Coffee Market Report
The well-respected commodity bank Rabobank have lowered their new Brazil crop estimate to 52.4 million bags, which would be made up from 40 million bags of arabica coffee and 12.4 million bags of conilon robusta coffees. This dip in their forecast being related to their assessment that the new conilon robusta crop that had suffered from the dry weather during the first quarter of this year, is 200,000 bags lower than their earlier estimate.
Rabobank have further and in terms of their assessment of the new Brazil crop amongst the balance of world production and against their assessment of world coffee demand, increased their forecast for global coffee supply deficit by 600,000 bags, to foresee a 2.5 million bags global coffee deficit supply for the coming October 2016 to September 2017 coffee year. This being news that has assisted to buoy speculative confidence within the volatile New York market, which is presently holding its trading range.
Contrary to the modestly positive nature of the latest Rabobank forecast the market leading U.S.A. roasting company J. M. Smucker have made note that they are confident that their earlier in the year lowering of their wholesale coffee prices, as they foresee more than sufficient coffee supply for the foreseeable future. Especially so they say, as there is good new arabica coffee supply coming to the fore from the new Brazil crop.
There is of course reality to the fact that while it is becoming accepted that global coffee supply for the coming coffee year and depending upon whose forecasts in terms of both supply and demand one might believe and with good consumer market stock levels in place shall be close to even supply, that the lower producer stock levels within Brazil and Vietnam shall leave the market vulnerable to any unforeseen weather issues for the producers in the coming months. Thus one might foresee that the threat for negative weather issues coming to the fore to tip the global coffee supply into a significant longer term deficit, shall continue to assist to keep the funds long into the terminal markets and to assist to buoy the coffee price trading range until such time as there is longer term weather stability confirmed for the main coffee producer blocs.
The November to December contracts arbitrage between the London and New York markets broadened yesterday, to register this at 64.65 usc/Lb., while this equates to a 43.90% 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 1,495 bags yesterday; to register these stocks at 1,282,914 bags. There was meanwhile a smaller in volume 276 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 9,700 bags.
The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 31,333 bags or 1.3% over the week of trade leading up to Monday 22nd. August, to see these stock registered at 2,377,500 bags, on the day.
The commodity markets encountered positive economic data out of the U.S.A. yesterday and a degree of stability for the U.S. dollar, with the overall macro commodity index taking a modestly positive track for the day. The Oil, Natural Gas, Sugar, Cocoa, New York arabica Coffee, Cotton, Orange Juice, Gold and Silver markets had a positive day, while the London robusta Coffee, Copper, Wheat, Corn and Soybean markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.66% higher; to see this Index registered at 424.38. The day starts with the U.S. dollar showing a degree of buoyancy and trading at 1.318 to Sterling and 1.129 to the Euro, while North Sea Oil is steady in early trade and trading at 48.05 per barrel.
The London market and New York markets opened the day yesterday on a hesitantly softer note and taking a soft sideways track into the early afternoon trade but as the afternoon progressed the still thinly traded New York market recovered its losses and moved back into modest positive territory, while the London market moved back up to trade close to par. It was however something of an erratic afternoon, as the New York market came under pressure and slipped back into negative territory and with the London market following suit and while the New York market soon recovered, the London market maintained a soft sideways stance. The London market maintained this stance through the day, but with the New York market attracting late in the day support to maintain as positive stance through to the close. The London market ended the day on a modestly softer note, but having recovered 63% of the earlier losses of the day by the close, while the New York market ended the day on a positive note and with 63% of the earlier gains of the day intact. This close tends to contribute to a positive technical picture for the markets and one might expect to see a steady start for early trade today against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
SEP 1791 – 8 SEP 145.30 + 1.20
NOV 1821 – 10 DEC 147.25 + 0.85
JAN 1844 – 11 MAR 150.45 + 0.85
MAR 1858 – 10 MAY 152.35 + 0.80
MAY 1871 – 10 JUL 154.00 + 0.70
JUL 1883 – 10 SEP 155.55 + 0.65
SEP 1895 – 10 DEC 157.60 + 0.50
NOV 1908 – 10 MAR 159.60 + 0.35
JAN 1917 – 10 MAY 160.65 + 0.20
MAR 1924 – 10 JUL 161.65 + 0.30
