Coffee Market Report
The Coffee Federation in Colombia have reported that the country’s coffee production for the month of May was on par with that of the same month in the previous year, at a total of 1,163,000 bags. This performance has contributed to the countries cumulative production for the first eight months of this new October 2015 to September 2016 coffee year to being 1,218,000 bags or 14.66% higher than the same period in the previous coffee year, at a total of 9,526,000 bags.
In terms of exports, the Coffee Federation in Colombia have reported that the country’s coffee exports for the month of May were 86,000 bags or 9.34% lower than the same month in the previous year, at a total of 920,000 bags. This lower performance does nevertheless contribute to the countries cumulative exports for the first eight months of this new October 2015 to September 2016 coffee year to being 696,000 bags or 8.82% higher than the same period in the previous coffee year, at a total of 8,582,000 bags.
These figures so far do not reflect the fears for a dip in production levels out of Colombia due to the excessively dry El Nino weather which was encountered in many of the country’s coffee districts over the past six months, but with the mid-year new Mitaca crop only due to start picking up in volume there remains the possibility for lower comparative year on year production figures to still come to the fore in the coming months. Colombia is the largest of the fine washed Arabica coffee producer countries and has made a remarkable recovery from the weather affected lows influenced by the last severe El Nino and followed directly by a La Nina that devastated two crop years, to see the country recover year on year in production terms and the current twelve month production period from May 2015 to May 2016 has reported production at a cumulative 14.55 million bags, an increase of 16% on that of the same time in the previous year.
Added to the upward impetus of commodities in general with the support of a continuation of the softer US Dollar this week, the already rumoured prospects of frost to come to Brazil which started earlier in the day yesterday, was confirmed in the outlook by one of the local weather forecasters in Brazil. This added fuel to the fire that had already been lit under the New York market and the latter day trade continued to surge to close in New York at the highs of the day.
The discussion around frost at this point would appear to be mostly emotive and while conflicting weather reports abound, news has come to the market of isolated incidence within the southern Parana region. The latest local forecast by Somar predicts that near freezing temperatures are due to enter coffee areas in Sao Paulo and Minas Gerais over the coming weekend with the most intensity around dawn on Monday. There are however no forecasts of any prospects for a widespread frost within the main coffee growing areas, while the isolated pockets which may be affected; if at all; are unlikely to have any significant impact upon Brazils overall new coffee crop that is currently being harvested.
Instead the weather news to come from Brazil has the appearance of serving to provide additional inspiration for speculators and this sector has already demonstrated a willingness of late, to extend their longs into this market. Whereas prior to this latest weather discussion, the weaker U.S. Dollar environment and internal political stability indicators have seen the Brazil Real firm considerably from a trading high of 3.6352 at the start of this month, just over a week ago, the Real was trading at a firmer 3.3584 against the US Dollar yesterday. This has encouraged Brazil producers to withdraw from selling activity and for the moment, there is only limited producer selling participation into the markets.
The September to September contracts arbitrage between the London and New York markets widened yesterday, to register at 63.36 usc/Lb., while this equates to a 44.73% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, continues to inspire support for the robusta coffee sector of the industry.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 1,382 bags yesterday; to register these stocks at 1,309,190 bags. There was an increase in the number of bags pending grading for this exchange, of 10,724 bags; to register these pending grading stocks at 28,347 bags on the day.
It was another positive day in the commodity markets yesterday, supported by the softer U. S. Dollar against other major currencies as the likelihood of a near term interest rate increase within the world’s largest economy, appears to be on the wane. It was another firm day for the oil markets and so too a positive day across the commodities board with perhaps the only exception on the day Orange Juice, to close in negative territory. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.50% higher at 434.80. The day starts with the U.S. Dollar trading at 1.450 to Sterling and 1.1396 to the Euro, while North Sea Oil is firm in early trade and is selling at US$ 51.44 per barrel.
The coffee markets started the day on a softer note and both markets dipped lower almost from the outset to set a downward track for the early morning session. Both markets continued to trade in negative territory but the influence of external macroeconomics the New York session gained with the introduction of additional volume of speculative buyer support, to turn incremental upward moves to the positive that in time built upon the earlier gains and set a positive track toward the middle of the session in New York. The London robusta market found producer selling returning to the floor, this market while trending positively did not in comparative terms manage to keep up with New York’s new found energy that was boosted by the weaker US Dollar and speculatively spurred on, by the news of colder weather forecasts in Brazil. The second half of the day in New York did see a return of sellers to the floor which was relatively short lived as the upward momentum took hold once more to the end of the session. It was a hefty volume day in New York meanwhile with 84,515 lots traded over the session in the two front months. It was a similarly a good volume day in London which registered a positive close also near to the high in this market, to set the close yesterday on a positive note in both markets as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
JUL 1697 + 8 JUL 139.65 + 7.45
SEP 1726 + 14 SEP 141.65 + 7.50
NOV 1740 + 14 DEC 144.20 + 7.40
JAN 1752 + 15 MAR 146.65 + 7.30
MAR 1764 + 18 MAY 148.30 + 7.20
MAY 1779 + 20 JUL 149.80 + 7.20
JUL 1794 + 24 SEP 151.25 + 7.20
SEP 1807 + 24 DEC 153.15 + 7.10
NOV 1802 + 24 MAR 154.80 + 6.90
JAN 1822 + 24 MAY 155.70 + 6.85
