Coffee Market Report
| With the new Brazil crop coming into maturity and the conilon robusta coffees starting to be harvested while the new arabica coffee harvest is still a couple of months to the fore in terms of the start of the harvest, the new crop forecasts continue to be reported. These forecasts are however very mixed in their numbers and with the traditionally conservative official forecasts to the side, vary between 52 million and 60 million bags.
The latest forecast was the one by the trade house Mercon yesterday, which has pegged this new crop at a figure of 58.05 million bags. This figure related to forecasts for 12.3 million bags of conilon robusta coffees and 45.75 million bags of arabica coffees. With the conilon robusta coffee forecast very much in line with many other forecasts, but with the arabica coffee forecast at the high end of the range of forecasts. There is no doubt that with the good rains that have been experienced over the main arabica coffee districts of Brazil over the past four months and the resulting good ground water retention levels for the majority of the arabica coffee farms, that the overall size of the new crop arabica coffee beans shall be larger for this new crop and by nature, so too the overall weight of the new arabica coffee crop. Thus with this factor that has farmers speculating that at least 30% of the new arabica coffee crop shall be beans that are above screen 17 and along with the increased number of cherries in general, does ensure that there shall be a good Brazil arabica coffee crop for this year. But one might perhaps in terms of the large variance of forecasts for the new Brazil crop need to be cautious and bank rather for the time being on an overall new crop of approximately 55 million bags, which would be made up from approximately 12 million bags of conilon robusta coffees and 43 million bags of arabica coffees. With most of the smaller this year 12 million bags of conilon robusta coffees destined for the Brazil domestic market and approximately 32 million bags of the arabica coffees available for export to the consumer markets, which shall be more than sufficient to satisfy dedicated consumer market demand for Brazil arabica coffees for the coming October 2016 to September 2017 coffee year. This is however not a level of supply to contribute much in the way of surplus arabica coffees towards the rebuilding of the now much depleted Brazil coffee stocks and it might suggest that the post Brazil winter weather conditions over the last quarter of this year shall be a critical factor, as unless the Brazil arabica coffee districts are in receipt of a normal summer rain season, there shall be problems for longer term Brazil coffee supply from the next 2017 crop. Thus one cannot really see the larger new 2016 Brazil crop to be a longer term bearish factor for the coffee markets, until early in the coming year and by when there shall be some clarity as to the prospects for the next years Brazil crop. The May on May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 62.38 usc/Lb., while this equates to a 47.58% 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 5,225 bags yesterday; to register these stocks at 1,434,541 bags. There was meanwhile a smaller in volume 2,820 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 38,879 bags. The commodity markets with the U.S. dollar finding some renewed muscle came under pressure yesterday, to see the overall macro commodity index taking a softer track for the day. The Sugar and Orange Juice markets nevertheless had a day of buoyancy and the London robusta Coffee and Cotton markets were steady for the day, while the Oil, Natural Gas, Cocoa, New York arabica 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 1.61% lower; to see this Index registered at 388.35. The day starts with a steady U.S. Dollar showing a degree of buoyancy and trading at 1.410 to Sterling and 1.117 to the Euro, while North Sea Oil is near to steady in early trade and is selling at 38.25 per barrel. The London and New York markets opened the day yesterday with some degree of follow through buoyancy, but this was shore lived and both markets soon came under selling pressure and to take a softer track into the afternoon trade. The well discounted London market did however soon recover and showed a degree of buoyancy as the afternoon progressed, while the New York market remained under pressure and extended its losses. The relative softness of the New York market that was somewhat under the influence of the negative nature of the overall macro commodity index did little to assist the sentiment within the London market which struggled to stay above par, but with the New York market bouncing off the lows and posting a partial recovery for the day. The London market ended the day on a steady note and having liquidated 95% of the earlier in the day’s gains, while the New York market ended the day on a soft note and with 66.4% of the earlier losses of the day intact. This close and with the New York charts looking a little negative is unlikely to inspire much better than a hesitant steady start for early trade today against the prices set yesterday, as follows: LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb. MAR 1480 + 1 |
