The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market increase their net long position within the market by 16.15% over the week of trade leading up to Tuesday 30th. June; to register a net long of 24,523 Lots on the day. This net long that is the equivalent of 4,087,167 bags has been marginally softened over the period of mixed but overall softer trade, which has since followed.

The United States Department of Agriculture Foreign Agricultural Service has forecasted that the Kenya coffee production for the forthcoming August 2015 to July 2016 national coffee crop year shall relatively flat, with an estimated production of 900,000 bags of arabica coffees. This figure which is a relatively positive one in comparison to the many private industry forecasts of closer to 800,000 bags, they note has pushed coffee that historically was the leading foreign exchange earner to forth position and well below the income the country earns from Tea the star exporter, Horticulture and Textiles.

Mexico’s Agricultural Secretariat has addressed their struggling coffee industry that they say has declined by 40% in volume of production over the last fifteen years, to crops levels which now total only approximately 3.6 million bags per annum. In this respect the government that had already allocated the equivalent of 44.6 million U.S. dollars towards programs to stimulate the industry this year, has increased this grant by the equivalent of a further 82.7 million U.S. dollars. This funding they say shall assist farmers to replant approximately 75,000 hectares of aged and relatively low yielding coffee trees, with new disease resistant and higher yielding trees, with the target to renew at least 250,000 hectares over the next three years.

This is a similar program to what has been successful in both Colombia and Honduras over the past ten years and is one that has potential merit for the Mexican coffee farmers and the prospects for a recovery in the countries future coffee production, albeit that it shall take at least four years before the results shall start to come into effect. The question is however with the prevailing relatively dismal prices that the international coffee markets dictate for the fine washed arabica coffees that Mexico is famed for, how inspired many farmers might be to reinvest into the planting of new coffee trees, even with the assistance of the state to finance the re-planting of their farms. Many farmers have already looked to alternative and more secure crops to farm and the present circumstances, do little to inspire confidence.

While J. M. Smucker and its prominent Folgers and Dunkin’ Donuts brands have announced reductions in their wholesale prices for coffee in the U.S.A. and with this move being expected to be followed by the other leading brands, Starbucks have announced that due to in store costs and despite lower green coffee prices, they shall be increasing the prices for in store cups of coffee. Thus broadening the gap in prices between out of home and in home coffee consumption, but perhaps not so noticeable in terms of the rise in market share in terms of the in home consumption of relatively high cost single serve coffee capsules.

The arbitrage between the markets has narrowed yesterday to register this at 47.54 usc/Lb., while this equates to a 37.99% 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 1,535 bags yesterday; to register these stocks at 2,145,917 bags. There was meanwhile a larger in volume 2,395 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 27,015 bags.

The commodity markets seemingly took something of a knock from the overall negative impact that came with the Greek crisis yesterday, with the overall macro commodity index taking a downside track for the day. The Sugar, Soybean, Gold and Silver markets nevertheless had a day of buoyancy and the Natural Gas market was steady, while the Oil, Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.24% lower: to see this Index registered at 427.35. The day starts with the U.S. Dollar showing a degree of buoyancy and selling at 1.559 to Sterling and 1.104 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 opened the day on a softer note yesterday and both markets maintained this soft track into the afternoon trade, but with something of a recovery for both markets as the afternoon progressed, to see the London market move back to par and the New York market posting some modest gains. This recovery was however not sustained and with negative influences of the macro commodity index coming in to dampen spirits, both market soon moved back into negative territory and with sell stops being triggered started on a downside track and with the New York market registering one and half year lows in value. The London market continued to end the day on a soft note and with 82.2% of the earlier losses of the day intact, while the New York market ended the day near to the lows of the day and with 95.7% of the losses of the day intact. This overall soft close and with the volatile New York market ending near to the lows of the day does little to inspire, but one might expect to see a hesitantly cautious steady to start for early trade today against the prices set yesterday, as follows:

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

JUL 1844 – 9                                JUL   123.30 – 2.30
SEP 1711 – 37                              SEP   125.15 – 2.25
NOV 1724 – 37                            DEC  128.95 – 2.20
JAN 1741 – 34                             MAR 132.60 – 2.25
MAR 1761 – 34                           MAY 134.85 – 2.15
MAY 1785 – 32                             JUL 136.90 – 2.10
JUL 1805 – 32                               SEP 138.90 – 2.00
SEP 1824 – 32                              DEC 141.75 – 1.80
NOV 1843 – 32                           MAR 144.40 – 1.65
JAN 1866 – 32                            MAY 145.95 – 1.70