Coffee Market Report
The year has been good so far in terms of volumes of coffee exports out of Vietnam, which along with growing domestic consumption have so far absorbed almost the equivalent of most of the last of new crop robusta coffees, but with a good volume of the record carryover stocks into the last crop having contributed to these exports. There is evidence however and with the next new crop due to start in two months’ time, that farmers and internal traders are continuing to show price resistance and are looking to carry good volumes of coffee stocks into the new crop.
One might suggest that with the relatively sophisticated nature of the Vietnam farmers and internal traders in terms of global market awareness, that they are very aware that until the middle of next year and by which time that there shall be new robusta coffee crops from Brazil and Indonesia starting to impact upon the consumer markets, that they shall encounter only muted competition for their robusta coffees within the consumer markets. Thus with forecasts for a marginally smaller new Vietnam robusta coffee crop due to come to the fore over the last quarter of this year, there is good reason to hold onto stocks and feed the market in an orderly and relatively good value manner, rather than take on an aggressive selling stance.
This stance that is being taken within Vietnam can thus for the foreseeable future, provide something of a supportive factor for the fortunes of the related London market. But of course only to the extent that the more volatile New York market can maintain its present improved price trading range, which is proving for the present to be somewhat questionable, albeit that there is some degree of tentative support coming with the concerns over the possibility of a new La Nina phenomenon starting to come into play within the Pacific Ocean, aside from the general fund interest in the commodity markets.
The New York market gaining some degree of tentative support from the renewed confidence within Brazil at present, where the prospects for the progress of the impeachment of their President, is assisting to buoy the confidence for their currency that has firmed from below 4 Reais to the U.S. dollar to the present rate of 3.14 to the U.S. dollar. Thus despite the improved value of the reference prices of the New York market in terms of new crop Brazil sales, the exchange rate is creating a degree of internal market price resistance and by nature lessens the threat of selling aggression and the related lacklustre volumes of price fixation selling into the New York market.
But this one might see to be a weak support factor for the prospects for the New York market as in the end the farmers need to cash in new crops and the influence of the firmer currency might be more related to some degree of firming of the export differentials for new crop Brazil arabica coffees, than to a lack of volume of sales of the new crop coffees.
The November to December contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 60.66 usc/Lb., while this equates to a 41.89% 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 decrease by 301 bags yesterday; to register these stocks at 1,290,829 bags. There was meanwhile a larger in volume 1,212 bags decline to the number of bags pending grading for this exchange; to register these pending grading stocks at 13,380 bags.
The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 17,500 bags or 0.72% over the week of trade leading up to Monday 8th. August, to register these stocks at 2,414,333 bags, on the day.
The commodity markets were mostly on a negative track in trade yesterday, with the overall macro commodity index taking a modestly softer track for the day. The Orange Juice, Wheat, Corn, Soybean and Gold markets had a day of buoyancy, while the New York arabica Coffee and Silver markets were near to steady for the day, while the Oil, Natural Gas, Sugar, Cocoa, London robusta Coffee, Cotton and Copper markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.47% lower; to see this Index registered at 420.87. The day starts with the U.S. dollar tending softer and trading at 1.305 to Sterling and 1.115 to the Euro, while North Sea Oil is near to steady in early trade and trading at 43.00 per barrel.
The London and New York markets started the day yesterday on something of a back foot and with the London market moving into the afternoon to post losses of $ 11.00 per metric ton and the New York market losses of 2.55 usc/Lb., but with the New York market attracting support as the afternoon progressed and to move back into positive territory and gains of 1.10 usc/Lb., while the London market finally followed suit and to move back into modest positive territory. The New York market did however falter and attracted selling pressure to set the market for a reversal and attracting sell stops to shed its new found muscle, while the London market settled back into modest negative territory. The London market continued to end the day on a modestly negative note and with 63.6% of the earlier losses of the day intact, while the New York market ended the day on a hesitantly steady note for the day. This close does little to inspire and with the technical picture of the markets leaning towards the negative, one might expect little better than a near to steady start for the markets for early trade today against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
SEP 1819 – 6 SEP 141.10 unch
NOV 1848 – 7 DEC 144.75 – 0.05
JAN 1868 – 6 MAR 147.95 unch
MAR 1879 – 6 MAY 149.85 + 0.10
MAY 1891 – 7 JUL 151.60 + 0.05
JUL 1905 – 5 SEP 153.25 + 0.05
SEP 1917 – 5 DEC 155.45 + 0.05
NOV 1930 – 5 MAR 157.60 + 0.05
JAN 1939 – 5 MAY 158.80 – 0.05
MAR 1946 – 5 JUL 160.05 – 0.05
