Coffee Market Report
| To comply with the dictates of the European Union competition regulators the newly amalgamated Jacobs Douwe Egberts Company that was mad up from the joining of Mondelez International and D. E. Master Blenders 1753 have confirmed the sale to Lavazza of the former Mondelez International coffee brand Carte Noire, for approximately 800 million U.S. dollars. This purchase shall mean that Lavazza who are already the dominant player within the Italian coffee market, shall now also be with the combination of Lavazza and Carte Noire sales, the dominant player within the French coffee market.
The latest survey by the analysts Technavios has indicated that the domestic coffee market in Brazil shall grow at a compound annual growth rate of approximately 1.19% over the next four years, which would indicate domestic market demand increasing to approximately 21.5 million bags per annum. This is a figure which is not very threatening to longer term Brazil coffee supply to the consumer markets, as Brazil is presently coming out of its climatic problems for coffee production and is potentially heading towards annual crops that shall hover around the 60 million bags per annum mark. This survey follows the stalling of Brazil domestic coffee consumption last year, following many years of steady vibrant growth within this the second largest after the U.S.A. coffee consuming nation. But what is perhaps noticeable and worth comment, it that Brazil rather alike the well-developed western European and North American markets is presently experiencing a very vibrant growth in the market share, of the relatively parsimonious single serve capsule and pod coffee machines and the related low volume of coffee per cup, which comes with this form of brewing coffee. Thus resulting in less coffee contributing to more cups, which is a scenario that is dampening coffee consumption growth within the developed coffee markets in general. Meanwhile in terms of coffee supply there remain no medium to longer term concerns and with the prospects for a marginal surplus supply for the forthcoming October 2015 to September 2016 coffee year and so long as the weather holds for Brazil which with the El Nino in play is very much expected and a 60 million bags plus crop for Brazil next year, a much larger surplus supply for the follow on October 2016 to September 2017 coffee year. The question might now be for the longer term and with the resulting soft international coffee prices, what effect that these prices might have on the potential for longer term coffee supply. One might in this respect suspect that prices shall have a negative impact upon coffee farm inputs and that by 2017 there shall be many producers experiencing problems to maintain yields, which will see coffee supply tighten and by then, the possibility of some climatic problems having occurred for some of the producer blocs, to further tighten coffee supply. The arbitrage between the markets narrowed yesterday to register this at 48.80 usc/Lb., while this equates to a 39.02% price discount for the London robusta coffee market. This arbitrage remaining relatively to roasters in comparison to arabica coffee prices, but is perhaps due to widen further in time and when Vietnam stocks start to impact upon the fortunes of the London market. The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 299 bags yesterday; to register these stocks at 2,138,471 bags. There was meanwhile a larger in volume 2,560 bags to the number of bags pending grading for this exchange; to register these pending grading stocks at 320 bags. The commodity markets remained mostly flat to softer yesterday, with slower economic growth prospects within China, the prospects for an increase in the U.S. interest rates later in the year and the resulting robust U.S. dollar continuing to dampen spirits within many markets. The London robusta Coffee, Cotton, Orange Juice and Platinum markets had a day of buoyancy, while the Oil, Natural Gas, Sugar, Cocoa, New York arabica Coffee, Copper, Wheat, Corn, Soybean, Gold and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.37% lower; to see this Index registered at 410.32. The day starts with the U.S. Dollar steady and trading at 1.561 to Sterling and 1.093 to the Euro, while North Sea Oil is steady in early trade and is selling at 55.75 per barrel. The London and New York markets started the day yesterday showing a degree of buoyancy within an environment of thin and lacklustre trade and with both markets maintaining their generally positive stance through to the afternoon trade, with trade proving to be more technical than physical coffee related. The London market maintained its positive stance for the day, but with the New York market finally coming under pressure and heading back below par as the day progressed. The London market continued to end the day on a positive note and with 50% of the earlier gains of the day intact, while the New York market ended the day on a soft note and with 60% of the earlier losses of the day intact. This close provides little in the way of direction and one might think that with the faltering of the New York market yesterday, that it shall most likely inspire a softer start for the London market and little better than a near to steady start for the New York market in early trade today, against the prices set yesterday, as follows: LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb. JUL 1820 + 19 |
