the markets are devoid of any supportive news and in terms of the producer bloc the fact is no news is bad news, while the watch the lacklustre New York market drifting below the recent trading range and the London market struggling to remain steady. The situation becoming further disappointing for the producers as the weather conditions in Brazil so far, would seemingly confirm that the next 2014 crop shall be a biennially bearing larger new crop that shall be 4 to 5 million bags larger than the recently completed crop of close to 52 million bags and shall support surplus overall world coffee supply into 2015.

The Certified washed Arabica coffee stocks held against the New York market were seen to decline by 4,361 bags yesterday, to register these stocks at 2,738,616 bags. There was meanwhile no change to the very modest number of bags that were pending grading for the exchange; to register these pending grading stocks at 4,890 bags.

Mexico and the Central Americans contribute 1,734,861 bags or a 63.35% share of these stocks and followed by Peru with 583,603 bags or a 21.31% share of the stocks, to maintain their dominance of these mostly aged and discounted coffee stocks. While so far and despite the fears of the traditional producers of coffees tenderable to these stocks, the Brazilian washed arabica coffees that became tenderable in March this year, still only account for 284 bags within these stocks. The balance of these certified stocks are made up by 305,029 African coffees, 109,311 Indian coffees and a very modest 5,528 bags Colombian coffee. While the European based warehouses for the exchange in Antwerp, Barcelona, Bremen and Hamburg hold 2,093,399 bags or a dominant 76.44% of these stocks, as against the modest numbers being held within the U.S.A. based warehouses of the exchange.

The commodity markets seemingly shrugged off the positive news of improved economic figures from China yesterday and with the news of rising Oil inventories in the U.S.A. coming in to pressure the influential Oil markets lower, to dampen spirits within both the U.S.A. and Brent markets yesterday. The Natural Gas, London robusta Coffee, Orange Juice, Wheat, Corn and Silver markets showed some buoyancy for the day, while the Oil, Sugar, New York arabica Coffee, Cocoa, Cotton, Copper, Gold, Platinum and Palladium markets had a softer days trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.57% lower, to see Index registered at 516.66. The day starts with a softer U.S. dollar trading at 1.621 to Sterling and 1.381 to the Euro, while Brent Crude is once again tending softer in early trade and is selling at $ 107.65 per barrel.

The New York market started the day yesterday on a near to steady note and followed by a similar stance being taken within the London market, with both markets showing some degree of buoyancy as the morning progressed and into early afternoon trade. The New York market however and with the negative influences of the macro commodity index coming into play faltered and dipped back into negative territory and started on a steady slide backwards, while the London market maintained its steady stance and took a sideways track within a thin trading range. The London market continued to end the day with modest buoyancy but with only 26.9% of the earlier gains of the day intact, while the New York market ended the day on as soft note and near to the lows of the day, with 96.6% of the losses of the losses of the day intact. This dismal close for the New York market is perhaps a negative factor for sentiment and one might expect to see little better than a near to steady start for both markets for early trade today against the prices set yesterday, as follows:

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

NOV 1613 + 7 DEC 110.55 – 1.40

JAN 1586 + 7 MAR 113.75 – 1.35

MAR 1570 + 3 MAY 116.05 – 1.30

MAY 1577 + 1 JUL 118.35 – 1.25

JUL 1589 + 1 SEP 120.55 – 1.30

SEP 1600 unch DEC 123.60 – 1.30

NOV 1608 unch MAR 126.40 – 1.30

JAN 1614 unch MAY 128.05 – 1.30

MAR 1592 unch JUL 129.55 – 1.30

MAY 1592 unch SEP 131.05 – 1.25

Coffee Market Report

October 23 2013

The slower export volumes from Mexico, Central America and Peru and despite surging volumes of exports from Colombia has seen the combined exports from the fine washed arabica coffee producer bloc of Mexico, Central America, Dominican Republic, Colombia and Peru for the month of September registered 9.9% lower than the same month last year, at a total of 1,998,000 bags. This does not however detract from the fact that the cumulative exports from this important producer bloc for the October 2012 to September 2013 coffee year were 4.47% higher than the previous 2011/2012 coffee year, at a total of 29.36 million bags.

There are however severe financial problems for this important quality producer bloc at present, as with the reference prices of the related New York market having dipped to four year lows and these in terms of a relatively weak U.S. dollar, there are many farmers who shall struggle to break even with their coffee sales. This being a particular problem for the Mexicans and Central Americans who are having to finance the battle against Roya or Leaf Rust and with the combination of often lower yields and low prices, shall find that their unit costs of production will have risen significantly.

Thus one might fear the longer term effects of this situation for Mexico and Central America, which has the potential to impact negatively upon farmer’s confidence in growing coffee and can in time influence many traditional coffee farmers to start moving into alternative crops, which shall impact negatively upon production levels. This to finally have an impact upon prices which would reward those farmers that have stuck with coffee, but unlikely to quickly bring those that have left the industry, to return.

This would make one speculate that the longer term perspective is for fine washed arabica coffee production levels and despite potential growth for the subsidised Colombian coffee farming industry, is for flat volumes for the foreseeable future. With the growth in world coffee supply due to be related the natural arabica and robusta coffees, which do anyhow fuel most of the new market coffee demand. While even the traditional markets for the fine washed arabica coffees, are steadily moving into higher percentages of natural arabica and robusta coffees, within their blends and seemingly with no resistance from consumers, for this change in blend profiles.

These are however also not easy times for the natural arabica and robusta farmers worldwide, as the softer nature of the New York market does also impact upon the farm gate prices for the former while the soft nature of the reference prices of the London market that is trading at three year lows, is starting to make life difficult for the robusta coffee farmers. This is particularly noticeable in Vietnam where with the larger new robusta coffee crop now in harvest, there is still evidence of price resistance within the internal market, as farmers are finding that the gap between production costs and market prices has severely narrowed, as has been the case for the recently completed new natural arabica coffee crop in Brazil.

Thus likewise in terms of the longer term supply of natural arabica and robusta coffees, one might also speculate that there shall be a slowing in the growth in production of even these coffees, which might start to impact upon the ration of supply and demand by 2015. However on the short term and with surplus supply on the cards for these coffees until at least the end of next year and with unforeseen climatic issues coming forth to change this scenario, there would seem to be little in the way of short term relief for coffee farmers in general.

The Certified washed Arabica coffee stocks held against the New York market were seen to decline by 4,890 bags yesterday, to register these stocks at 2,742,977 bags. There was meanwhile no change to the very modest number of bags that were pending grading for the exchange; to register these pending grading stocks at 4,890 bags.

The commodity markets selectively reacted to the further softening of the U.S. dollar that reacted to the news of lower than expected job growth data from the U.S.A., which seemingly insured that there would in fact be no chance of tapering of the present U.S. Federal Reserve bond buying market stimulus program. This was aside from some added support for the Oil markets, as the Saudi government is reacting in a somewhat unfriendly manner towards the U.S.A. and the West in general, in reaction to inactivity over the crisis in Syria and to some degree, the signs for a friendlier attitude towards Iran. The Brant Oil, Sugar, Cocoa, Copper, Wheat, Soybean, Gold, Silver and Platinum markets had a day of buoyancy and the London robusta Coffee market was near to steady, while the U.S. Oil, Natural Gas, New York arabica Coffee, Cotton, Orange Juice, Corn and Palladium markets had a softer days trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.16% higher, to see Index registered at 519.64. The day starts with a softer U.S. dollar trading at 1.621 to Sterling and 1.377 to the Euro, while Brent Crude is tending softer in early trade and is selling at $ 109.35 per barrel.

The New York market started the day yesterday with some early corrective buoyancy and followed by a similar start for the London market, but with some profit taking and price fixation pressure on both markets, forcing a dip back into negative territory, ahead of a brief recovery that could not be sustained within the New York market and while the London market returned to show buoyancy for most of the afternoon. The London market however and with the New York market remaining on a softer track lost its gains at the end of the day and ended the day on a hesitantly near to steady note, while the New York market continued to end the day on a soft note and with 88% of the losses of the day intact. This soft close for the New York market is not encouraging but with price resistance being shown by producers to limit the volumes of price fixation hedge selling into the markets and along with the weak nature of the U.S. dollar, one might expect to see a degree of hesitant buoyancy for early trade today against the prices set yesterday, as follows:

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

NOV 1606 + 4 DEC 111.95 – 0.75

JAN 1579 – 6 MAR 115.10 – 0.70

MAR 1567 – 4 MAY 117.35 – 0.70

MAY 1576 – 4 JUL 119.60 – 0.70

JUL 1588 – 3 SEP 121.85 – 0.70

SEP 1600 – 1 DEC 124.90 – 0.65

NOV 1608 – 4 MAR 127.70 – 0.65

JAN 1614 – 4 MAY 129.35 – 0.65

MAR 1592 – 4 JUL 130.85 – 0.65

MAY 1592 – 4 SEP 132.10 – 0.65

Coffee Market Report

October 22 2013

The latest Commitment of Traders report from the London robusta coffee market has seen the shorter term Speculative sector of this market reduce their net short sold position within this market by 89.69% in the week of trade leading up to Tuesday 15th. October, to register a net short sold position of 484 Lots, on the day. This net short position which is the equivalent of a negligible 80,667 bags has however most likely, been further extended over the following days of overall negative trade.

The Coffee authorities in Mexico have reported that the country’s coffee exports for the month of September wer