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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

22 Sep 2017

Brazils official agricultural statistics agency CONAB and with the new crop harvest completed, have announced that this crop has proved to be 830,000 bags or 1.82% lower than their forecast for this crop in May this year, with a final figure of 44,770,000 bags. In this respect, they assess that the countries new arabica coffee crop is 1,340,000 bags or 3.79% lower than their earlier forecast, at 34,060,000 bags. While they have assessed the countries new conilon robusta coffee crop to be 600,000 bags or 5.94% higher than forecasted in May, at 10,700,000 bags.

This news that came to the markets relatively early during yesterday’s trade did not have any supporting effect, but was soon followed by a weakening within both the New York and London markets. Suggesting that with so many other well respected new crop reports that have pegged this year’s Brazil crop at between 50 million and 52 million bags, that the traditionally very conservative CONAB figure being approximately 12% lower than the average of the other estimates, was seen to be supportive of the higher crop assessments.

The softer nature of the New York market is presently stalling internal market new crop business in Brazil, but there is apparently still quite active internal market trade for the new crop conilon robusta coffees. But it is perhaps that the majority of the latter conilon robusta coffees are anyhow destined for the domestic market roasters, that it proves easier for farmers and industries to come to an agreement on prices.

While focus on the part of the farmers and traders within Brazil and indeed for international market players, remains very much on the prospects for the forecasted spring rains that are due for the end of next week. Especially so, as there are a host of forecasts that differ in their views as to the intensity or volumes that shall be forthcoming, from these early rains.

The Uganda Coffee Development Authority UCDA have reported that the countries coffee exports for the month of August were 127,281 bags or 43.73% higher than the same month last year, at a total of 418,340 bags. This higher figure contributes to the countries cumulative coffee exports for the first eleven months of the present October 2016 to September 2017 coffee year, to be 1,157,374 bags or 37.26% higher than the same period in the previous coffee year, at a total of 4,263,985 bags.

It is an impressive figure and would suggest that Uganda shall end the present coffee year, with coffee exports of approximately 4.5 million bags. Confirming the countries status as Africa’s leading coffee exporter, while illustrating in terms of the successful growth of the Ugandan coffee industry over the past few years, the positive influences and the improved financial farm gate prices, that have come with the implementation of a free market structure for the Ugandan coffee industry.

The November to December contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 43.74 usc/Lb., while this equates to 32.4% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 50 bags yesterday; to register these stocks at 1,810,295 bags. There was meanwhile a larger in number 958 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 48,573 bags.

The commodity markets had a mixed day yesterday, but with many markets taking a softer track for the day and likewise, the overall macro commodity index took a downside track for the day. The Sugar, Cocoa, Wheat, Corn and Soybean markets had a day of buoyancy and the Oil markets were near to steady, while the Natural Gas, Coffee, Cotton, Copper, Orange Juice, Gold and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.81% lower, to see this Index registered at 408.57. The day starts with the U.S. Dollar near to steady and trading at 1.359 to Sterling and at 1.196 to the Euro, while North Sea Oil is showing a degree of buoyancy and selling at US$ 57.95 per barrel.

The London market started the day yesterday close to par, while the New York market opened the day within modest negative territory, but to see the London market soon joining the New York market within modest negative territory into the early afternoon trade. As the afternoon progressed the New York market came under further speculative and fund pressure and extended its losses, while the London market continued on more of a sideways softer track and to be joined by a partial recovery and similar sideways track on the part of the New York market.

The London market ended the day on a soft note and with 82.1% of the earlier losses of the day intact, while the New York market ended the day on a similarly soft note and with 53.4% of the earlier losses of the day intact. The softer close does little to inspire, but it might in terms of the relatively thin trade yesterday be seen to be more related to modest short selling activity rather than a trend south and one might expect to see a hesitant steady start due for early trade today, against the prices set yesterday, as follows:


SEP 2035 – 23
NOV 2012 – 23                                            DEC 135.00 – 1.55
JAN 1988 – 16                                            MAR 138.55 – 1.55
MAR 1980 – 11                                           MAY 140.90 – 1.50
MAY 1990 – 9                                               JUL 143.15 – 1.50
JUL 2017 – 10                                               SEP 145.35 – 1.50
SEP 2025 – 10                                              DEC 148.65 – 1.45
NOV 2035 – 10                                            MAR 151.85 – 1.45
JAN 2044 – 10                                             MAY 153.85 – 1.45
MAR 2049 – 10                                             JUL 155.80 – 1.40