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I. & M. Smith (Pty) Ltd.

Coffee Market Report

02 Apr 2015

Coffee Market Report

April 03 2015

The negative nature of the reference prices of the London robusta coffee market over the past few weeks is causing intense pressure for many of the exporters in Vietnam, with many short sold exporters struggling to find affordable coffees to cover their short term short sold contracts. There might however be some slight relief coming with the pre long weekend bounce that was experienced yesterday, but it is perhaps not enough to counter the potential for a number of late shipments that might result during the month of April.

The more impressive recovery for the New York market might bring some small relief for exporters in Brazil in terms of the presently tight price resistant internal market in Brazil, but this recovery has been matched by a recovery for the Brazil Real, which counters in terms of domestic prices much of the advantage that the New York market might offer for the exporters and for the present the asking export differentials for new sales of Brazil coffee remain relatively firm. This situation being very much the case for most arabica coffee exporters, with the Central American exporters having to pay up for new crop coffee within their price resistant internal markets and with the similar result of having to demand relatively firm export differentials, relative to the volatile and still relatively soft New York market.

In terms of the development of the questionable in size new crop in Brazil, the month of March has experienced good rains for all of the main coffee districts and the ground water retention levels with the farms is reasonably good, ahead of the May to September relatively dry winter season. This shall not only assist to lessen the stress for the coffee trees during the forthcoming new crop harvest season, but shall assist the cherries to fill out ahead of the harvest and lessen to a degree the negative effects of the unseasonal dry month of January and might perhaps make one lean more towards some of the more positive new crop forecasts at around 49 million bags.

There is now a relatively long Easter break for the coffee markets and commodity markets in general, as while the New York markets shall return to work for a short trading day on Monday following today’s Easter Friday long weekend break, the majority in terms of volume coffee producers and consumer industry roasters shall remain on holiday until Tuesday next week. Not that one can expect much in the way of active physical trade for Tuesday, as both producers and consumers shall be awaiting further assessment of the direction that the New York and London markets might take, following yesterday’s relatively positive recovery for the markets.

The arbitrage between the markets has broadened yesterday to register this at 61.92 usc/Lb., while this equates to a now less attractive 43.07% 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 5,054 bags yesterday; to register these stocks at 2,291,184 bags. There was meanwhile a smaller in volume 2,804 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 51,175 bags.

Many of the commodity markets gained some degree of support from the marginally weaker U.S. dollar yesterday, but with the influential Oil markets tending to falter. The Natural Gas, Sugar, Cocoa, Coffee, Cotton, Orange Juice, Wheat and Corn markets had a positive day’s trade, while the Oil, Copper, 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 0.36% higher; to see this Index registered at 424.22. The day starts with the U.S. Dollar tending steady and trading at 1.482 to Sterling and 1.088 to the Euro, while North Sea Oil was softer yesterday and selling at 54.10 per barrel.

The London and New York markets started the day on a steady to soft note yesterday, but both markets soon started to attract some support and entered the afternoon on a positive note. This set a good pre long weekend platform for the markets, which started to build upon their gains as the afternoon progressed and with stop loss buy stops being triggered to accelerate the gains for the more volatile New York market. The London market continued to end the day on a positive note, albeit that there was a modest reversal near to the close and with 74.3% of the gains of the day intact, while the New York market maintained its steady upward track and ended the day on a very positive note and with 91.2% of the earlier gains of the day intact. This positive close is perhaps supportive for sentiment for what can be expected to be a thinly traded New York market on Monday, while the London market shall have to wait to see the direction that shall be taken within New York for the day, to set its mood for trade on Tuesday next week. Thus we would expect that New York shall start the day on a steady to perhaps buoyant track on Monday against the positive prices set yesterday, as follows:

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

MAY 1778 + 28 MAY 140.90 + 6.05

JUL 1804 + 26 JUL 143.75 + 5.70

SEP 1825 + 24 SEP 146.70 + 5.70

NOV 1840 + 22 DEC 150.65 + 5.70

JAN 1855 + 20 MAR 154.35 + 5.65

MAR 1872 + 18 MAY 156.50 + 5.70

MAY 1891 + 18 JUL 157.75 + 5.85

JUL 1909 + 18 SEP 158.50 + 5.95

SEP 1927 + 18 DEC 159.35 + 5.80

NOV 1930 + 18 MAR 161.70 + 5.70

 


Coffee Market Report

April 02 2015

With the month of March over the Indonesian island of Sumatra which dominates the nations robusta coffee production has reported that the islands robusta coffee exports for the month of March were 41,147 bags or 21.31% higher than the same month last year, at a total of 234,268 bags. This follows a relatively dismal performance over the first four months of the present coffee year and therefore the cumulative robusta exports from Sumatra for the first six months of the present new October 2014 to September 2015 coffee year are still 930,842 bags or 35.3% lower than the same period in the previous coffee year, at a total of 1,705,871 bags.

This relatively poor five month performance on the part of robusta coffee supply from Sumatra is of course related to a greater degree to a poor weather related crop last year and one can expect that for the short term and ahead of the new crop that starts to come into play during the second quarter of this year, that the figures shall continue to be relatively flat for the next two to three months. However the weather conditions have been much improved and the prospects are for a much improved new crop, which should see the Sumatran robusta coffee exports start to pick up and become more aggressive by the third quarter this year and thereon for the last quarter of the present coffee year.

The National Coffee Institute of Costa Rica has reported that the countries coffee exports for the month of March were 846 bags or 0.52% higher than the same month last year, at a total of 165,021 bags. This does however follow five months of price resistant slow export activity and the cumulative exports for the first six months of the present October 2014 to September 2015 coffee year are 41,760 bags or 7.76% lower than the same period in the previous coffee year, at a total of 496,552 bags.

The preliminary coffee export figure for the month of March in Brazil have been announced and with the country reporting that the coffee exports in March were 400,000 bags or 16.26% higher than the same month last year, at a total of 2.86 million bags. This figure by nature of the relatively large volume reported is somewhat bearish for market sentiment, as while it does of course confirm that Brazil despite a modest deficit 2014 crop has been able to use their significant carryover stocks from the previous years to maintain good coffee supply, that there is seemingly not fear of a significantly large dip in the size of the new crop that would justify holding back stocks from the market.

Adding confusion to the mixed nature of new crop forecasts from Brazil the prominent local exporter Comexim has forecasted that the new crop shall most probably be only marginally 1.52% lower than the previous crop, at a total of approximately 48.6 million bags. This forecast estimating that while the new arabica coffee crop shall be 2.2 million bags or 6.72% higher at 34.95 million bags, the dry weather affected new conilon robusta crop shall be 2.95 million bags or 17.77% lower at 13.65 million bags.

Perhaps the most important factor in terms of these forecasts is the fact that they mostly all indicate that there shall be some improvement in the size of the new arabica coffee crop and with the losses being related to the conilon robusta coffee crop, which is not a coffee that is of as much concern to the main consumer markets. These conilon robusta coffees are mostly related to the price sensitive sector of the Brazil domestic market and with exports being more dedicated to the advantageous rather than dedicated consumer market buyers at such times as there is surplus conilon robusta supply.

Thus one might suggest that if these forecasts are correct that there shall now be less conilon robusta coffees available for export which shall be covered by the presently adequate Asian robusta coffee supply, while there shall be additional arabica coffee supply to reduce the risk of longer term tightness of Brazil arabica coffee supply to the consumer markets. Arabica coffee supply that has so far since mid-last year and shall be for the next twelve months, been supplemented by the significantly large carryover stocks of arabica coffees into the last deficit 2014 crop.

The arbitrage between the markets has broadened yesterday to register this at 55.47 usc/Lb., while this equates to a now less attractive 41.13% 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 10,231 bags yesterday; to register these stocks at 2,296,238 bags. There was meanwhile a larger in volume 35,284 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 53,979 bags.

The commodity markets gained some degree of support from the news of slower growth for the U.S. economy for the first quarter of this year and a marginally weaker U.S. dollar, which buoyed the macro commodity index for the day. The Oil, Sugar, Cocoa, Coffee, Copper, Wheat, Corn, Soybean, Gold, Silver and Platinum markets had a day of buoyancy, while the Natural Gas, Cotton and Orange Juice markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.33% higher; to see this Index registered at 422.71. The day starts with the U.S. Dollar tending steady and trading at 1.483 to Sterling and 1.078 to the Euro, while North Sea Oil is showing buoyancy in early trade and is selling at $ 55.95 per barrel.

The London market started the day on a steady note yesterday, while the New York market kicked off with a degree of buoyancy and with the New York market extending its gains into the afternoon’s trade and to be followed by modest buoyancy for the London market. Later on in the afternoon and with volumes of trade building, the New York market started to react to the firmer nature of the Brazil Real and the prospects of slowing Brazil sales and extended its gains, which triggered buy stops to accentuate the rally, with the London market starting to likewise add some more weight. The markets did however soon hit a ceiling and encountered profit taking selling to settle back from the highs, but to maintain along with the support from the overall macro commodity index a positive track through to the end of the day. The London market continued to end the day on a positive note and with 77.8% of the gains of the day intact, while the more volatile New York market ended the day on a positive note and with only 28.26% of the earlier gains of the day intact. The inability of the New York market to hold onto the major part of the rally might be a concern to the chartists and one might expect to see only a cautious steady pre long weekend start for the markets for early trade today, against the prices set yesterday, as follows:

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

MAY 1750 + 21 MAY 134.85 + 1.95

JUL 1778 + 20 JUL 138.05 + 1.95

SEP 1801 + 17 SEP 141.00 + 1.85

NOV 1818 + 17 DEC 144.95 + 1.85

JAN 1835 + 16 MAR 148.70 + 1.90

MAR 1854 + 19 MAY 150.80 + 2.00

MAY 1873 + 21 JUL 151.90 + 2.20

JUL 1891 + 21 SEP 152.55 + 2.20

SEP 1909 + 30 DEC 153.55 + 2.45

NOV 1912 + 30 MAR 156.00 + 2.70

 


Coffee Market Report

April 01 2015

Trade within the internal market in Vietnam was stalled yesterday, as the already price resistant and relatively high priced farmers and internal traders refused to follow the negative trend of the reference prices of the London robusta coffee market. This is putting severe pressure upon such forward sold exporters who have yet to cover all the stocks required to cover their medium term commitments and there are fears being voiced that this might result in some delayed shipments, over the next couple of months.

Many speculate that in excess of 50% of the new 27 million bags crop in Vietnam is still within the hands of the farmers and internal traders, which is a frightening factor in terms of the delivery potential of the exporters and their forward sold commitments. While so long as the farmers hold out for higher relative to the London market and so long as there is no short term bounce, this situation might become much worse and for the present there are no signs that the farmers are ready to break and become more aggressive sellers.

Coex Coffee International with from its headquarters in Miami Florida have forecasted that the new Brazil crop shall be 6.18% lower than the previous 2014 crop, at a total of 45.08 million bags. This relatively modest figure is very much in line with the recent forecasts that came from the brokers International F C Stone and the Neumann Gruppe Statistical Unit, but well below the earlier forecasts for the 2015 Brazil crop from Volcafe and Ecom, who have forecasted a new crop of in excess of 49 million bags.

There is no question however that with a domestic coffee demand of close to 21 million bags and an export demand with a strong conilon robusta coffee domestic market component due to see lower conilon robusta exports dip over the next twelve months to possibly see overall export demand at around 32 million bags, that this shall be a deficit new crop. The question is shall the deficit be 3.5 million bags or 8 million bags, which shall further deplete the diminishing carryover stocks into the new crop and by nature dictate the next 2016 crop shall have to well exceed 55 million bags, if there is not to be a severely tightening Brazil coffee supply for the 2016/2017 coffee year.

There is however with unforeseen damaging weather issues aside the prospects for a good recovery for the Brazil crop for next year and likewise, rising coffee production due for Central America, Colombia, Peru, Vietnam, Indonesia and Uganda and for the present, the indications are that there shall be good coffee supply for the follow on 2015/2016 and 2016/2017 coffee years. But weather is unpredictable and while so for the present the prospects for longer term coffee supply might justify the soft nature of the New York and London coffee markets that are also being influenced by the soft nature of the bail out by the funds for commodities in general, one might expect that there is more chance of damaging weather issues to the fore than not and therefore, a good chance for a change in market sentiment and a recovery in prices for later in the year.

The International Coffee Organisation has reported that the world coffee exports for the month of February was 980,000 bags or 10.23% lower than the same month last year, at a total of 8.6 million bags. This dip contributes to their figure for world coffee exports for the first five months of the present October 2014 to September 2015 coffee year to be 2.7% lower than the same period in the previous coffee year. But this is not a reflection of tight coffee supply, but is rather the result of strong price resistance within the internal markets of most of the major producers, which is resulting in rising asking differentials for exports and less buying aggression on the part of the trade houses and consumer market industries. A factor that is most probably resulting in a slow but steady liquidation of the still substantial consumer market coffee stocks, that are filling the gap created by lower overall volumes of producer coffee exports.

The arbitrage between the markets has broadened yesterday to register this at 54.47 usc/Lb., while this equates to a now less attractive 40.99% 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 3,271 bags yesterday; to register these stocks at 2,306,469 bags. There was meanwhile a larger in volume 7,649 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 18,695 bags.

The commodity markets were mixed yesterday, but with the overall macro commodity index maintaining a softer track for the day. The Natural Gas, Cocoa, Coffee, Cotton, Gold and Platinum markets had a day of buoyancy and the Soybean and Silver markets were steady, while the Oil, Sugar, Cotton, Orange Juice, Wheat and Corn markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.75% lower; to see this Index registered at 417.18. The day starts with the U.S. Dollar tending marginally easier and trading at 1.485 to Sterling and 1.077 to the Euro, while North Sea Oil is showing buoyancy in early trade and is selling at $ 54.15 per barrel.

The London market started the day on a softer note yesterday, while the New York market had a steady start and while the New York market started to show some degree of buoyancy, the London market remained in negative territory into the early afternoon trade. The New York market did however attract more support as the afternoon progressed and to add some more value, which seemingly had its influence to see the London market recover to just above par. The New York market continued to show some muscle and with the London market adding some value as the afternoon progressed and with good volumes of trade coming into both markets, but with both the markets coming under pressure at the highs and reversing the trend later in the day. The London market continued to end the day with modest buoyancy and with 53.8% of the gains of the day intact, while the New York market ended the day with only very modest buoyancy and only 15.3% of the earlier gains of the day intact. This late in the day reversal in the fortunes of the markets is unlikely to inspire much better than a steady to soft start for early trade today against the prices set yesterday, as follows:

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

MAY 1729 + 7 MAY 132.90 + 0.55

JUL 1758 + 7 JUL 136.10 + 0.45

SEP 1784 + 7 SEP 139.15 + 0.45

NOV 1801 + 5 DEC 143.10 + 0.40

JAN 1819 + 5 MAR 146.80 + 0.30

MAR 1835 + 3 MAY 148.80 + 0.25

MAY 1852 unch JUL 149.70 + 0.15

JUL 1870 – 3 SEP 150.35 + 0.20

SEP 1879 – 3 DEC 151.10 + 0.20

NOV 1879 MAR 153.30 + 0.15

 


Coffee Market Report

March 31 2015

The latest Commitment of Traders report from the washed arabica coffee New York market has seen the shorter term in nature Managed Money Fund sector of the market increase their net short sold position within this market by 54.68% in the week of trade leading up to Tuesday 24th. March; to register a net short sold position of 8.399 Lots on the day. Over the same period the longer term in nature and steadier Index Fund sector of this market increased their net long position within the market by 10.35%, to register a net long on the day of 24,799 Lots.

During this same week of trade the Non Commercial Speculative sector of the market increase their net short sold position within the market by 26.03%, to register a net short of position of 13,366 Lots. This net short sold position which is the equivalent of 3,789,202 bags has most likely been further increased over the period of mixed buy overall softer trade that has since followed and likewise, that of the Managed Money fund sector of the market.

The latest Commitment of Traders report from the London robusta coffee has reported that the more speculative Managed Money sector of this market decreased their net long position within this market by 8.27% in the week of trade leading up to Tuesday 24th. March, to see this long position registered at 11,877 Lots, on the day. This speculative net long position within the London market which is the equivalent of a relatively modest 1,979,500 bags has most likely been further decreased, over the period of mixed but overall softer trade that has since followed.

There was nothing in the way of striking news coming to the markets from any sectors of the coffee markets, which in terms of the negative track that the funds are presently taking the markets, tended to support the bearish sentiment of the speculative sector of the market. Thus with the chartists very much in control and triggering sell stops later in the day yesterday, there was a return to the lows of earlier in the month for both markets. A dip that with the potential for the charts to influence further selling on the part of the funds, is most certainly a frightening factor for the majority of the producers.

The question is how far albeit that already in terms of cost of production and despite prices being defined in terms of a firmer U.S. dollar might the funds take the markets as unless there is soon another correction, the downside could be quite severe. Especially so as with the Central and South American producer bloc that still accounts of approximately 60% of world production already distracted by the forthcoming Easter holiday season, one cannot expect much in the way of supportive action coming forth from the producers. Not that one can really think of much that could be done by any of the producers on the short term, to counter the negative pressure of the funds that is not only related to coffee, but to commodities in general.

This issue of soft commodity prices is well illustrated by the Sugar market that dipped yesterday to new six year lows, which further increases the problems for many large multi crop farmers in South East Brazil who farm coffee, sugar and citrus. Farmers who traditionally in terms of the insurance provided by multi cropping, used to look to their alternative crops to counter the negative nature of prices for one or the other of their crops. This will contribute to continued strong price resistance within the internal market on the part of Brazils farmers ahead of their new crop, as it does already within most other producer countries and with the resulting rising asking export differentials having to be demanded by most coffee exporters in general, but for many farmers the period of resistance might be limited by their ability to finance farm stocks.

The arbitrage between the markets has narrowed yesterday to register this at 54.24 usc/Lb., while this equates to a now less attractive 40.98% 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 751 bags yesterday; to register these stocks at 2,309,740 bags. There was meanwhile a larger in volume 4,284 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 26,344 bags.

The commodity markets maintained their overall soft stance yesterday, but with some exceptions. The Natural Gas, Copper, Orange Juice, Wheat, Corn and Soybean markets had a day of buoyancy and the Cotton market was near to steady, while the Oil, Sugar, Cocoa, Gold, Silver and Platinum markets had a softer day’s trade and the Coffee markets were big losers on the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.27% lower; to see this Index registered at 420.32. The day starts with the U.S. Dollar showing some buoyancy and trading at 1.478 to Sterling and 1.078 to the Euro, while North Sea Oil is tending softer in early trade and is selling at $ 54.10 per barrel.

The London and New York markets opened the day yesterday taking a modestly softer track, within an environment of thin and lacklustre trade. There was the occasional support coming forth though for the thinly traded New York market that experienced the occasional recovery to par in the early afternoon, but as the afternoon progressed and with a little more volume coming into play, both markets extended their losses. This remained the track for the rest of the day within both markets and with the markets lacking underlying industry support, taking a steady downside track towards the close. The London market ended the day on a soft note and with 93% of the losses of the day intact, while the New York market ended the day on a similarly soft note and with 91.4% of the earlier losses of the day intact. This soft close does little to inspire and one might expect with a firm U.S. dollar in play and the negative nature of the macro commodity index, little better than a steady to soft start for early trade today against the prices set yesterday, as follows:

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

MAR 1697 – 66

MAY 1722 – 66 MAY 132.35 – 5.85

JUL 1751 – 65 JUL 135.65 – 5.85

SEP 1777 – 66 SEP 138.70 – 5.75

NOV 1796 – 66 DEC 142.70 – 5.75

JAN 1814 – 66 MAR 146.50 – 5.70

MAR 1832 – 67 MAY 148.55 – 5.80

MAY 1852 – 67 JUL 149.55 – 5.90

JUL 1873 – 67 SEP 150.15 – 5.95

SEP 1882 – 67 DEC 150.90 – 6.00

 


Coffee Market Report

March 30 2015

The latest Commitment of Traders report from the New York arabica coffee market has seen the Non Commercial Speculative sector of this market increase their net short sold position within the market by 26.03% during the week of trade leading up to Tuesday 24th. March; to register a net short sold position of 13,366 Lots. This net short sold position which is the equivalent of 3,789,202 bags has most likely been little changed over the period of mixed but overall steady trade, which has since followed.

The General Statistical Office in Vietnam has announced on Friday that with most of the months export registrations in hand, that they foresee exports of mostly robusta coffees during the month of March to be 52.6% lower than the same month last year, at a total of close to 2.17 million bags. This they say would contribute to the countries cumulative coffee exports for the first six months of the present October 2014 to September 2015 coffee year to be 25.5% lower than the same period in the previous coffee year, at a total of close to 10.83 million bags.

This forecast in terms of the March exports is however significantly higher than the earlier forecasts on the part of the Vietnamese traders, who have been talking of March exports due to total between 1.5 million and 1.84 million bags. But whichever figures are correct they provide clear evidence that the prevailing price resistance within the internal market in Vietnam on the part of the farmers and internal traders, is tending to retard export volumes out of the country.

The largest coffee cooperative in Brazil Cooxupé and by nature of Brazil’s dominance in world coffee production and supply the world’s largest coffee cooperative, has reported that due to aggressive selling of their large 2013 crop coffee stocks along with their more modest crop in 2014, that they registered a 31.5% increase in revenue during 2014. This surge in income which was buoyed by the buoyancy seen within the reference prices of the New York arabica coffee market during 2014, the say has seen the cooperative register a profit of the equivalent of 43 million U.S. dollars for the year.

The reference prices of the New York arabica coffee market have however since softened during the first quarter of this year, but the negative bite of this dip in the value of the international coffee prices has been countered by the sharp fall in the value of the Brazil real and furthermore, the cooperative has been delivering coffees that were forward contract sold during last year and ahead of this year’s dip in the international prices and with these sales in hand they forecast a further 16% rise in Brazil Real revenue for this year. It is however perhaps a questionable forecast as it is early days and ahead of the harvest of their new and forecasted repeat modest 2015 crop, while much of the cooperatives stocks would have by now been liquidated and one might foresee the forecast to perhaps be somewhat ambitious.

The report does nevertheless tend to squash fears that the lower international coffee prices might have a negative effect upon longer term farm inputs and production, as their members look towards the investment at the end of the year towards the follow on 2016 crop. Thus one might see the report to be somewhat bearish in nature, in terms of speculative sentiment with the volatile and presently lacklustre and soft New York arabica coffee market.

The arbitrage between the markets has narrowed on Friday to register this at 57.10 usc/Lb., while this equates to a now less attractive 41.32% 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 15,099 bags on Friday; to register these stocks at 2,310,491 bags. There was meanwhile a smaller in volume 5,488 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 30,628 bags.

The commodity markets experienced a soft end to last week, with the Oil prices leading the way for a softer stance within the overall macro commodity index. The Cotton and Wheat markets had a day of buoyancy and the Corn market was steady for the day, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Copper, Orange Juice, Soybeans, 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 0.93% lower; to see this Index registered at 421.48. The day starts with the U.S. Dollar showing some buoyancy and trading at 1.486 to Sterling and 1.087 to the Euro, while North Sea Oil is tending softer in early trade and is selling at $ 54.51 per barrel.

The London market opened the day on Friday on a near to steady note, while the New York market started the day with modest buoyancy but with the New York market soon slipping back into modest negative territory, while the London market extended its early losses. Both markets maintained their soft stance through the afternoon of slow and lacklustre thin trade, with the negative influences of the soft nature of the macro commodity index contributing to the lack of support within the more volatile New York market. The London market continued to end the day on a soft note and with 90.3% of the earlier losses of the day intact, while the New York market ended the day on an equally soft note but with only 55.4% of the earlier losses of the day intact. This close does little to inspire confidence, but perhaps with the evidence of the extended net short sold position of the speculative sector of the New York market and the fact that the New York market managed to partially bounce back from its lows, there may be a hesitantly cautious steady start for early trade today against the prices set on Friday, as follows:

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

MAR 1763 – 28

MAY 1788 – 28 MAY 138.20 – 2.05

JUL 1816 – 28 JUL 141.50 – 2.00

SEP 1843 – 28 SEP 144.45 – 2.05

NOV 1862 – 27 DEC 148.45 – 2.00

JAN 1880 – 26 MAR 152.20 – 1.95

MAR 1899 – 25 MAY 154.35 – 1.80

MAY 1919 – 20 JUL 155.45 – 1.70

JUL 1940 – 13 SEP 156.10 – 1.65

SEP 1949 + 2 DEC 156.90 – 1.60

 


Coffee Market Report

March 27 2015

The National Coffee Organisation of Guatemala has reported that the country’s coffee exports for the month of February were 81,745 bags or 25.02% lower than the same month last year, at a total of 244,959 bags. This poor performance follows many months of relatively low export volumes and the countries cumulative exports for the first five months of the present October 2014 to September 2015 coffee year are 197,460 bags or 23.39% lower than the same period in the previous coffee year, at a total of 646,693 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.

There is seemingly no let up to the regular spells of rainfall over the main Brazil coffee areas and with more rains forecast for the leading arabica coffee districts for early next week, which shall see this leading producer having experienced good rainfall for the month of March. But more important is the fact that these rains shall have assisted to build up the ground water retention levels within the coffee farms, ahead of the relatively dry May to August winter harvest season. This moisture not only conducive to relieving the stress for the coffee trees that comes with the relatively aggressive strip harvesting methods applied by most farmers, but also in terms of the forthcoming frost season, to provide tree moisture that is assists the trees to counter the negative effects of any mild frost occurrences.

The big question however still remains with the Brazil new crop as while the cherry counts upon the trees might support some of the higher new crop forecasts, albeit that none of these dispute the fact that there shall be another deficit crop, there is no certainty over the bean yield per cherry. The big question being the effects of the relatively dry conditions experienced during the traditionally wet month of January and carrying on into the first half of February for many areas within south east Brazil, which might influence relatively small beans and by nature, a lower weight yield from the cherries. This factor perhaps the justification for some of the more modest new crop forecasts that have been coming from not only the traditionally conservative official bodies within the country, but also from some leading coffee trade houses and international futures brokers.

The clarity of this new Brazil crop factor shall really only be forthcoming by the third quarter of this year, as and when there are more specific and accurate hulling and grading outturn reports coming forth from the coffee mills. In the meantime though and once the early new crop coffees start to come to the mills in Brazil, one might expect some low yield scare stories to start coming to the market, even though some of these might be market manipulative in nature.

The arbitrage between the markets has broadened yesterday to register this at 57.88 usc/Lb., while this equates to a now less attractive 41.27% 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 6,799 bags yesterday; to register these stocks at 2,325,590 bags. There was meanwhile a larger in volume 11,093 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 25,140 bags.

The commodity markets were mixed yesterday but with most markets lacklustre and generally softer in nature, but with the macro commodity index nevertheless being buoyed but the strong Oil markets, which were reacting to the fears over the entry of Saudi Arabia and some of the Gulf states into the conflict situation in Yemen. The Oil, markets had a strong day and the New York arabica Coffee, Copper, Gold, Silver and Platinum markets had a day of modest buoyancy and the London robusta Coffee market was steady, while the Natural Gas, Sugar, Cocoa, Cotton, Orange Juice, Wheat, Corn and Soybean markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.11% higher; to see this Index registered at 425.42. The day starts with the U.S. Dollar steady and trading at 1.485 to Sterling and 1.088 to the Euro, while North Sea Oil is tending softer in early trade and is selling at $ 56.60 per barrel.

The London market opened the day yesterday on a steady note and the New York market with some degree of buoyancy to enter the afternoon on a positive track, but to come under pressure amid thin and lacklustre trade as the afternoon progressed and with both markets briefly moving back into negative territory. There was however a recovery and with the New York market posting modest gains, while the London market returned to just above par but struggling to build upon its recovery and with trade within both markets remaining thin and lacklustre in nature. The London market continued to end the day on a hesitantly steady note, while the New York market shed most of its gains to end the day on a modestly buoyant note and with only 10.5% of the earlier gains of the day intact. This close does little to inspire but shall perhaps be sufficient to inspire a slow and 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.

MAR 1791 unch

MAY 1816 unch MAY 140.25 + 0.30

JUL 1844 unch JUL 143.50 + 0.30

SEP 1871 + 1 SEP 146.50 + 0.30

NOV 1889 + 1 DEC 150.45 + 0.25

JAN 1906 + 1 MAR 154.15 + 0.25

MAR 1924 unch MAY 156.15 + 0.35

MAY 1939 unch JUL 157.15 + 0.45

JUL 1953 unch SEP 157.75 + 0.45

SEP 1947 + 9 DEC 158.50 + 0.45

 


Coffee Market Report

March 26 2015

The well respected commodity futures brokers forecasted yesterday that the new Brazil coffee crop shall be close to 44 million to 45.5 million bags and picking up some degree of respect, as the higher figure is somewhat in line with the Neumann Kaffee Gruppe Statistical Unit figure of 45.3 million bags that came to the markets last week. This latest F C Stone forecast that has indicated a new arabica coffee crop of between 32.5 million and 33.5 million bags and a much reduced new conilon robusta crop of between 11.5 million and 12 million bags, with their latest negative adjustment to conilon robusta crop being related to the overly dry weather during January and half of February, within the state of Espirito Santo.

One might suggest that this latest F C Stone forecast while already coming forth from a well-respected institution, gains further respect from the reports not so conservative reference and acknowledgement of the previous year’s crop having been between 48 million to 49 million bags. This figure is well above official figures out of Brazil and is very much in line with many if not most, of the very well respected private trade and industry assessments of the last 2014 crop.

The implication of this latest forecast and one that follows on from the similar in number forecast from a usually reliable source is that one might now be looking at Brazil coming in with a significant deficit production this year. In this respect and with there no doubt that this year shall most certainly see a smaller conilon robusta crop and one that has a dedicated domestic demand, one might expect to see Brazil’s overall coffee export demand dip back towards 31 million bags per annum. However even with the possibility of this dip in exports that shall be added to the approximate 21 million bags of domestic market demand, these latest reports now indicate a deficit supply which would most probably exceed 7 million bags and therefore, one that would nearly eliminate Brazil coffee stocks by the start of the follow on 2016 Brazil crop.

The scheduled auction yesterday of 40,809 bags of aged Brazil Government coffee stocks proved to be a failure, as there were no bidders prepared to pay up over the approximate 101 usc/Lb. to 118 usc/Lb. minimum price levels that were set for individual lots within this overall offering. The comments being that while these minimum price levels were relatively expensive, they were not so in terms of the quality of these over ten year old coffees. There is nevertheless another auction that is scheduled for Wednesday next week, which shall offer approximately 40,800 bags of these aged coffees and with the minimum prices for these lots to be announced on Monday.

With the prevailing price resistance within the internal market in Vietnam which has resulted in exporters having to demand high positive differentials for new robusta coffee business, the Ministry of Agriculture and Rural Development have with the evidence of exports so far this month; estimate that this shall be another month of relatively modest exports. The effects of this to see the countries coffee exports of mostly robusta coffees for this first quarter of 2015, to be over 40% lower than the same period last year. Thus further illustrating or confirming that with the new crop having been only marginally lower than the previous crop, the significantly high levels of new crop stocks that are still being held by farmers and internal traders in Vietnam.

Contrary to the comments on the part of the Indonesian Coffee Exporters and Industries Association on Monday that they foresee coffee production from Indonesia for this year shall be marginally lower than last year; there are many local and international trade and industry players who are actively involved within the country who seemingly do not agree. In fact the perspective is that due to generally favourable weather conditions that the new robusta crop this year that shall start to build up in volumes by May, shall be in excess of 15% larger than the previous crop and one would expect that by the third quarter of the year that there shall be more aggressive robusta coffee selling activity out of Indonesia. Albeit that presently there is no surety of this, while the price resistance within the tight internal market continues to inflate asking export differentials for Indonesian robusta coffees.

The arbitrage between the markets has broadened yesterday to register this at 57.58 usc/Lb., while this equates to a now less attractive 41.14% 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 14,750 bags yesterday; to register these stocks at 2,318,791 bags. There was meanwhile a smaller in volume 13,925 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 36,233 bags.

The commodity markets were mixed yesterday but with most remaining within a narrow trading range, while with the overall macro commodity index was assisted by the weighted oil markets that took a positive track to show some buoyancy for the day. The Oil, Sugar, Cocoa, New York arabica Coffee, Orange Juice, Corn, Gold, Silver and Platinum markets had a day of buoyancy and the London robusta Coffee market was steady, while the Natural Gas, Cotton, Copper, Wheat and Soybean markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.23% higher; to see this Index registered at 424.97. The day starts with the U.S. Dollar near to steady and trading at 1.488 to Sterling and 1.098 to the Euro, while North Sea Oil is showing buoyancy in early trade and is selling at $ 56.85 per barrel.

The London market started the day yesterday on a softer note, while the New York market had a steady start, but with the New York market soon joining the London market in negative territory and into the early afternoon trade. The New York market did however seemingly react to the latest International F C Stone Brazil new crop forecast and moved back into positive territory, while the London market moved back to close to par and finally with the New York market retaining its new found buoyancy to join New York in positive territory. The London market did not however manage to hold on to its gains that peaked at $ 15.00 per Mt and faltered near the end of the day to end on a near to steady note, while the New York market maintained a positive stance through to the end but only retaining 52.5% of the earlier gains of the day by the close. This was however something of a positive day and one might think that with a marginally softer U.S. dollar in play and trade thin that the markets shall encounter a steady start for early trade today against the prices set yesterday, as follows:

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

MAR 1791 – 2

MAY 1816 – 2 MAY 139.95 + 2.65

JUL 1844 – 1 JUL 143.20 + 2.65

SEP 1870 – 1 SEP 146.20 + 2.65

NOV 1888 – 2 DEC 150.20 + 2.70

JAN 1905 – 2 MAR 153.90 + 2.75

MAR 1924 unc MAY 155.80 + 2.80

MAY 1939 unch JUL 156.70 + 2.65

JUL 1953 unch SEP 157.30 + 2.60

SEP 1938 + 4 DEC 158.05 + 2.50

 


Coffee Market Report

March 25 2015

The export selling activity for mostly robusta coffees out of Vietnam is slow and lacklustre for the present, with farmers and internal traders still holding large volumes of new crop coffee stocks and showing strong price resistance towards the negative dictates of the reference prices of the London robusta coffee market. This is however not completely stalling exporters selling activities as the very same soft London market prices allow for consumer roaster buyers to justify paying up high purchase differentials for need to have short term coffees, but it is most certainly dampening spirits in terms of longer term forward buying activity.

It is however proving to be difficult times for any short sold exporters, as they are obliged to pay up loss making prices for coffee stocks to cover such commitments and thus in the bid to recover losses, are obliging them to inflate differentials for new business. Thus with only modest volumes of such business forthcoming and likewise from Indonesia where internal market price resistance is also very much in evidence, there is only lacklustre price fixation hedge selling coming in over the London market for the present and this is assisting this market to be relatively less negative in nature in comparison to the soft New York market.

Meanwhile the Brazil real has recovered some of its recent losses albeit still near to its recent over ten year lows and with farmers having already sold large volumes of their once significant arabica coffee stocks and the relatively soft nature of the reference prices of the New York arabica coffee market dampening selling spirits, there remains a good degree of price resistance within the internal market in Brazil. Thus ahead of the new crop the new business export trade out of Brazil is lacklustre for the present, but with exporters still actively working on the exports of good volumes of their forward sales commitments.

There is likewise a degree of price resistance being shown within Colombia and Central America for the present, but with the latter Central Americans just completing their new crop harvest and with good volumes of new crop stocks in hand, perhaps not having the overall financial muscle to hold out for too long. Thus these coffees along with the pending new Mitaca crop from Colombia and the new Peru crop on the horizon and the resulting price fixation hedge selling that they bring, do provide some degree of threat to the short to medium term fortunes of the related New York market.

With good rains of late the new Brazil coffee crop is steadily progressing towards harvest and with the northern conilon robusta districts soon to start bringing in new crop coffees, while the central and southern arabica coffee districts have their harvest starting in a couple of months’ time. In the meantime all that can be said in terms of forecasts for this potentially relatively modest crop has been reported and with the prevailing and unthreatening normal weather conditions in play, there is nothing more in terms of market supportive fundamental news coming to the markets from Brazil.

This is likewise the case from all the other main producer blocs and the volatile fund playground of the New York arabica coffee market is devoid of supportive fundamental news for the present, to see this market maintaining its soft stance for the present. One might however suggest that there is need to be cautious in terms of this market on the longer term, as there are many weather related hurdles to the fore and recent experience has shown that world weather conditions are erratic and with the soft nature of coffee prices despite the stronger nature of the U.S. dollar limiting the affordability of farm inputs for many producers, there is in many instances a longer term threat to coffee production. Thus one might be safe to bet that on the longer term there shall be some degree of fundamental support coming to the markets, but where the funds might wish to take the markets down to prior to such events, is becoming frightening to the producers.

The arbitrage between the markets has narrowed yesterday to register this at 54.84 usc/Lb., while this equates to a now less attractive 39.94% 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 6,905 bags yesterday; to register these stocks at 2,304,041 bags. There was meanwhile a larger in volume 11,006 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 50,158 bags.

The commodity markets were mixed yesterday but with most remaining within a narrow trading range, as was the case of the seemingly steady U.S. dollar which had little influence within the markets. The U.S. Oil, Natural Gas, Cocoa, Copper, Orange Juice, Corn, Gold, Silver and Platinum markets showed buoyancy, while the Brent Oil, Sugar, Coffee, Cotton, Wheat and Soybean markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.06% lower; to see this Index registered at 423.99. The day starts with the U.S. Dollar steady and trading at 1.486 to Sterling and 1.092 to the Euro, while North Sea Oil is near to steady in early trade and is selling at $ 53.35 per barrel.

The London and New York markets started the day yesterday with some buoyancy and maintained this stance into the early afternoon’s trade, but with the New York market starting to falter and dip back into negative territory as the afternoon progressed. The change in confidence within the New York market and with sell stops being triggered saw the market start to extend its losses and finally had its influence within the London market that followed suit in a less aggressive manner into negative territory. The London market continued to end the day on a soft note and with 90.9% of the losses of the day intact, while the New York market ended the day on a very soft note and with 79.8% of the earlier losses of the day intact. This overall soft close and with nothing in the way of supportive fundamental news in play does little to inspire confidence and one might expect to see a steady to softer start for early trade today against the prices set yesterday, as follows:

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

MAR 1793 – 20

MAY 1818 – 20 MAY 137.30 – 4.55

JUL 1845 – 19 JUL 140.55 – 4.60

SEP 1871 – 19 SEP 143.55 – 4.60

NOV 1890 – 20 DEC 147.50 – 4.65

JAN 1907 – 21 MAR 151.15 – 4.70

MAR 1924 – 24 MAY 153.00 – 4.65

MAY 1939 – 23 JUL 154.05 – 4.55

JUL 1953 – 23 SEP 154.70 – 4.55

SEP 1934 – 23 DEC 155.55 – 4.70

 


Coffee Market Report

March 24 2015

The latest Commitment of Traders report from the washed arabica coffee New York market has seen the shorter term in nature Managed Money Fund sector of the market increase their net short sold position within this market by 26.93% in the week of trade leading up to Tuesday 17th. March; to register a net short sold position of 5,430 Lots on the day. Over the same period the longer term in nature and steadier Index Fund sector of this market decreased their net long position within the market by 2.3%, to register a net long on the day of 22,473 Lots.

During this same week of trade the Non Commercial Speculative sector of the market increase their net short sold position within the market by 13.84%, to register a net short of position of 10,605 Lots. This net short sold position which is the equivalent of 3,006,471 bags has most likely been somewhat reduced over the period of mixed but overall more positive trade which has since followed and likewise, that of the managed money fund sector of the market.

The latest Commitment of Traders report from the London robusta coffee has reported that the more speculative Managed Money sector of this market decreased their net long position within this market by 27.51% in the week of trade leading up to Tuesday 17th. March, to see this long position registered at 12,948 Lots, on the day. This speculative net long position within the London market which is the equivalent of a relatively modest 2,158,000 bags has most likely been little changed, over the period of mixed and overall steady trade that has since followed.

The National Coffee Council in El Salvador have forecasted with most of the new crop harvested that the new crop shall 688,500 bags, which is a figure that is well below some of the earlier private trade and industry forecasts of in excess of 800,000 bags. However this relatively modest forecast until such time as all the new crop coffees actually come to the market has to be seen as something of a conservative estimate and one might think that in time, the evidence of exports shall support a higher new crop figure.

The Indonesian Coffee Exporters and Industries Association have forecast that the 2015 coffee crop shall be from 1.62% to 8.65% lower than the production in 2015, with estimates for this year’s production to be between 10,833,333 bags and 11,666,667 bags. The report supports this conservative estimate with comments on the damaging effects of spells of modest rains, which have been experienced within many leading coffee districts. But one might well suggest that the prevailing negative nature of the reference prices of the international coffee markets might have some influence in the timing and the negative nature of this report, which might be designed to buoy speculative spirits within the market.

There is nevertheless no doubt that whichever of the forecasts that one would wish to believe in terms of the pending new Brazil crop, that it is due to be another relatively small deficit crop and aside from the possible market manipulative nature of reports coming forth from other producers, that coffee supply must tighten as the year progresses. Thus while market direction as is dictated by the financial muscle of the funds is not always related to longer term market fundamentals, one might expect that in time there has to be support forthcoming from the forces of supply and demand. Such a recovery in the markets is however presently being retarded by the evidence of more than adequate world coffee stocks and a degree of complacency on the part of the main consumer market industries, along with the negative nature of the macro commodity index.

The arbitrage between the markets has narrowed yesterday to register this at 58.48 usc/Lb., while this equates to a now less attractive 41.23% 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 13,414 bags yesterday; to register these stocks at 2,297,136 bags. There was meanwhile a larger in volume 16,304 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 61,164 bags.

The commodity markets were seemingly buoyed yesterday by the marginally softer nature of the U.S. dollar, which saw the overall macro commodity index take a positive track. The Oil, Sugar, London robusta Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Gold, Silver and Platinum markets had a day of buoyancy, while the Natural Gas, Cocoa and New York arabica Coffee markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.99% higher; to see this Index registered at 424.24. The day starts with the U.S. Dollar steady against its softer value on Friday and trading at 1.493 to Sterling and 1.092 to the Euro, while North Sea Oil is tending softer in early trade and is selling at $ 5