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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

17 Jul 2015
The largest coffee cooperative in Brazil Cooxupe has reported that their members have so far harvested 27.3% of their new crop coffees, which remains well behind the percentage harvested at the same time last year. This new crop harvest falling behind for not only a longer period required for cherry maturity, but also due to the recent cold fronts that have brought in unseasonal rain showers, which have interrupted the arabica coffee harvest.

So far with the conilon robusta coffee harvest within Brazil near to completion and the arabica coffee harvest picking up in volume, the reports are that most likely due to the partial drought in south east Brazil for the first six weeks of the year, that the overall percentage of bolder screen 17/18 bean outturns are much lower than normal. However the reports are that bean size aside and with only approximately 20% rather than the usual 30% of the beans being within this bolder screen 17/18 category, the cup quality of the new crop arabica coffees is overall above average.

This reduced overall bean size is in the meantime inspiring farmers and millers to start demanding increased price premiums for their larger beans, which is resulting in a degree of internal market price resistance for this quality of beans. Thus inspiring many consumer roasters to change their buying habits and to start looking closer at the small screen 14/16 beans, for which there is no apparent tightness of supply.

The physical robusta coffee market shall be particular quiet today, with the Vietnam market still suffering from the prevailing internal market price resistance that is muting consumer buying interest for Vietnam robusta coffees, while the alternative supplier Indonesia started to close down yesterday in advance of today’s Eid us Fitr public holiday. This holiday that comes with the new moon and hails the end of the annual Ramadan fasting period and shall be further celebrated in Indonesia with both Monday and Tuesday declared as public holidays and under the banner of both the Libur Bersama and Cuti Bersama titles, is likely to somewhat stall within the robusta coffee market through to the second half of next week.

The Vietnam central highlands province of Dak Lak which has approximately 204,500 hectares of land under coffee farms has announced plans to invest the equivalent of 715.4 million U.S. dollars in the construction of an additional 82 new reservoirs and pumping stations and the upgrading of an existing 271 reservoirs and pumping stations, to support irrigation systems for the provinces farmers. Thus underlining the longer term sustainability of the Vietnam coffee industry of which, the province of Dak Lak accounts for approximately 29% of overall production. This small province in terms of coffee production is amazingly the fifth largest coffee producer, behind Brazil, Vietnam overall, Colombia and Indonesia.

The arbitrage between the markets has remained steady yesterday to register this at 51.51 usc/Lb., while this equates to a 39.98% 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 765 bags yesterday; to register these stocks at 2,155,120 bags. There was meanwhile a larger in volume 1,986 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 2,645 bags.

The commodity markets were generally lacklustre in nature yesterday and with the overall macro commodity index tending softer through the day, to see the majority of the markets drifting back to lower value. Meanwhile the European Central bank has maintained their existing low interest rate, while the U.S.A. has reported a ten year low in jobless rates which impacted positively upon the fortunes of the U.S. dollar, which assisted to dampen spirits within many markets. The Brent Oil, Cotton and Corn markets had a day of buoyancy and the U.S. Oil and Cocoa markets were steady, while the Natural Gas, Sugar, Coffee, Copper, Orange Juice, Wheat, Soybean, Gold, Silver and Platinum markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.85% lower: to see this Index registered at 420.11. The day starts with the U.S. Dollar steady and trading at 1.564 to Sterling and 1.088 to the Euro, while North Sea Oil is near to steady in early trade and is selling at 56.20 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. As the afternoon progressed and with the negative influences of the softer macro commodity index having an influence, the markets lost a little more weight and with trade remaining thin and lacklustre in nature, with seemingly most producers and consumer industry players remaining side-lined. The London market continued to lose weight as the afternoon progressed but to bounce off the lows near to the end of the day, while the New York market took something of a stuttering sideways track to the close. The London market ended the day on a soft note and with 66.7% of the earlier losses of the day intact, while the New York market ended the day on a likewise softer note but having recovered 60.9% of the earlier losses of the day by the close. This overall soft close and with the U.S. dollar retaining its muscle is unlikely to inspire little better than a steady start for early trade today against the prices set yesterday, as follows:


JUL 1836 – 16                               JUL   127.45 – 0.55
SEP 1705 – 20                               SEP   128.85 – 0.90
NOV 1716 – 19                             DEC  132.35 – 0.80
JAN 1732 – 18                              MAR 136.00 – 0.75
MAR 1752 – 19                            MAY 138.20 – 0.75
MAY 1774 – 18                             JUL  140.25 – 0.80
JUL 1796 – 16                               SEP  142.25 – 0.80
SEP 1814 – 18                              DEC  145.25 – 0.75
NOV 1836 – 16                            MAR 148.00 – 0.70
JAN 1858 – 16                              MAY 149.50 – 0.60