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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

05 Aug 2016

The National Coffee Institute in Costa Rica have reported that the countries coffee exports for the month of July were 15,860 bags or 16.31% higher than the same month last year, at a total of 113,074 bags. This number contributes to the countries cumulative coffee exports for the first ten months of the present October 2015 to September 2016 coffee year to be 49,156 bags or 4.66% higher than the same period in the previous coffee year, at a total of 1,104,100 bags.

Following a successful auction of aged government arabica coffee stocks last week the Brazil governments Crop Supply Agency CONAB have announced that they shall put up for auction a further 65,000 bags of these stocks, on Thursday 11th. August. These coffees which are targeting the price sensitive domestic roasting industry, provide for competitive input against the presently buoyed by farm price resistance internal market new crop coffee prices.

While it is early in the month the forecasts from traders and exporters in the country and with forward contract export contracts in hand, have indicated that they can expect exports of mostly robusta coffees for the month to be between 1.67 million and 2 million bags. With increased volumes of robusta coffees now starting to come to the consumer markets from their main Asian competitor Indonesia, there might be some reality to this forecast that is for a relatively modest number compared to the volumes of exports reported for most of the month so far this year.

This increase in export activity for Indonesian robusta coffees does however follow relatively dismal export volumes for the first half of the year and the Association of Indonesian Coffee Exporters and Industries have reported that despite some catch up export activity in progress, that they forecast that the countries coffee exports shall be between 5% and 10% lower for this year.

In terms of Asia’s third largest coffee producer and exporter India, the reports are that the prevailing monsoon season is going well and while the main reservoir levels within the country are marginally lower than the ten-year average, they foresee that there are good rains to come and that it shall finally prove to be an above average monsoon season. This is supportive for the presently developing new coffee crop, but despite this the forecasts are that the new crop might be marginally lower than the previous crop at something close to 5.2 million bags.

The November to December contracts arbitrage between the London and New York markets broadened yesterday, to register this at 61.97 usc/Lb., while this equates to a 42.53% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, continues to inspire support for the robusta coffee sector of the industry.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 2,384 bags yesterday; to register these stocks at 1,292,031 bags. There was meanwhile a smaller in number 825 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 4,967 bags.

The commodity markets were mixed in trade yesterday but mostly taking a positive track for the day and assisting the overall macro commodity index, to take a positive track for the day. The Oil, Sugar, Cocoa, New York arabica Coffee, Cotton, Orange Juice, Soybean and Gold markets had a positive day’s trade, while the Natural Gas, London robusta Coffee, Copper, Wheat, Corn and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.37% higher; to see this Index registered at 420.80. The day starts with the U.S. dollar steady and trading at 1.313 to Sterling and 1.114 to the Euro, while North Sea Oil is tending marginally softer in early trade and trading at 41.95 per barrel.

The London and New York markets started the day yesterday on a steady to softer note and with both markets losing their way in early afternoon trade and particularly so the more volatile New York market that dipped to lows of 3.4 usc/Lb. under the previous day’s close, while the London market was posting more modest losses of $ 20.00 per metric ton. There was however some support for sentiment within the New York market that came with the rally in the value of the Brazil Real that firmed significantly to below 3.2 to the U.S. dollar, which seemingly assisted to buoy spirits for late trade and set the market on an upside track. This change in the fortunes for the market and with buy stops being triggered accentuated both the volume of trade and value and saw the market move relatively swiftly into positive territory, while the London market started to recover from its lows. The London market continued to end the day on a modestly softer note and having recovered 65% of the earlier losses of the day by the close, while the New York market ended the day on a positive note and with 62.7% of the earlier gains of the day intact. The sharp recovery for the New York market in late trade and with the Brazil Real marginally firmer this morning is perhaps supportive for sentiment for the markets, but one might foresee a degree of caution and perhaps only some catch up buoyancy for the London market and a steady start for the New York market for early trade today, against the prices set yesterday, as follows:


SEP 1817 – 10                             SEP 142.10 + 1.70
NOV 1846 – 7                            DEC 145.70 + 1.85
JAN 1865 – 6                             MAR 145.80 + 1.85
MAR 1876 – 5                           MAY 150.60 + 1.85
MAY 1887 – 7                             JUL 152.25 + 2.00
JUL 1897 – 9                               SEP 153.90 + 2.25
SEP 1909 – 9                              DEC 156.15 + 2.60
NOV 1928 – 9                           MAR 158.15 + 2.75
JAN 1937 – 9                             MAY 159.30 + 2.85
MAR 1944 – 9                              JUL 160.40 + 3.10