MARKET REPORT 10 April 2015
| The Florida based coffee traders with Wolthers Douque USA who have a traditionally strong Brazilian relationship have forecasted that the new Brazil crop that is already starting in terms of the conilon robusta harvest, shall be 3.14% higher than their estimate for the past 2014 crop, at a total of 45.6 million bags. There is however already some question on their assessment of the previous crop being approximately 3.5 million to 4 million bags lower than many other reliable private trade and industry assessments of the past crop and therefore, there might be some question on the relatively modest figure that this trade house is forecasting for the new crop.
Meanwhile within Brazil the internal market supply of stock coffees has slowed, with a the firmer nature of the Brazil Reais contributing to price resistance and thus impacting upon very short term selling activity on the part of the exporters. Most exporters do however already have good volumes of forward sales commitments to still fulfil, as have most consumer market industries got good short to medium term cover on their books and this slowing of sales activity has no significant impact upon global supply of Brazil coffees. But it is something of a problem for consumer buyers looking for short term fill in supply of Brazil coffees, as they have to pay up relatively high differentials to secure such coffees. There are no weather issues presently coming to the markets from Brazil, following the past few weeks of good rains and to contrary and while there are many months still to the fore in terms of weather, the trees are looking to be in very good shape for the prospects for a good flowering in October and a good follow on crop in the coming year. These are however early days and with the unlikely to be damaging frost season on the nearby horizon aside, the big question shall be what will be the quality of the new spring and summer rain season that comes into play late in September, which shall be critical for the prospects for the next 2016 crop. The well-respected Climate Prediction Centre in the USA has raised their potential for the pending El Nino phenomenon to a 70% factor, which might contribute towards a degree of confidence in the prospects for a normal to good spring and summer rain season for South Eastern Brazil and including the main coffee growing districts. Traditionally an El Nino within the Pacific Ocean, brings with it higher rainfall for this region in Brazil and therefore, lessens the risk of a delayed start to the next rain season. It might however as this phenomenon is expected to come into play in the coming month or two, bring rains into play during the traditionally relatively dry winter harvest season in Brazil, which might cause interruptions during this harvest and some risk of damage in quality rather than volume, for harvest coffees in their patio drying process. The pending joining of the Mondelez International and D. E. Master Blenders 1753 coffee business in Europe which is still awaiting approval by the EU competitions board is seemingly going to encounter further delays, as the sale of the Mondelez International Carte Noire Brand to Lavazza that would be expected to satisfy the competitions board, is apparently still some way from being concluded. This indicated by a report yesterday that Lavazza only expects to make a decision on the matter by late June this year, which would most likely delay the prospects for the finalisation of an amalgamation of Mondelez International and D. E. Master Blenders 1753 into the second half of the year. The arbitrage between the markets has broadened yesterday to register this at 57.73 usc/Lb., while this equates to a now less attractive 41.19% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices. Especially so as the price resistance within the majority of arabica producer countries, continues to buoy asking export differentials for new business. The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 3,912 bags yesterday; to register these stocks at 2,295,904 bags. There was meanwhile a smaller in volume 222 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 43,596 bags. The commodity markets were mixed yesterday, but with many experiencing a softer day’s trade and impacting negatively upon the overall macro commodity index for the day. The Oil and New York arabica Coffee markets had a day of buoyancy and the London robusta Coffee market was steady, while the Natural Gas, Sugar, Cocoa, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Gold, Silver and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.65% lower; to see this Index registered at 419.42. The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.469 to Sterling and 1.067 to the Euro, while North Sea Oil is steady in early trade and is selling at 55.90 per barrel. The London and New York markets started the day on a softer track yesterday, which continued into the afternoon’s trade. There was however support at the lows and the markets recovered in late afternoon trade, but while the New York market managed to hold on to its gains, the London market slipped back to par in late trade. The London market continued to end the day on a steady note, while the New York market ended the day with modest buoyancy and with 66.7% of the gains of the day intact. This rather uncertain close is unlikely to be supportive for confidence and one might expect that the markets are due for little better than a cautiously steady start for early trade today against the prices set yesterday, as follows:
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