Coffee Market Report
The National Coffee Institute in Honduras have reported that the country’s coffee exports for the month of August were 129,421 bags or 87.06% higher than the same month last year, at a total of 278,076 bags. This increase has contributed to the cumulative exports for the country for the first eleven months of the present October 2015 to September 2016 coffee year to being 66,852 bags or 1.31% higher than the same period in the previous coffee year, at a total of 5,172,954 bags.
When one takes into account the estimated 700,000 bags of Honduras coffees that have been smuggled into mostly neighbouring Guatemala and to a lesser extent into Mexico, El Salvador and Nicaragua and along with a domestic consumption of approximately 200,000 bags, this is very impressive number. Thus with exports for the present coffee year potentially due to top 5.3 million bags, it would extrapolate to confirm that the country had a good past crop of in excess of 6 million bags and with early forecasts now pointing to a 5% larger new crop to come to the fore.
The National Coffee Institute in Costa Rica have reported that the country’s coffee exports for the month of August were 21,921 bags or 31.65% higher than the same month last year, at a total of 91,184 bags. This improved performance contributes to the countries cumulative exports for the first eleven months of the present October 2015 to September 2016 coffee year to being 71,077 bags or 6.32% higher than the same period in the previous coffee year, at a total of 1,195,284 bags.
The preliminary green coffee exports from Brazil for the month of August have been reported to have been 45,296 bags or 1.7% lower than the same month last year, at a total of 2,624,624 bags. One might comment that while only a marginally lower figure that at this time last year there were relatively good volumes of conilon robusta coffees being exported and that the reality is that Brazil exported a much lower volume of arabica coffees during August, compared to the same month last year.
But this is due not to any shortage of arabica coffees from a much larger new arabica coffee crop, but more so to the short term delay in these coffees coming to the consumer markets, as exporters no longer have good carry over arabica coffee stocks to blend down the fresh cupping profile of the new arabica crop coffees. With the potential now that the new arabica coffee harvest is almost complete, for exports to start to pick up in volume from now on.
The unseasonal scattered rain showers over many of the coffee districts in South East Brazil have caused some early flowerings and with the fears that there might not be follow on rains for some weeks, the speculation that this might cause flowers to abort and damage the potential of the next 2017 crop. However, one has to keep in mind that following earlier unseasonal rains in June, that the ground water retention levels for the farms are relatively good for this time of the year and thus this might not be so much of a threat. But in the meantime the speculation over damage to the next Brazil crop, is contributing to some degree of speculative buoyancy for the fortunes of the New York market. But should the new spring and summer rain season for Brazil start to soon come to the fore and there is a new cold front and possible rains foreseen for next week, this would no doubt dampen some of the spirits for the speculative bulls within the market.
With forward contract commitments in hand, traders in Ho Chi Minh City are forecasting that the country’s exports of mostly robusta coffees, shall be between 1.67 and 1.83 million bags. However, it is early days and one might suspect that with these estimates being based on business in hand, that there has to be some new business and that by the end of the month the export volumes shall be more related to the higher rather than the lower end of the forecasts.
There is however with the harvest over more volume of robusta coffees coming to the fore from Indonesia and with asking export differentials becoming more competitive, albeit for the short term. These coffee might however assist to counter to a degree the interest in additional prompt shipment of robusta coffees from Vietnam, which shall possibly support the view that the countries September coffee exports shall remain below 2 million bags.
The International Coffee Organisation have reported that the global coffee exports for the month of July were 22% lower than the same month last year, at a total of 7.75 million bags. This number they say brings down the cumulative coffee exports for the first ten months of the present October 2015 to September 2016 coffee year to now being 1.7% lower than the same period in the previous coffee year, at a total of 93.28 million bags.
The November to December contracts arbitrage between the London and New York markets broadened yesterday, to register this at 67.39 usc/Lb., while this equates to a 44.41% 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 1,750 bags yesterday; to register these stocks at 1,280,844 bags. There was meanwhile a smaller in volume 1,007 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 7,677 bags.
The commodity markets had a mixed day yesterday and with the overall macro commodity index tending softer for the day, while the U.S. dollar tended marginally easier for the day. The Coffee, Cotton, Orange Juice, Wheat, Corn, Gold and Silver markets had a day of buoyancy and the Copper market was steady, while the Oil, Natural Gas, Sugar, Cocoa and Soybean markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.21% higher; to see this Index registered at 413.20. The day starts with the U.S. dollar steady in early trade and trading at 1.329 to Sterling and 1.119 to the Euro, while North Sea Oil is near to steady in early trade and trading at 44.90 per barrel.
The London and New York markets started the day with modest buoyancy, but with the New York market soon attracting support and to take a positive track into the early afternoon trade, with the London market following suit in a more cautiously modest manner. As the afternoon progressed and with volume picking up the New York market triggered buy orders which accelerated and extended the gains of the day, while the London market added more value in a more modest and less aggressive fashion. The markets toned down their excitement later in the day and with some light producer selling coming to the fore for the New York market, to see the markets take a steady track for the rest of the day. The London market ended the day on a positive note and with 80% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 74.4% of the earlier gains of the day intact. This close supports a positive technical picture for the markets but following the high volume day yesterday in New York and with Monday’s Labour Day long weekend holiday to the fore one might expect a degree of exhaustion to set in and only 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.
SEP 1826 + 33 SEP 150.10 + 4.20
NOV 1852 + 24 DEC 151.40 + 4.35
JAN 1869 + 22 MAR 154.50 + 4.30
MAR 1884 + 22 MAY 156.30 + 4.20
MAY 1897 + 21 JUL 157.85 + 4.20
JUL 1908 + 21 SEP 159.20 + 4.10
SEP 1920 + 21 DEC 161.20 + 4.10
NOV 1933 + 21 MAR 163.10 + 4.00
JAN 1942 + 21 MAY 164.15 + 3.90
MAR 1949 + 21 JUL 165.20 + 3.85
