Coffee Market Report
| The U.S.A. Governments National Weather Service’s Climate Prediction Centre which has forecasted the prevailing El Nino phenomenon that is presently on the wane and should end early in the second quarter of this year is now most likely to be followed later this year by a La Nina phenomenon within the Pacific Ocean, which will bring with it cooling water conditions. This would be the first La Nina for four years and is remembered well in terms of coffee production, for its resulting excessive rains and its negative impact upon the crops in Colombia and Indonesia.
Presently the excessive heat and dry conditions within parts of the coffee districts of Colombia and Indonesia that have come with the El Nino over the past four months and are forecasted to reduce the potential of the mid-year Mitaca crop in Colombia and the new robusta coffee harvest in Sumatra, have not had any impact upon sentiment within the coffee terminal markets. These markets for the present being more focused on the record carryover stocks in Vietnam and the larger new Vietnam robusta coffee crop and the prospects for a significantly larger new arabica coffee crop for Brazil during the middle of this year, which create something of a negative cloud over the London and New York coffee markets, respectively. But one might foresee that the markets at present are somewhat reflecting the quiet before the storm and should the forecasts for a new La Nina prove to be correct and start to impact by the last quarter of the year, one might see a sharp change in sentiment and a corrective stance being taken by the speculative and managed money fund sectors of the coffee markets. There are however many months to the fore for the reality if any of this La Nina to come to the markets and for the present they are attracting little in the way of speculative or fund support and with the physical coffee trade lacklustre and slow, the markets are struggling along at the low side of this year’s soft trading range. The May on May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 51.13 usc/Lb., while this equates to a 44.46% 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 14,647 bags yesterday; to register these stocks at 1,571,106 bags. There was meanwhile a smaller in volume 2,953 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 9,488 bags. The steady erosion of these certified stocks held against the New York market would historically have supported some degree of speculative confidence within the market, but the reality that the decline in the stocks is related mostly to producer price resistance that is inflating asking price export differentials over tenderable parity than to any shortage of supply, is negating the influence of the falling stocks for the present. Thus the issue of the relatively modest certified stocks of both the New York and London markets is proving to be a side-lined factor for the coffee markets for the present. The question remains however that with a new and overall larger Central American new crop now passing peak harvest and significant stocks of robusta coffee within Vietnam, is there a possibility that the holders of some of these stocks might start to lose heart and start chasing buyers during the second half of the year and by nature, bringing to the markets tenderable parity prices and a contribution to the recovery of the certified stocks of both markets. The commodity markets with the exception of the currency hedge precious metals markets were on a back foot yesterday, as were the equity markets. Thus the overall macro commodity index remained on the back foot for the day, to do little to inspire the markets in general. The Soybean, Gold and Silver markets had a day of buoyancy and the Corn market was steady, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice and Wheat markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.16% lower; to see this Index registered at 363.09. The day starts with the U.S. Dollar steady in early trade and trading at 1.446 to Sterling and 1.130 to the Euro, while North Sea Oil is showing some buoyancy in early trade and is selling at 30.40 per barrel. The London and New York markets started the day yesterday with modest buoyancy, but with the London market soon slipping back into modest negative territory. The afternoon brought with it increasing volumes of trade and with both markets moving lower in negative territory and with the London market unable to sustain a brief correction towards par, to see both markets take a negative track through to the end of the day’s trade. The London market ended the day on a soft note and with 85.7% of the earlier losses of the day intact, while the New York market likewise ended the day on a negative note and with 80.4% of the earlier losses of the day intact. This close contributes to a negative stance for the market charts but one might suspect that there shall be a degree of uncertainty and caution and that the markets might well be due for a hesitantly steady to perhaps even corrective steady to buoyant start for early trade today against the prices set yesterday, as follows: LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb. MAR 1382 – 10 MAR 113.00 – 1.75 |
