Coffee Market Report
| The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 33,981 bags or 0.58% during the month of February, to register these stocks at 5,869,288 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 February 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 now being 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 are however some concerns coming to the fore in terms of longer term coffee supply in that the forecasted larger new crop from Brazil is now seen to be potentially closer to 55 million bags, rather than some of more ambitious numbers that had been forecasted late last year and early this year. This crop would nevertheless forward a small surplus arabica coffee supply out of Brazil, but with fears of a dip in the growing production out of Colombia later in the year and as a result of the El Nino inspired dry weather that has affected flowering for the forthcoming new Colombian Mitaca crop, along with the potential for a similarly El Nino inspired lower new Indonesia robusta coffee crop, there are concerns that global coffee supply shall only forward a very modest surplus supply for the new October 2016 to September 2017 coffee year. A modest surplus is not a significantly bullish sign for the markets, but with the past two years of deficit coffee supply that came with the smaller 2014 and 2015 Brazil crops has resulted in a steady draw down of coffee stocks and with the need to rebuild stocks in Brazil, it can be expected that global coffee supply shall be manipulated by producers to become relatively tight for the foreseeable future. This scenario and with the new threat of the possibility for a new La Nina phenomenon to develop later in the year and its threat of impacting upon production for next year for the Pacific Rim coffee producing countries and further afield for dry weather for South East Brazil, has the potential to start to buoy sentiment for the presently relatively soft coffee markets as the year progresses. The May on May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 61.15 usc/Lb., while this equates to a 48.65% 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 7,633 bags yesterday; to register these stocks at 1,454,796 bags. There was meanwhile a smaller in volume 3,425 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 26,790 bags. The Certified Robusta coffee stocks held against the London market are seen to have fallen by 312,667 bags or 9.49% over the first two and half months of this year, to see these stocks registered at 2,980,333 bags on Monday 14th. March. These stocks with the prevailing price resistance being shown within the internal markets of the main robusta coffee producers and by nature dictating positive export differentials for coffee exports that do not encourage tendering of coffee to the exchange, offer good value to the consumer roasters and are expected to continue to decline in the coming months. The commodity markets tended to run out of steam and took something of a softer track in trade yesterday, with the overall macro commodity index tending softer for the day. The Natural Gas and Orange Juice markets nevertheless had a day of buoyancy and the Cotton market was near to steady, while the Oil, Sugar, Cocoa, Coffee, Copper, Wheat, Corn, Soybean, 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 0.41% lower; to see this Index registered at 385.09. The day starts with the U.S. Dollar showing early buoyancy and trading at 1.413 to Sterling and 1.095 to the Euro, while North Sea Oil is steady in early trade and is selling at 38.00 per barrel. The London and New York markets had a relatively steady start to trade yesterday and trading either side of par into the afternoon trade and with a positive stance being taken within both markets to see the New York market touch its highest level since the 4th. January this year, but with the negative influences of the softening macro commodity index coming into play both markets ran out of steam as the afternoon progressed and settled back to trade below par for the rest of the day. The London market continued to end the day on a softer note and with 65.2% of the earlier losses of the day intact, while the New York market ended the day on a likewise softer note and with 81.1% of the earlier losses of the day intact. This close does little to inspire and with the U.S. dollar showing some early muscle and resulting in the Brazil Real falling back to trade at 3.76 to the dollar, one would expect to see little better than a 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 1392 – 19 MAR 124.10 – 1.50 |
