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

Coffee Market Report

31 Aug 2016

There was really nothing in the way of striking news coming to the coffee markets yesterday, with the markets very much taking a sideways stance for the present, within an environment of steady physical coffee supply and with the new Central American, Colombian main crop and Vietnam crops due to start coming into play during the last quarter of the year, no medium term threat foreseen for this scenario to continue into the coming year. There is of course the perspective that with unforeseen weather conditions aside that while coffee supply shall be sufficient, there is unlikely to be much in the way of a longer term surplus supply, which can be seen to be supportive for longer term market stability.

Meanwhile the main northern hemisphere markets are starting to see industries coming back from their slow summer holiday season and one might think that post the coming Labour Day long weekend in the U.S.A. that shall see this leading player on holiday on Monday, that there might be some increase in the physical trade activity for the markets. But so far one cannot foresee that this shall bring with it any excitement, as with consumer market stocks more than sufficient to fuel medium term requirements, there is no reason for the consumer industries to show much in the way of buying aggression.

The November to December contracts arbitrage between the London and New York markets broadened yesterday, to register this at 62.59 usc/Lb., while this equates to a 43.14% 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 increase by 2,840 bags yesterday; to register these stocks at 1,283,419 bags. There was meanwhile a larger in volume 3,940 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 5,929 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 11,167 bags or 0.47% during the week of trade leading up to Monday 29th. August, to see these stocks registered at 2,366,333 bags, on the day.

The commodity markets lacked any excitement yesterday but with the U.S. dollar continuing to hold on to its anticipation of an interest rate hike in September muscle, the overall macro commodity index took a softer track for the day. The New York arabica Coffee market nevertheless had a positive day and the London robusta Coffee market was near to steady for the day, while the Oil, Natural Gas, Sugar, Cocoa, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, 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 0.59% lower; to see this Index registered at 412.98. The day starts with the U.S. dollar showing some degree of buoyancy in early trade and trading at 1.309 to Sterling and 1.115 to the Euro, while North Sea Oil is showing some degree of buoyancy in early trade and trading at 47.85 per barrel.

With the London market returned from the Summer Bank Holiday long weekend yesterday on a steady note, while the New York market opened the day with modest buoyancy, but with both markets taking a modestly softer track into the early afternoon trade. As the afternoon progressed the New York market came under further pressure and with little in the way of industry buying support under the market it extended its losses, while the London market continued on a modestly softer sideways track. However, while the London market continued on its mostly sideways track the New York market attracted late in the day support to spring back into positive trade late in the day and to set this market for what was a somewhat unexpected, positive close for the day. The London market ended the day on a modestly softer note, but having recovered 66.7% of its earlier losses of the day by the close, while the New York market ended the day on a positive note and with 96.2% of the earlier gains of the day intact. This close and with the late in the day recovery for the volatile New York market might assist to buoy confidence and to set the markets for something of a steady start for early trade today against the prices set yesterday, as follows:

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

SEP 1780 – 3                                  SEP 144.75 + 0.75
NOV 1816 – 3                               DEC 146.05 + 0.95
JAN 1837 – 1                                MAR 149.25 + 1.00
MAR 1852 – 2                               MAY 151.20 + 1.05
MAY 1865 – 2                                 JUL 152.80 + 1.05
JUL 1876 – 2                                   SEP 154.25 + 1.00
SEP 1888 – 2                                  DEC 156.25 + 0.90
NOV 1901 – 2                               MAR 158.25 + 0.90
JAN 1910 – 2                                 MAY 159.40 + 0.95
MAR 1917 – 2                                 JUL 160.55 + 1.10