Coffee Market Report
| The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 907 bags or 0.016% during the month of January, to register these stocks at 5,835,306 bags at the end of the month. These stocks do not of course include the in transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is fed by these stocks of 530,000 bags per week, would conservatively have been at least 1.1 million bags.
Therefore if one is to consider the additional unreported stocks and look to end January stocks in North America of at the very least 6.95 million bags, it would have equated to something in the order of 13 weeks of roasting activity and still a safe reserve, in terms of the potential for a steady flow of new crop coffees from Brazil and Colombia that are already coming to the market and soon followed, by the new crop coffees from Mexico, Central America, Vietnam and India. Crops that in terms of short term volume availability and competition to find a home, shall most probably tend to influence consumer industry buyers to maintain their slow and steady selective buying activity. There remains however a strong degree of price resistance within many producer countries, as farmers and cooperatives look to add value against the soft reference prices of the terminal markets. This price resistance is particularly noticeable in terms of the washed arabica coffees from producer countries such as Ethiopia, Kenya, Indonesia, Guatemala, Costa Rica and Panama, but with all but the origin brand name consumer roasters tending to turn to alternative origins and washed arabica coffees, to fulfil their fine quality arabica coffee requirements. This is creating a wide range of prices for washed arabica coffees, with price differences that far exceed the differences in quality but at the same time, forcing some changes to the recipes for many of the main stream consumer market blends that have to fight for market share within the price sensitive consumer markets. With an eye upon the evidence of the El Nino influenced drought over Indonesia and the resulting sharply lower robusta coffee production due for this year and thus less competition coming from Indonesia within the consumer markets, the internal market within Vietnam continues to reflect price resistance. Thus so far this year the Vietnam robusta coffee exports continue to flow at price levels well above tenderable parity with the London robusta coffee market and by nature of their firmer prices relative to this market, to influence positive differentials from the robusta coffee producers in general. A report from the executive of the Uganda Coffee Develop Authority has indicated that due to the steady expansion of land under coffee within the country and with many of these new coffee trees now coming into maturity, that the present October 2015 to September 2016 coffee year might see coffee production increase by as much as 27% over that of the previous coffee year. This report by nature would indicate that following the previous 2014/2015 coffee years export performance of 2,722,636 bags of robusta coffees and 733,216 bags of arabica coffees and therefore a total of 3,455,852 bags, that there is a potential for exports for the present coffee year to exceed 4 million bags. It is however early days within the present coffee year, but with the Uganda coffee exports for the first three months of this new coffee year having been recorded at being 20.92% over the same period in the previous coffee year, there would appear to be reason to believe in rising production within Uganda, even if it is not as much as the latest and somewhat ambitious forecast. The May on May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 51.59 usc/Lb., while this equates to a 44.09% 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 550 bags yesterday; to register these stocks at 1,568,394 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 8,005 bags. Many of the commodity markets came under some pressure from the renewed muscle of the U.S. dollar yesterday, as did the Oil market in particular lose some of their lustre with the news that the meeting between Saudi Arabia, Russia, Venezuela and Qatar to find a way to limit production resulted in no significant decision on the matter. Thus the overall macro commodity index finally slipped back a little for the day, to dampen late in the day trading spirits. The Sugar, London robusta Coffee, Cotton, Copper, Orange Juice, Wheat, Corn and Soybean markets nevertheless had a day of buoyancy, while the Oil, Natural Gas, Cocoa, New York arabica Coffee, Gold and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.14% lower; to see this Index registered at 367.04. The day starts with the U.S. Dollar tending a little softer in early trade and trading at 1.430 to Sterling and 1.116 to the Euro, while North Sea Oil is showing buoyancy in early trade and is selling at 31.35 per barrel. The New York and London markets both started the day with buoyancy yesterday and maintained their positive track into the afternoon trade, but with volumes building up and with the added negative to sentiment influence of the weakening Brazil real that is now trading at 4.065 to the dollar, the New York market that had experienced early gains of 2 usc/Lb. came under pressure and headed back into negative territory. This was followed by a similar move by the London market, which likewise moved back into negative territory before recovering into modest positive territory, while the New York market remained south of par for the rest of the day. The London market ended the day on a positive note and with 64.3% of the gains of the day intact, while the New York market ended the day on a softer note and with 33.3% of the earlier losses of the day intact. The markets did not however in terms of this close indicate much in the way of direction and one might expect to see a hesitantly steady start for early trade today against the prices set yesterday, as follows: LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb. MAR 1419 + 9 MAR 114.90 – 0.65 |
