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

Coffee Market Report

16 Jul 2015
The National Coffee Association of Guatemala has reported that the countries coffee exports for the month of June were 74,092 bags or 22.62% higher than the same month last year, at a total of 401,629 bags. This number follows many months of internal market price resistant slower sales and relatively modest export numbers and therefore the countries cumulative exports for the first nine months of the present October 2014 to September 2015 coffee year are still 194,707 bags or 8.18% lower than the same period in the previous coffee year, at a total of 2,185,701 bags.

The National Coffee Council of El Salvador have announced that the countries coffee exports for the month of June were 10,149 bags or 19.96% higher than the same month last year, at a total of 60,990 bags. This number contributes to the countries cumulative exports for the first nine months of the present October 2014 to September 2015 coffee year to being 81,372 bags or 17.8% higher than the same period in the previous coffee year, at a total of 538,515 bags.

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 220,664 bags or 4.17% during the month of June, to register these stocks at 5,510,114 bags at the end of the month. These stocks do not of course include the in transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is fed by these stocks of 500,000 bags per week, would conservatively have been at least 1 million bags.

Therefore if one is to consider the additional unreported stocks and look to end August stocks in North America of at the very least 6.5 million bags, it would have equated to at least a very safe 13 weeks of roasting activity and still a safe reserve, in terms of the potential for a continued steady flow of new crop coffees from Mexico, Central America, Colombia, Peru, Vietnam and Indonesia. To soon be followed by the new crop coffees from Brazil, where all the latest forecasts are now pointing towards a much better than had initially been forecasted, new arabica coffee crop. Albeit that on the short term with the prevailing soft nature of the terminal markets, one can expect that price resistance might slow producer selling activity.

The Vietnam Customs Authority has reported that the countries coffee exports for the month of June were very much in line with market expectations, at a total of 1,736,667 bags. This figure sees the countries cumulative exports of mostly robusta coffees for the first six months of this year being 36% lower than the same period last year, at a total of 11,408,333 bags.

The arbitrage between the markets has narrowed yesterday to register this at 51.51 usc/Lb., while this equates to a 39.70% 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 decrease by 790 bags yesterday; to register these stocks at 2,154,355 bags. There was meanwhile a larger in volume 3,250 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 4,631 bags.

The commodity markets were in receipt of better than expected Chinese GNP figures yesterday, but relatively static economic figures out of the U.S.A and accompanied by the negative news for the oil markets, which comes with the agreement that is likely to see sanctions lifted for Iran and is likely to increase global oil supply. Thus despite the support from the news out of China, the macro commodity index tended marginally softer during trade yesterday. The Natural Gas, Orange Juice and Corn markets had a day of buoyancy, while the Oil, Sugar, Cocoa, Coffee, Cotton, Copper, Wheat, 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 0.77% lower: to see this Index registered at 423.73. The day starts with the U.S. Dollar experiencing a degree of buoyancy and trading at 1.561 to Sterling and 1.092 to the Euro, while North Sea Oil is showing some buoyancy in early trade and is selling at 57.00 per barrel.

The London and New York markets started the day yesterday on a marginally softer note and within an environment of thin and hesitant trade, to continue on this track into the afternoon. However in early afternoon trade the London market moved back into positive territory, while the New York market briefly moved back to par, before moving back into negative territory and finally triggering sell stops and heading deeper into negative territory and having an influence upon sentiment within the London market, which likewise fell back into negative territory. The New York market posted a degree of recovery from its lows but with the negative influences of the macro commodity index in play took a sideways track for the rest of the day’s trade, which was accompanied by a similar sideways track by the London market. The London market continued to end the day on a soft note and with 63% of the earlier losses of the day intact, while the New York market likewise ended the day on a soft note and with 52.3% of the earlier losses of the day intact. This relatively dismal close following the early in the week buoyancy is unlikely to inspire, but with the markets having bounced off their lows yesterday one might expect to see a cautious near to steady start for the markets for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.

JUL 1852 – 15                              JUL   128.00 – 1.85
SEP 1725 – 17                              SEP   129.75 – 2.25
NOV 1735 – 18                            DEC  133.15 – 2.20
JAN 1750 – 19                             MAR 136.75 – 2.15
MAR 1771 – 18                           MAY 138.95 – 2.15
MAY 1792 – 17                             JUL 141.05 – 2.10
JUL 1812 – 15                               SEP 143.05 – 2.00
SEP 1832 – 15                              DEC 146.00 – 1.95
NOV 1852 – 15                            MAR 148.70 – 1.95
JAN 1874 – 15                             MAY 150.10 – 2.15