Coffee Market Report
| The Vietnam Customs authorities have reported that the countries coffee exports of mostly robusta coffees for the month of January proved to be higher than both official and trade forecasts, with the exports for the month having been 23.58% higher than the same month last year, at a total of 2.83 million bags. This increase in January export volumes has contributed to the countries coffee exports for the first four months of the present October 2015 to September 2016 coffee year to be 1.25 million bags or 17.37% higher than the same period in the previous coffee year, at a total of 8.46 million bags.
This surge in Vietnam coffee exports is however not unexpected, as it comes to the fore with the lessening of competition in robusta coffee supply from both Indonesia and Brazil, where with lower crops to the fore and declining stocks, their internal market price resistance has been inflating prices relative to the reference prices of the London market for Indonesian robusta and Brazil conilon robusta coffees. This has allowed Vietnam and despite their internal market price resistance and the resulting positive export differentials, to attract increased consumer market support. In the meantime and with the reference prices of the relatively soft London market impacting, the internal market in Vietnam maintains its price resistance and there is a continuous struggle on the part of the countries exporters to cover at affordable price levels their short sold forward contracts, which with a lack of strong competition from other robusta coffee origins, is a scenario likely to continue for the foreseeable future. This is a factor that is likewise assisting to firm up the prices relative to the price dictates of the London market that farmers can demand from the mills and exporters within the internal markets of robusta coffee producers in general. The weather conditions in Brazil remain perfect for the main arabica producing districts of the country and likewise the ground water retention levels are high and therefore, the prospects for a much larger new arabica crop for later in the year are very much confirmed. This is not however the case for the south east Brazil conilon robusta coffee districts in Espirito Santo and South Bahia, where the mostly dry and hot conditions continue and the forecasts for a smaller new conilon robusta crop are very much sealed. Meanwhile and with arabica coffee farmers in Brazil already well sold for their present coffee stocks and with good percentages of new crop forward sales in hand, there is once again evidence of strong price resistance developing within the internal market. This price resistance is mirrored by the conilon robusta coffee farmers who with the prospects of a lower new crop to the fore, are pressuring higher the prices for their coffees with mostly go to the countries domestic coffee industry. The May on May contracts arbitrage between the London and New York markets broadened yesterday, to register this at 51.33 usc/Lb., while this equates to a 44.21% 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 unchanged yesterday; to register these stocks at 1,565,228 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. The commodity markets had a mixed and somewhat lacklustre day of trade yesterday, with the overall macro commodity index taking a modestly softer track for the day. The Oil, Cocoa, Cotton, Gold and Silver markets had a day of buoyancy and the Copper market was near to steady, while the Natural Gas, Sugar, Coffee, Orange Juice, Wheat, Corn and Soybean 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 this Index registered at 369.25. The day starts with the U.S. Dollar steady in early trade and trading at 1.433 to Sterling and 1.112 to the Euro, while North Sea Oil is near to steady in early trade and is selling at 32.90 per barrel. The New York and London markets both started the day on a near to steady note and taking an early boost to north of par, but this was not sustained and the markets took a modestly softer track for the afternoon trade which remained the direction taken for the rest of the day’s trade. The London market ended the day on a soft note and with 73.7% of the earlier losses of the day intact, while the New York market ended the day on a softer note and with 41.7% of the earlier losses of the day intact. This softer close does little to inspire and despite a relatively weak Brazil Real that is now trading at 4.02 to the U.S. dollar, one cannot expect that there shall be much to inspire the market players and that the markets are due for little better than a hesitantly near to steady start for early trade today against the prices set yesterday, as follows: LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb. MAR 1402 – 12 MAR 114.15 – 0.40 |
