I. & M. Smith (Pty) Ltd. since 1915
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I. & M. Smith (Pty) Ltd.

MARKET REPORT 9 April 2015

09 Apr 2015
The National Coffee Organisation of Guatemala has reported that the country’s coffee exports for the month of March were 28,707 bags or 6.99% lower than the same month last year, at a total of 382,208 bags. This poor performance follows many months of relatively low export volumes and the countries cumulative exports for the first six months of the present October 2014 to September 2015 coffee year are 226,167 bags or 18.02% lower than the same period in the previous coffee year, at a total of 1,028,901 bags.

It is difficult however to appropriate the relatively sharp dip in exports from Guatemala directly to the size of the just being completed new crop, as most forecasts have foreseen this crop to be similar to the last crop and one might rather appropriate the lower exports to the strong internal market price resistance that has this year inflated the asking export differentials for Guatemala coffees, relative to the competition of their neighbouring fine washed arabica coffee producers in Central America and Colombia. While with a change to the VAT regulations within the country, there are prospects of lower volumes of neighbouring Honduras coffees crossing the border, to fly under the lower altitude grades but nevertheless relatively higher value Guatemala flag.

The Coffee Export Association of Brazil have reported that the country exported 213,000 bags or 8.4% more green coffee during the month of March than was exported during the same month last year, at a total of 2,749,000 bags. The arabica coffee exports contributed 2,409,000 bags or 87.63% to this number, with conilon robusta coffees accounting for 340,000 bags or 12.37% of the exports.

Meanwhile with these exports in March while taking place against a relatively soft market, were in terms of value related to the same month last year when prices were related to an even softer market start to 2014, the value of these exports were a greater 24% higher at 552.3 million U.S. Dollars. However when one is to apply the fact that the Brazil Reais was trading at around 2.33 to the dollar during March 2014 as against and exchange rate of around 3.2 to the dollar during March this year, the value of exports in terms of local currency of the 8.4% increase in exports during March this year would have been approximately 70% higher in value than the same month last year. A factor that clearly illustrates the supportive effects of the weaker Brazil Reais for the Brazilian coffee industry, as it sells against the price dictates of weakening international coffee prices. Albeit that the Reais has since posted a modest recovery against the U.S. dollar this month and is presently trading at 3.05 to the dollar.

The European Coffee Federation port warehouse stocks were seen to increase by a modest 96,450 bags or 0.84% during the month of January, to end the month with stocks reported at 11,587,217 bags. These stocks do not however include the onsite roaster inventory, bulk container transit and unreported private warehouse stocks which with the combination of west and east European consumption of around 980,000 bags per week, would most likely have been at least 2.5 million bags and therefore at a guess, total stocks as at the end of December of approximately 14 million bags. Thus stocks that would exceed 14 weeks of the presently flat to often marginally lower roasting activity, which is a very safe level and allow for the European industries to be cautious rather than aggressive buyers.

The arbitrage between the markets has narrowed yesterday to register this at 56.33 usc/Lb., while this equates to a now less attractive 40.60% 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 increase by 5,107 bags yesterday; to register these stocks at 2,299,816 bags. There was meanwhile a smaller in volume 3,324 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 43,818 bags.

The commodity markets experienced a down day yesterday, with the macro commodity index taking a softer track for the day. The Sugar, Cocoa, Cotton and Orange Juice markets had a day of buoyancy, while the Oil, Natural Gas, Coffee, Copper, 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 1.15% lower; to see this Index registered at 422.16. The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.486 to Sterling and 1.076 to the Euro, while North Sea Oil is steady in early trade and is selling at 55.55 per barrel.

The London market started the day on a near to steady note, while the New York market started with a degree of modest buoyancy and with the London market recovering to see both markets showing good buoyancy in early afternoon trade. As the afternoon progressed however and with the negative nature of the overall macro commodity index in play and with the American trade coming into work, the New York market suffered from a relatively sharp reversal and with the dip in value triggering sell stops, to accelerate the losses and to influence a more modest reversal of fortunes for the London market. The London market continued to end the day on a modestly softer note and with 88.9% of the losses of the day intact, while the New York market took as sideways soft track following it relatively high volume sharp dip and ended the day on a very soft note and with 91.7% of the losses of the day intact. This overall soft close and one that was near to the lows of the day is likely to inspire a cautious and hesitant softer start relatively stable London market and perhaps a steady start for the New York market against the prices set yesterday, as follows:

 

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
MAY 1790 – 16 MAY 135.70 – 6.25 
JUL 1817 – 16  JUL 138.75 – 6.10 
SEP 1840 – 15 SEP 141.65 – 6.00 
NOV 1854 – 15 DEC 145.55 – 5.95 
JAN 1865 – 17 MAR 149.35 – 5.95 
MAR 1881 – 17  MAY 151.55 – 5.90 
MAY 1897 – 17  JUL 153.00 – 5.75 
JUL 1913 – 17 SEP 153.85 – 5.65 
SEP 1931 – 17  DEC 154.65 – 5.70 
NOV 1934 – 17  MAR 157.20 – 5.75