Coffee Market Report

Coffee Market Report

October 14 2014

The respected Brazilian meteorologists Somar have reported yesterday that not only shall there be little chance of rain for the main central and southern arabica coffee districts for this week, but the temperatures are due to be very hot and generally well in excess of 30 Celsius, which shall be damaging for the modest early flowerings that occurred with some scattered showers a couple of weeks ago. The report does however foresee that the prevailing dry air mass over South Eastern Brazil breaks up during the second half of next week, that it shall allow cold fronts to enter the country from the south and bring with them, some widespread rains.

Meanwhile the U.S.A. based meteorologists Commodity Weather Group have forecasted above average rainfall to come to South Eastern Brazil in the next 11 to 15 days, while they also forecast that the mild El Nino phenomenon could possibly soon start to occur within the Pacific Ocean that would bring with it above average rainfall for South Eastern Brazil. Thus for the present there would appear to be a general consensus that the delayed start to the Brazil spring and summer rain season shall eventually develop into a normal rain season for the rest of the summer, but the question remains how much damage this delay might have already caused for the prospects of next year’s Brazil arabica coffee crop.

There is no doubt that some damage has been incurred but there is also the factor to consider that stressed coffee trees do tend to flower better, once the rains occur. Therefore so long as the damage from the now low ground water retention levels and the coming days of hot weather is not too extreme, there is the possibility of a nevertheless good flowering to come. This so long as the forecasts for fair follow on rains, might well limit the losses to the new crop potential and might likewise bring with these flowerings and rains some better new arabica coffee crop forecasts. Albeit that there is no doubt that the new Brazil arabica coffee crop for 2015 is still likely to be a deficit crop and with this year’s relatively modest crop, shall result in the liquidation of most of the large carry over arabica coffee stocks from last year, to fuel near to steady Brazil arabica coffee supply through to the follow on 2016 crop.

The International Coffee Organisation have reported that the Roya or Leaf Rust affected coffee production from Mexico and Central America for the just completed October 2013 to September 2014 coffee year was 13.4% lower than the previous coffee year, at a total of 16.02 million bags. This volume that is marginally more modest that private trade and industry reports that talk in terms of 16.3 to 16.5 million bags, they say has contributed to global arabica coffee production for the coffee year having been close to 4% lower than the previous coffee year, at a total of 85.3 million bags.

Mexico and Central America are however seemingly coming out of their Roya or Leaf Rust problems and with the combination of improved prices and state subsidies, their farmers are getting the infestation under control and with a much improve new crop starting to be harvested. But the agricultural ministry in Peru is not showing as much confidence in their famers efforts to control Roya and with having caused a 22.4% dip in production for this year’s just completed new crop, which they have pegged at approximately 3.45 million bags and even lower than the private trade and industry reports of around 3.8 million bags. One might hope thought that with the Agricultural Ministry having declared a state of emergency for 11 of the country’s coffee districts and presumably due to provide longer term assistance and the assistance of more profitable higher prices, that Peru shall follow the developments in Mexico and Central America towards improve controls and some degree of recovery for next year’s April to September new crop harvest. Thus adding to growing washed arabica coffee supply to the consumer markets, which is already coming with the improved yields from Mexico, Central America and Colombia.

The arbitrage between the markets narrowed yesterday to register this at 118.81 usc/Lb., while this equates to a relatively attractive 54.47% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 250 bags yesterday, to register these stocks at 2,389,497 bags. There was meanwhile a larger in volume 2,770 bags increase to the number of bags pending grading for the exchange; to register these pending grading stocks at 10,725 bags.

The commodity markets were mixed yesterday and despite the softening nature of the oil markets and the buoyancy of the U.S. dollar, the overall macro commodity index was relatively steady. Cocoa, London robusta Coffee, Cotton, Copper, Wheat, Corn, Soybean, Gold, Silver and Platinum markets showed buoyancy and the Sugar market was steady, while the Oil, Natural Gas, New York arabica Coffee and Orange Juice markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.28% higher; to see this Index registered at 492.69. The day starts with the U.S. Dollar steady and trading at 1.608 to Sterling and 1.272 to the Euro, while North Sea Oil is relatively steady in early trade and is selling at $ 87.20 per barrel.

The London and New York markets started the day yesterday showing early buoyancy and carried this through to the afternoon, but with the New York market starting to come under pressure during the afternoon and heading back into negative territory, while the London market maintained its muscle. This remained the track for the rest of the day for both markets and with the London market continuing to end the day on a positive note and with 65% of the earlier in the day’s gains intact, while the New York market ended the day on a softer note and with 82.1% of the earlier in the day’s losses intact. This mixed close provides little in the way of guidance, but one might expect that with the fundamental of continued dry weather in Brazil that there might well be a degree of corrective buoyancy for the New York market and a near to steady start for the London market for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

NOV 2169 + 10 DEC 218.10 – 2.30

JAN 2189 + 13 MAR 222.00 – 2.20

MAR 2199 + 13 MAY 223.80 – 2.25

MAY 2210 + 13 JUL 225.05 – 2.30

JUL 2221 + 13 SEP 225.40 – 2.45

SEP 2230 + 13 DEC 225.20 – 2.40

NOV 2227 + 13 MAR 224.40 – 2.55

JAN 2217 + 13 MAY 223.65 – 2.70

MAR 2217 + 13 JUL 222.75 – 2.85

MAY 2210 + 13 SEP 221.90 – 3.25

Coffee Market Report

October 13 2014

The latest Commitment of Traders report from the washed arabica coffee New York market has seen the shorter term in nature Managed Money Fund sector of the market increase their net long position within this market by 8.9% in the week of trade leading up to Tuesday 7th. October; to register a net long position of 41,572 Lots on the day. Over the same period the longer term in nature and steadier Index Fund sector of this market decreased their net long position within the market by 2.76%, to register a net long on the day of 43,715 Lots.

During this same week of trade the Non Commercial Speculative sector of the market increased their net long position within the market by 18.49, to register a net long of 32,236 lots on the day. This net long position that is the equivalent of 9,138,763 bags has most likely been further increased over the period of overall more positive trade that has since followed and likewise, the net long position of the Managed Money Funds.

The question is that with the Managed Money Fund and the Non Commercial Speculative sectors of the New York market already holding substantial net long positions and most likely having extended these since the reports as at Tuesday last week, how much more appetite they might have to further extend these positions. It is likely that some players might be experiencing a degree of exhaustion, but with commodity markets in general relatively soft and the equity markets having taken a dip, there might still be some money looking for a more exciting investment and so long as the rains are not in play in Brazil, the market might still have some degree of upside traction.

Adding to the almost daily bouts of market supportive news emanating from Brazil, the countries National Coffee Council reported on Friday that they forecast little chance of rain for the main central and southern arabica coffee districts until the end of next week and therefore, the weather conditions have to be seen as unfavourable for the prospects of the next 2015 Brazil crop. There was however some degree of hesitancy with this report, as there were no further defining numbers coming with it, albeit that previously they had already been talking in terms of a 2015 Brazil coffee crop potential that might dip below 40 million bags. Meanwhile the report seemingly did little to inspire the relatively lacklustre coffee markets on Friday, which tended to run out of steam for the day.

The physical coffee market that are already quiet for the present tended to stall on Friday, with the largest of the consume markets Europe distracted by the majority of the leading roasters heading to Basel in Switzerland, for the annual coffee dinner. This dinner preceded by the usual round of pre-dinner meetings, with the trade houses striving to generate some increase in buying interest.

The positive effects of the weather issues upon the reference prices of the New York arabica coffee market and to a lesser degree the London robusta coffee market are however proving beneficial to the majority of the other coffee producers, who are looking to improved values for their exports in the coming months. This improved price factor can be seen to be particularly significant for Mexico, Central America, Colombia, Vietnam and India, who are all now starting with their new crops and shall have large volumes of coffee to sell. The problem is however with the consumer market traders reluctant to price fix and carry significant volumes of new crop stocks in terms of the potential to have to finance margin calls against rising futures market values, for the producers to encourage sales of new crop stocks in volume.

Thus one might expect and particularly so for the arabica coffees, to see rising competition between the producers to attract good value sales and this competition might be expected to be negative for export differentials relative to the New York market. However if the delayed start to the rains in Brazil at the end of the month is followed by good rains for the coming month and the market starts to dip, one might expect to see some increase in consumer market buying interest, but with differentials needing to be relatively modest, for the trade to feel safe to take on such stocks and one would still foresee reason for softer washed arabica coffee differentials into the first quarter of the new year.

The arbitrage between the markets narrowed on Friday to register this at 121.70 usc/Lb., while this equates to a relatively attractive 55.22% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 4,190 bags on Friday, to register these stocks at 2,389,747 bags. There was meanwhile a larger in volume 7,200 bags decrease to the number of bags pending grading for the exchange; to register these pending grading stocks at 7,955 bags.

The commodity markets were mostly side lined on Friday by the focus on the declining equity markets, which were reacting negatively to the prospects for softer global medium term growth. The Cocoa, Cotton, Copper, Corn, Wheat, Soybean, Gold and Platinum markets showed some buoyancy, while the Oil, Natural Gas, Sugar, Coffee, Orange Juice and Silver markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.46% lower; to see this Index registered at 491.32. The day starts with the U.S. Dollar steady and trading at 1.612 to Sterling and 1.268 to the Euro, while North Sea Oil is steady in early trade and is selling at $ 88.40 per barrel.

The London and New York markets started the day with follow through buoyancy on Friday, but with the New York market losing its way and heading back into negative in thin early afternoon trade, while the London market remained relatively steady. This dip in New York was however short lived and the market soon recovered as the afternoon progressed and moved back into positive territory, while the London market maintained its steady sideways stance. The New York market once again lost its lustre in continued lacklustre trade, to slip back and join the London market on its sideways track. The markets lost some more weight as the afternoon progressed, but with both shedding some of their losses near to the end of the day. The London market ended the day on a soft note but having recovered 35.3% of the earlier losses of the day, while the New York market likewise ended the day on a soft note and having recovered 60.3% of the earlier losses of the day by the close. This soft close might not be seen to be negative for sentiment, as the weather problems for Brazil remain in play and one might expect to see a steady to buoyant start for early trade today against the prices set on Friday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

NOV 2159 – 22 DEC 220.40 – 1.25

JAN 2176 – 19 MAR 224.20 – 1.25

MAR 2186 – 19 MAY 226.05 – 1.15

MAY 2197 – 19 JUL 227.35 – 0.95

JUL 2208 – 19 SEP 227.85 – 0.70

SEP 2217 – 19 DEC 227.60 – 0.95

NOV 2214 – 19 MAR 226.95 – 1.10

JAN 2204 – 19 MAY 226.35 – 1.10

MAR 2204 – 19 JUL 225.60 – 1.10

MAY 2197 – 19 SEP 225.15 – 1.05

Coffee Market Report

October 10 2014

With apparently still a week and half to perhaps even two weeks or so prior to the start of the rain season for the South East of Brazil and therefore the main central and southern arabica coffee districts of the country, the reports are that not only are ground water retention levels falling rapidly, but so too the water reservoirs within these districts. Thus the weather in Brazil continues to buoy market sentiment within the New York market, with the London robusta market following suit in a more restrained manner.

Meanwhile with the countries exporters seemingly well covered in stocks of both past and present crop coffees to support their short term forward contract export commitments and with many fearing the cost of funding margin calls for hedged stocks, the internal market in Brazil is relatively lacklustre in nature. With many eager to sell into the prevailing relatively high priced market farmers, struggling to find buying interest from the countries exporters.

What is noticeable is the free selling activity on the part of the Brazilian coffee farmers over the past year, with coffee exports from Brazil for the first nine months of this calendar year already having reached 26.6 million bags and the cumulative exports for the past twelve months having reached a record 35.6 million bags. These figures tending to illustrate the higher percentages of natural arabica coffees being used within the consumer market blends, in reaction to the relatively high prices for the washed arabica coffees. The gap in prices between the washed arabica coffees and the natural arabica coffees is however starting to narrow in terms of the more aggressive selling activity out of Colombia and for forward sales from Honduras and thus one might speculate, that this shall add to the present slower selling activity out of Brazil.

The Brazilian Export Council has nevertheless reported that Brazil registered a 7.8% increase in coffee exports for the month of September at 2.94 million bags relative to the same month last year, but a much healthier 42.9% increase in the value of these sales relative to the same month last year. This sharp increase in the value of the country’s exports would indicate that while the volume of sales might be dropping off for the countries farmers, their financial situation has significantly improved and that they are now better able to finance the carry of new crop coffee stocks. This situation is further reducing the selling activity out of Brazil, which removes some of the negative effects of price fixation hedge selling over the New York market and thus assisting to further buoy this market.

While the subject of Roya or Leaf Rust has not raised its head within the coffee news in the recent months, the problem remains for the Mexican and Central American farmers. But with the much improved reference prices of the New York market and the related profitability from coffee sales is assisting along with various state supported programs within the individual countries, for farmers to invest in the inputs necessary to counter this infestation. Thus for the present the earlier forecasts for overall larger crops from the coming new crop harvest, would appear to be realistic. Albeit that there are many farmers within this region, who are still complaining of the struggle to finance their battle against Roya.

The Climate Prediction Centre in the U.S.A. has reported that they foresee an El Nino phenomenon starting to come into play within the Pacific Ocean by the first quarter of the coming year. But for the present they expect that this shall only be a mild El Nino and therefore one would guess, that the El Nino shall have little influence upon Pacific Rim coffee production for the coming year. In fact marginally drier weather in terms of Colombia and Peru would assist to reduce the impact upon the wet weather inspired Leaf Rust or Roya fungus upon the coffee trees, while an El Nino does usually bring increased rainfall to South East Brazil and could be beneficial to the development of the next 2015 crop. So long as the rains do finally start by the end of this month, to bring with them new flowerings and continue into the new year, to set this potentially relatively modest new crop.

The arbitrage between the markets broadened yesterday to register this at 122.09 usc/Lb., while this equates to a relatively attractive 55.08% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were unchanged yesterday, to register these stocks at 2,385,557 bags. There was meanwhile a 2,325 bags increase to the number of bags pending grading for the exchange; to register these pending grading stocks at 15,155 bags.

The commodity markets were mixed but overall the macro commodity index remained relatively steady yesterday, as was the U.S. dollar steady for the day. The Natural Gas, Cocoa, London robusta Coffee, Copper, Corn, Soybean, Gold, Silver and Platinum markets had a day of buoyancy and the New York arabica Coffee market experienced another sharp rally for the day, while the Oil, Sugar, Cotton, Orange Juice and Wheat markets had a softer days trade. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.06% higher; to see this Index registered at 493.58. The day starts with the U.S. Dollar steady and trading at 1.612 to Sterling and 1.270 to the Euro, while North Sea Oil remains soft in early trade and is selling at $ 87.65 per barrel.

The London market started the day yesterday on a softer track but was soon followed by a positive start for the New York market, which had its influence upon sentiment within the London market and a resulting recovery and with both markets maintaining a positive track into the afternoon and through for the rest of the day. The London market ended the day on a firm note and with 70.8% of the earlier gains of the day intact, while the New York market ended the day on a very firm note and with 90.6% of the gains of the day intact. This positive close likely to inspire a follow through steady to buoyant start for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

NOV 2181 + 30 DEC 221.65 + 7.20

JAN 2195 + 34 MAR 225.45 + 7.15

MAR 2205 + 36 MAY 227.20 + 7.15

MAY 2216 + 38 JUL 228.30 + 7.20

JUL 2227 + 38 SEP 228.55 + 7.25

SEP 2236 + 39 DEC 228.55 + 7.25

NOV 2233 + 37 MAR 228.05 + 6.90

JAN 2223 + 27 MAY 227.45 + 6.70

MAR 2223 + 27 JUL 226.70 + 6.20

MAY 2216 + 27 SEP 226.20 + 5.85

Coffee Market Report

October 09 2014

The well respected Brazilian meteorologist Somar has reported that there might be some scattered showers in a weeks’ time, but that significant rainfall shall only enter the main central Brazil arabica coffee districts in approximately two weeks’ time. This report further fuel the concerns over the late start to this year’s rain season in Brazil, with the report accompanied by reports of declining ground water retention levels, which indicates extreme stress for the coffee trees and further supports the many forecasts that this shall severely affect the potential of the next 2015 crop.

The present the general range of 2015 Brazil crop forecasts are very much in line with the F O Licht forecast for a 2015 Brazil crop of approximately 43 million bags, which would result in an approximately 9 million to 10 million bags deficit crop, so long as consumer market demand for Brazil coffees is retained at its present high levels. There is however an approximate 3 million bags increase in overall washed arabica coffee supply due for the coming year and likewise an approximate 2 million bags increase in robusta coffee supply due during the coming year, which with the flexibility of consumer roaster blending, would take some of the bite out of such a deficit from Brazil.

Thus for the present the consumer market industry players and with relatively high consumer market stocks in hand, do not have reason to fear any disruption to overall coffee supply for the coming year and through to the middle of the following year. There are however concerns over the influence that the funds and speculative sectors of the international coffee markets and with more emphasis upon the more volatile and related in terms of Brazil arabica coffees, shall have upon consumer market prices. This so long as the funds continue to react to the declining Brazil arabica coffee supply could severely inflate wholesale prices and might have a market effect upon consumption within some markets, with the world’s largest market being Europe, already suffering from poor economic conditions.

Meanwhile despite rising levels of coffee exports being reported from Brazil, Colombia and Vietnam and with the former still shipping large volumes of carryover stocks from the 2013 crop, the world coffee supply to the consumer markets is overall flat. This related to lower levels of coffee supply from most of the other producers who while dwarfed by Brazil and Vietnam in terms of supply, combine to flatten out the overall coffee supply to the still well stocked consumer market industries. This is resulting in the consumer market industries for the present, remaining cautious and lacklustre in nature, with many buyers maintaining something of a hand to mouth approach to the market. While the consumer market trade houses fearing the costs of margin calls for hedged coffee stocks, are reluctant buyers of longer term new crop stocks.

A survey of ten traders in Vietnam and with the new crop harvest starting, has resulted in an average forecast for the new Vietnam crop that is dominated by an approximate 96% share for the robusta coffees, of a close to last 28.17 million bags. There is however some question as to the size of the past October 2013 to January 2014 crop in Vietnam, as with the combination of domestic consumption and the evidence of the export volumes over the past year, this crop would have seemed to have been much higher that most of the reports and presumably so if the new crop is to be similar in size, so too shall be the new crop. While with the higher trading range for the coffee markets at present and the significant discount that is in play for the robusta coffees relative to arabica coffees, one might expect that with good robusta coffee supply from Vietnam and to be followed during next year by rising robusta coffee supply from India and Indonesia, that robusta coffees shall increase their share within the more price sensitive consumer market blends in the coming year.

The arbitrage between the markets narrowed yesterday to register this at 116.43 usc/Lb., while this equates to a relatively attractive 54.29% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 1,980 bags yesterday, to register these stocks at 2,385,557 bags. There was meanwhile a larger in volume 4,155 bags decrease to the number of bags pending grading for the exchange; to register these pending grading stocks at 12,830 bags.

The commodity markets somewhat surprisingly did not react positively to the marginal reversal in the value of the U.S. dollar yesterday, with the dollar losing some of its lustre in line with the cautious statements emanating from the U.S. Federal Reserve Bank, who indicate that they might not be rushing into raising dollar interest rates during the second half of next year. The Orange Juice, Wheat and Corn markets did however have a day of buoyancy, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Soybean, Gold, Silver and Platinum markets ended the day tending softer for the day. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.46% lower; to see this Index registered at 493.28. The day starts with the U.S. Dollar steady and trading at 1.618 to Sterling and 1.274 to the Euro, while North Sea Oil is showing some degree of buoyancy and is selling at $ 91.00 per barrel.

The London and New York markets started the day on a softer note and in thin and lacklustre trade, but with the New York market starting to pick up support in the early afternoon and recovering to head back into positive territory and with the London market recovering its losses as the afternoon progressed, but both markets tended to falter at the end of the day to stall the upside track of the markets. The London market continued to end the day on a soft note and with 59.1% of the earlier losses of the day intact, while the New York market also closed on a soft note and with 35.5% of the earlier losses of the day intact. This soft close with the markets tending to lose their way at the end of the day is unlikely to inspire much better than a cautiously steady start for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

NOV 2151 – 25 DEC 214.45 – 1.90

JAN 2161 – 26 MAR 218.30 – 1.90

MAR 2169 – 26 MAY 220.05 – 1.85

MAY 2178 – 25 JUL 221.10 – 1.60

JUL 2189 – 20 SEP 221.30 – 1.50

SEP 2197 – 19 DEC 221.30 – 1.40

NOV 2196 – 19 MAR 221.15 – 1.45

JAN 2196 – 19 MAY 220.75 – 1.55

MAR 2196 – 19 JUL 220.50 – 1.50

MAY 2189 – 19 SEP 220.35 – 1.45

Coffee Market Report

October 08 2014

The Brazil Cooperative Cocatrel that represents approximately 5,000 coffee farmers has added its voice to the concerns over the prospects for the next 2015 Brazil crop, which are related to the late start to the Brazil rain season this year that instead of the rains coming in with some regularity in the first half of October, are now foreseen to only start their regular coverage from the last week of October onwards. In this respect they have assessed that their Cooperatives 2015 crop potential might be as much as 30% lower than their normal production levels, as last registered in the 2013 crop. This following their just completed crop this year, which they say was 40% lower than their 2013 crop.

The interesting factor about this report is the reference to a significant 40% dip in production for this year’s harvest from the previous year’s level, while for next year they are only talking about a 30% dip in potential production. This rather contradicts the many other reports that concede that this year’s arabica coffee crop harvest was negatively affected by the partial drought during the first two months of this year, but with the potential for an even lower crop potential for next year. Thus bringing in to question for the present, the accuracy of many of these reports and well illustrating that one needs to wait until December when post the November rains there shall be an ability to more accurately count the results of the flowerings and the budding new crop potential.

There is however in terms of the late start to the rains this year at least some more experience in terms of new 2015 crop evaluation as unlike the partial drought over January and February this year that was a first time experience for the Brazil farmers, there have been many years when rains have come late. The worst having been in 1985, when the dry weather extended well into November and most certainly, did impact negatively upon production in 1986, albeit in the end, not as bad as some of the market supportive forecasts over December 1985 and January 1986 had indicated.

Albeit early in the month, the trade in Vietnam are talking in terms of coffee exports of mostly robusta coffees for the month of September being approximately 1.67 million bags. These exports being related to the carryover stocks from the past crop, rather than the new crop coffees that are only due to start being harvested in the coming weeks. One might comment that with most of these exports being related to existing forward contract commitments that that there is most probably some degree of accuracy to these trade estimates, as they have this data at hand. There might however with the sudden surge in the reference prices of the London robusta coffee market over the past few days be some increase in discounted differential selling activity, which might with the related month end shipments slightly inflate this forecasted monthly export figure.

There has however so far, not been much increase in selling aggression within the internal market in Vietnam, as the farm and internal trader past crop stocks are relatively low, with the majority of the carryover stocks being held mostly by the trade. These latter stocks more often than not hedged at existing differentials, with negate the ability to further discount against the prices of the London market. Thus eliminating the possibility of surging London prices to inspire short term aggressive selling and a flood of coffee to head toward not only the consumer roasters, but also to the alternative of the London Certified stocks.

The arbitrage between the markets narrowed yesterday to register this at 117.15 usc/Lb., while this equates to a relatively attractive 54.15% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 39 bags yesterday, to register these stocks at 2,383,577 bags. There was meanwhile a larger in volume 1,961 bags decrease to the number of bags pending grading for the exchange; to register these pending grading stocks at 16,985 bags.

The commodity markets were mixed in trade yesterday with the now sideways track of the U.S. dollar tending to eliminate the negative effects of a firming dollar within many markets, but with the rising unemployment and flat economic prospects for the Euro zone bloc tending to dampen some spirits. The Natural Gas, Sugar, London robusta Coffee, Cotton, Orange Juice, Wheat, Corn, Soybean and Gold markets had a day of buoyancy, while the Oil, Cocoa, New York arabica Coffee and Silver markets ended the day softer. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.30% higher; to see this Index registered at 495.54. The day starts with the U.S. Dollar steady and trading at 1.606 to Sterling and 1.263 to the Euro, while North Sea Oil is steady in early trade and is selling at $ 90.55 per barrel.

The London market started the day yesterday taking a softer track and with some producer price fixation selling pressure hanging over the market, while the New York market following an initial steady start tended to soften slightly in thin trade. Both markets did however move well into positive territory for the afternoon’s more active trade, but without any of the excitement that was experienced during the previous day and with the London market holding on to a steady sideways positive track for the rest of the day, but with the New York market coming under late in the day pressure to move back into negative territory. The London market ended the day on a modestly positive note and with 71.4% of the gains of the day intact, while the New York market ended the day on a softer note and with 78.1% of the losses of the day intact. This mixed close and with the more volatile New York market tending to falter late in the day, might be conducive for a cautious steady to soft start for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

NOV 2176 + 11 DEC 216.35 – 4.45

JAN 2187 + 10 MAR 220.20 – 4.25

MAR 2195 + 9 MAY 221.90 – 4.20

MAY 2203 + 9 JUL 222.70 – 4.10

JUL 2209 + 8 SEP 222.80 – 3.85

SEP 2216 + 8 DEC 222.70 – 3.90

NOV 2215 + 11 MAR 222.60 – 4.00

JAN 2215 + 15 MAY 222.30 – 4.05

MAR 2215 + 19 JUL 222.00 – 4.15

MAY 2208 + 25 SEP 221.80 – 3.90

Coffee Market Report

October 07 2014

The latest Commitment of Traders report from the London robusta coffee market has seen the Non Commercial speculative sector of this market increase their net long position within this market by 19.58% during the week of trade leading up to Tuesday 30th. September; to register a net long position of 26,753 Lots on the day. This net long which is the equivalent of 4,458,833 bags has most likely been significantly increased during the period of mixed but overall positive trade, which has since followed.

The National Coffee Federation of Colombia have reported that the countries coffee production for the month of September was 52,000 bags or 6.05% higher than the same month last year, to total 912,000 bags. While the countries coffee exports for the month were 149,000 bags or 21.88% higher than the same month last year, at a total of 830,000 bags.

This improved production performance and following many improved months has contributed to the Colombian cumulative production for the just completed October 2013 to September 2014 coffee year being 2,201,400 bags or 22.18% higher than the previous coffee year, at a total of 12,128,400 bags. Likewise the countries cumulative exports for the just completed coffee year are 2,160,000 bags or 24.55% higher than the previous coffee year, at a total of 10,960,000 bags.

This very impressive performance from Colombia that had seen its El Nino and a following La Nina production dip to 7.7 million bags during the 2011/2012 coffee year, is forecasted with unforeseen weather issues aside, to increase further over the coming three to four years. This steady increase related to the fact that there are many new plantings within the approximate 930,000 hectares of coffee farms that are still to come to maturity, with a target for annual crops that shall achieve at least 15 million bags per annum. While one might guess that while the earlier forecasts were for a 2014/2015 crop of in excess of 12 million bags, that it is becoming more than likely that this new coffee year’s crop might well now exceed 13 million bags and likewise, exports to get closer to 12 million bags.

Thus with the more recent new crop forecasts from Mexico and Central America in mind and with the prospects for the next Peru crop to near to steady at around 4 million bags, one might estimate that fine washed arabica coffee supply from the Latin American producer bloc shall be in excess of 2.5 million bags higher for the coming calendar year. To provide a combined crop of close to 36 million bags of mostly fine washed arabica coffees, to eliminate any risk of tight supply at the top end of the quality sector of the consumer markets.

This somewhat bearish fine washed arabica coffee news is however side-lined for the present by the weather news from Brazil where the forecasts for dry weather for the central and southern coffee districts in Brazil for this week which fuelled the rally in the New York market last week, have been followed by forecasts that this shall be followed by mostly dry weather for the following week. This news and with accompanying forecasts that this shall be a reason for a 5 million bags to 6 million bags dip in mostly natural arabica coffee production for the 2015 Brazil crop, sparked the bulls within the New York market yesterday to set the market for strong rally from the start.

This rally triggered a host of stop loss price fixes and speculative and fund buy stops and perhaps accompanied by some trade hedge lifting, to see the market surge to two and half year highs. The longer range forecasts are however for a wet end to the month and thereon for the month of November and thus one might think that with pocket relatively full that there might be reason to believe that the market is getting closer to a good value ceiling. But no one can out guess the funds and thus yesterday’s excitement, might not have been the last lap of the coffee Grand Prix.

The arbitrage between the markets broadened yesterday to register this at 122.05 usc/Lb., while this equates to a relatively attractive 55.28% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 825 bags yesterday, to register these stocks at 2,383,616 bags. There was meanwhile a larger in volume 4,335 bags increase to the number of bags pending grading for the exchange; to register these pending grading stocks at 18,946 bags.

The commodity markets were assisted yesterday by a modest reversal in the recent fortunes of the U.S. dollar, with the majority of the markets returning to some degree of buoyancy. The Oil, Sugar, Cocoa, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Gold, Silver and Platinum markets showing buoyancy and the Coffee markets surged, while the Natural Gas market had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 1.70% higher; to see this Index registered at 494.08. The day starts with the U.S. Dollar steady and trading at 1.607 to Sterling and 1.262 to the Euro, while North Sea Oil is steady in early trade and is selling at $ 91.95 per barrel.

The London and New York markets started the day with a bang, with the speculative sector of the markets coming into forceful play and with both markets making a positive move against further medium term dry weather reports for Brazil, which immediately started to trigger buy stops and to cause a sharp rally within the markets. This rally was accompanied by a similar rally for the more London market, which added less aggressive but nevertheless significant value. The London market continued to end the day on a very positive note and with 94.4% of the gains of the day intact, while the New York market ended the day on a very firm note and with 75.3% of the earlier gains of the day intact. This very positive close in constructive for the markets, but unless there is an immediate follow through one might see some profit taking and hedge selling coming into play for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

NOV 2165 + 85 DEC 220.80 + 14.30

JAN 2177 + 84 MAR 224.45 + 14.15

MAR 2186 + 84 MAY 226.10 + 14.05

MAY 2194 + 84 JUL 226.80 + 13.70

JUL 2201 + 85 SEP 226.65 + 13.45

SEP 2208 + 85 DEC 226.60 + 13.05

NOV 2204 + 74 MAR 226.60 + 12.65

JAN 2200 + 65 MAY 226.35 + 12.40

MAR 2196 + 85 JUL 226.15 + 12.20

MAY 2183 + 96 SEP 225.70 + 11.25

Coffee Market Report

October 06 2014

The latest Commitment of Traders report from the washed arabica coffee New York market has seen the shorter term in nature Managed Money Fund sector of the market increase their net long position within this market by 10.38% in the week of trade leading up to Tuesday 30th. September; to register a net long position of 38,175 Lots on the day. Over the same period the longer term in nature and steadier Index Fund sector of this market decreased their net long position within the market by 3.17%, to register a net long on the day of 44,955 Lots.

During this same week of trade the Non Commercial Speculative sector of the market increased their net long position within the market by 18.7%, to register a net long of 27,206 lots on the day. This net long position that is the equivalent of 7,712,780 bags has most likely been significantly increased over the period of overall more positive trade that has since followed and likewise, the net long position of the Managed Money Funds.

The National Coffee Council of Nicaragua have reported that following last year’s crop of 1.51 million bags and with the evidence of a nicely developing new crop on the trees, that they forecast a 7% increase in the size of their new crop that shall soon start to come into harvest and therefore, a new crop of approximately 1.61 million bags. These figures are however somewhat conservative in terms of the evidence of the exports from the past crop that by August had already totalled 1,624,015 bags and figures that supported private trade and industry assessment of the past crop at approximately 1.8 million bags, but the private trade and industry reports to agree that the new crop shall be a potentially larger crop. These reports indicating a new crop of approximately 1.9 to 2 million bags.

This report follows Wednesday’s report from the National Coffee Institute of Honduras which has forecasted an approximate 20% increase in the size of their new crop, to add an additional 1 million bags of regional fine washed arabica coffee supply for the consumer markets and based on a new crop of approximately 5.4 million bags. While private trade and industry forecasts are also forecasting larger new crops for Mexico, Guatemala and El Salvador and therefore and approximate 2 million bags in overall regional fine washed arabica coffee supply from their combined new crops, to see the regional production with the inclusion of Costa Rica, Panama and the Dominican Republic total in excess of 18 million bags.

Of course these numbers in terms of the increase in overall fine washed arabica coffee supply from Mexico and Central America while impressive, are dwarfed by the potential damage in world overall coffee supply that might come with a partial drought in Brazil and its damage to the potential for the next 2015 crop. Thus with the weather forecasts from Brazil presently indicating generally dry weather for the main central arabica coffee districts for this week, the concerns over the prospects for the next Brazil crop easily counter the negative effects of rising washed arabica coffee supply for sentiment, within the presently bullish speculative sector of the New York market.

The arbitrage between the markets narrowed on Friday to register this at 111.56 usc/Lb., while this equates to a relatively attractive 54.02% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 6,250 bags on Friday, to register these stocks at 2,382,791 bags. There was meanwhile a smaller in volume 4,675 bags increase to the number of bags pending grading for the exchange; to register these pending grading stocks at 14,611 bags.

The Certified Robusta coffee stocks held against the London market were seen to increase by 245,667 bags or 15.21% over the two weeks of trade leading up to Monday 29th. September, to register these stocks at 1,861,117 bags. This increase in the stocks was to be expected and one might think that now that the price structure of the London market is friendly to the carry of stocks, that they can be expected to steadily increase over the coming months.

The commodity markets were mostly on the back foot on Friday, with the good economic figures from the U.S.A. and the muscle of the U.S. dollar impacting negatively within many of the markets. The Natural Gas, Sugar. London robusta Coffee, Cotton, Copper, Wheat and Corn markets had a day of buoyancy, while the Oil, Cocoa, New York arabica Coffee, Orange Juice, Soybean, Gold and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.54% lower; to see this Index registered at 485.84. The day starts with the U.S. Dollar steady and trading at 1.598 to Sterling and 1.253 to the Euro, while North Sea Oil is steady in early trade and is selling at $ 91.65 per barrel.

The London and New York markets started the day with both markets showing some hesitant but early buoyancy in thin trade, but with both markets taking a dip in afternoon’s trade against some light producer price fixation hedge selling. This was however short lived and the markets recovered and headed back into positive territory, with the speculative sector of the New York market remaining largely supportive and shrugging off the temptation to take pre-weekend profits. The London market continued to end the day on a positive note and with 83.9% of the earlier gains of the day intact, but with the New York market losing its way by the end of the day’s trade and moving back into negative territory to end the day on a softer note, with 65.6% of the losses of the day intact. This rather mixed close and with the speculative sector of the markets most probably experiencing some degree of exhaustion, is likely to set the markets for a cautiously hesitant steady start for early trade today against the prices set on Friday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

NOV 2080 + 27 DEC 206.50 – 2.10

JAN 2093 + 26 MAR 210.30 – 2.20

MAR 2102 + 24 MAY 212.05 – 2.15

MAY 2110 + 22 JUL 213.10 – 2.25

JUL 2116 + 22 SEP 213.20 – 2.15

SEP 2123 + 21 DEC 213.55 – 2.05

NOV 2130 + 20 MAR 213.95 – 1.90

JAN 2135 + 20 MAY 213.95 – 2.00

MAR 2111 + 20 JUL 213.95 – 2.10

MAY 2087 + 20 SEP 214.95 – 1.95

Coffee Market Report

October 03 2014

3rd. October, 2014.

The coffee markets are currently guided by the influence of the speculative sector and the prevailing weather market, which has seen a continuation of reports supporting the news of a lack of rain thus far into October and continues to bolster sentiment. These reports highlight concerns that are being raised over the thus far erratic rains over Brazil and the potential impact on the 2015 crop to come. The forecasts meanwhile are mostly for precipitation to move into the main coffee growing areas in Brazil within the latter half of this month. These weather developments and the effect upon the overall potential of the new crop to come will no doubt continue to draw speculative attention as the Brazil 2015/16 coffee crop progresses.

There is meanwhile, presently a steady supply of Brazil arabica coffees coming to the consumer markets and this is likely to continue, with the support of the improved levels in New York and a weaker Brazil Real that is trading at 2.49 to the US Dollar today, to inspire origin selling activity. Similarly, the new Colombia and Central America washed arabica and Vietnam robusta coffee harvests are soon to come into play, which would indicate that the already relatively well stocked consumer markets are, at least for the time being, able to watch these latest Brazil weather developments from the side lines.

The arbitrage between the markets broadened yesterday to register this at 118.74 usc/Lb., while this equates to a very attractive 55.88% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 1,989 bags yesterday, to register these stocks at 2,389,041 bags. There was meanwhile a larger in volume 5,554 bags decrease to the number of bags pending grading for the exchange; to register these pending grading stocks at 9,936 bags.

The commodity markets were mixed yesterday, many markets tending to lower and the influential energy markets softer on the day. The commodity markets would appear to have absorbed the latest round of bearish economic figures to come from China, ahead of the Unites States Employment data to be released later today. It was a softer day for the Oil markets, Cocoa, Cotton, Copper, Orange Juice, Gold, Silver, Platinum and Palladium. It was a mildly firmer day for Sugar, Wheat, Corn, Soybean and the Robusta coffee market near unchanged, whereas it was another positive close for Arabica coffee yesterday. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.27% lower; to see this Index registered at 488.47. The day starts with the U.S. Dollar trading at 1.612 to Sterling and 1.264 to the Euro, while North Sea Oil is steady in early trade and is selling at $ 92.95 per barrel.

The London market opened the day yesterday in some buoyancy, which was followed by a firmer on opening market in New York. The early buoyancy within New York yesterday met with speculative triggers along the way and the market registered a rapid 6.76% increase in value within the morning session. The London robusta market followed suit although in less volatility and both markets settled into a new trading range with gains mostly intact although in somewhat choppy trade in New York, which registered a hefty 41,971 lots in total volume by the end of the session. As the day progressed sellers returned to both markets to apply pressure to the gains made which in London was rapidly shed toward the latter half of the day. London went on to lose 2.66% of the gains and a finish hardly changed on the day. The downward seller pressure in New York was countered in the latter session to see this market retain 4.19% of the gains on the day, to set the close yesterday, in a positive range, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

NOV 2053 – 1 DEC 208.60 + 8.20
JAN 2067 – 1 MAR 212.50 + 8.00
MAR 2078 – 1 MAY 214.20 + 7.45
MAY 2088 Unch JUL 215.35 + 7.35
JUL 2094 Unch SEP 215.35 + 7.20
SEP 2102 + 2 DEC 215.60 + 7.20
NOV 2110 + 4 MAR 215.85 + 7.15
JAN 2115 + 4 MAY 215.95 + 6.95
MAR 2091 + 7 JUL 216.05 + 6.80
MAY 2067 + 7 SEP 216.40 + 6.65

Coffee Market Report

October 02 2014

The National Coffee Institute of Costa Rica have reported that the countries coffee exports for the month of September were 8,505 bags or 22.57% lower than the same month last year, at a total of 62,160 bags. This has contributed to the countries cumulative exports for the just completed October 2013 to September 2014 coffee year being 145,346 bags or 10.43% lower than the previous coffee year, at a total of 1,247,727 bags.

The National Coffee Institute of Honduras have reported that the countries coffee exports for the month of August were 35,306 bags or 71.27% higher than the same month last year, at a total of 84,842 bags. This has contributed to the countries cumulative exports for the just completed October 2013 to September 2014 coffee year being 116,139 bags or 2.68% lower than the previous coffee year, at a total of 4,223,882 bags.

The National Coffee Institute of Honduras and with the new crop coffee cherries getting closer to maturity have raised their earlier new crop forecast from their already positive forecast in June, to now forecast an approximate 20% increase in production for the new crop, which they now peg at approximately 5.4 million bags. This figure with a relatively modest domestic consumption of approximately 276,000 bags per annum aside, would add approximately 1 million bags of increase in export potential from Honduras for this new October 2014 to September 2015 coffee year, to see exports in excess of 5.2 million bags.

The preliminary coffee export figures from Brazil have seen the countries coffee exports for the month of September being 302,700 bags or 12.3% higher than the same month last year, at a total of 2,763,100 bags. These exports that are dominated by the natural arabica coffees from past crop stocks and new crop coffees, continuing to buoy consumer market stocks of Brazil coffees ahead of the higher volume winter roasting season within the main northern hemisphere consumer markets.

The recovery for the reference prices of the London market over the past couple of days can be expected to bring some increase in internal market selling activity of the remaining past crop stocks, but one cannot expect too much excitement for a few weeks still and until the new crop harvest starts to come into play by early next month. Thus one cannot expect too much in terms of the negative effects of exporter price fixation hedge selling coming to this market, which is presently tending to track the more volatile activities within the New York arabica coffee market.

The well respected analysts Coffee Network have added to the bullish Brazil related news yesterday, by talking in terms of a 15% dip in the size of the next 2015 Brazil crop that shall be negatively affected by the slow start to the new rain season. This factor in terms of their assessment of the just completed new crop of 47 million bags would indicate a 2015 Brazil crop that would be marginally below 40 million bags, which they say would contribute to a coffee supply for the October 2015 to September 2016 coffee year of approximately 144.9 million bags and therefore, a follow on world deficit coffee supply through to at least the second half of 2016.

This news added to the supportive mix of reports and the markets were once again buoyed yesterday by these reports and the continued concern over the erratic rains in Brazil, with so many now pointing towards the 40 million bags number for the coming year. Meanwhile and until the rains pick up in volume and it would seem in terms of the main central arabica coffee districts in Brazil that this might not happen until closer to the end of this month, the New York market would appear to have the prospects of some degree of short term muscle.

The arbitrage between the markets broadened yesterday to register this at 106.60 usc/Lb., while this equates to a relatively attractive 53.19% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 3,353 bags yesterday, to register these stocks at 2,387,052 bags. There was meanwhile a larger in volume 4,859 bags decrease to the number of bags pending grading for the exchange; to register these pending grading stocks at 15,490 bags.

The commodity markets were mixed yesterday, but with many markets tending to steady and likewise, the macro commodity index. The firm nature of the U.S. dollar did however remain a dominant factor for many markets, to supress any significant chances of a recovery, with the exception of the rally within the Coffee markets. The Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets had a day of buoyancy, while the Oil, Natural Gas, Sugar, Cocoa and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is that is made up from 17 markets is 0.12% higher; to see this Index registered at 489.79. The day starts with the U.S. Dollar marginally softer and trading at 1.621 to Sterling and 1.263 to the Euro, while North Sea Oil is steady in early trade and is selling at $ 92.95 per barrel.

The London market opened the day yesterday with light selling pressure taking value lower but followed by a steady start for the New York market which soon started to add value and with technical support, assisting to add more value as the afternoon progressed. This follow through buoyancy for the New York market soon started to have some effect upon sentiment within the London market and a modest recover, to see both markets enter the afternoon’s trade taking a positive track and with buy stops being triggered, adding value to both markets. This positive track was sustained for the rest of the day and the London market continued to end the day on a positive note and with 96.8% of the gains of the day intact, while the New York market ended the day on a likewise positive note and with 82.9% of the gains of the day intact. This overall positive close is supportive for sentiment and one might expect to see 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.

NOV 2054 + 62 DEC 200.40 + 7.05

JAN 2068 + 61 MAR 204.50 + 7.05

MAR 2079 + 61 MAY 206.75 + 6.90

MAY 2088 + 61 JUL 208.00 + 6.75

JUL 2094 + 59 SEP 208.15 + 6.50

SEP 2100 + 57 DEC 208.40 + 6.45

NOV 2106 + 65 MAR 208.70 + 6.45

JAN 2111 + 64 MAY 209.00 + 6.50

MAR 2084 + 64 JUL 209.25 + 6.45
MAY 2060 + 64 SEP 209.75 + 6.65

Coffee Market Report

October 01 2014

The general opinion was that the last Vietnam crop was approximately 28 million bags and made up from approximately 26.9 million bags of robusta coffee and 1.1 million bags of arabica coffee. There was of course approximately 3.4 million bags carryover stocks into this new crop in October last year, but it is something of a surprise with estimates for coffee exports for this month that would bring the October 2013 to September 2014 coffee exports up to 27.33 million bags, that Vietnam traders have estimated carryover stocks into the coming month of approximately 5 million bags.

These figures already make one question the actual size of the past October 2013 to January 2014 harvest, but when one considers a domestic market that is absorbing approximately 1.8 million bags, it does really make one think that the production estimates might have been overly conservative. Thus it is not a surprise that there are now some traders in Vietnam who are talking of a past crop of having exceeded 30 million bags, which with not much in the way of a decline expected for the new