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

Coffee Market Report

14 Sep 2016

The National Coffee Association of Guatemala have reported that the countries coffee exports for the month of August were 64,353 bags or 27.07% higher than the same month last year, at a total of 302,048 bags. This figure contributes to the countries cumulative coffee exports for the first eleven months of the present October 2015 to September 2016 coffee year to being 77,916 bags or 2.84% higher than the same period in the previous coffee year, at a total of 2,823,267 bags.

The Exporters Association in Brazil Cecafe have come to the fore with their coffee exports for the month of August, to report that the countries green coffee exports for the month were 7.4% lower than the same month last year, at a total of 2,402,000 bags. This contributed to the green coffee exports for the first eight months of this year to being 12.6% lower to the same period in the previous year, at a total of 18.49 million bags.

It is hardly surprising that the Brazil green coffee export levels have dipped, as following this year relatively dismal conilon robusta coffee crop, there are now minimal export volumes of these robusta coffees. This factor is likely to continue to depress the overall coffee exports from Brazil in the coming months, comparative to the figures for the same months in the previous year. Thus with green coffee exports for the eight months of this year.

Added to this green coffee exports report, they report that the countries value added soluble coffee exports for the month and calculated in terms of their green coffee equivalent, were 287,916 bags and therefore total exports of green and soluble coffees for the month, at 2,689,916 bags. There would have also been some exports of value added roast coffees during the month and the report concluded that total overall coffee exports for the month were 2,692,000 bags.

The International Coffee Organisation have reported that the global coffee exports for the month of July were 2,187,000 bags or 22.02% lower than the same month the previous year, at a total of 7,747,000 bags. However, one must note that this dip was related to the slowdown in Brazil exports ahead of the impact of the new arabica coffee crop and with Brazil unlike last year, not having large volumes of carryover past crop arabica coffee stocks in hand, to maintain high volume arabica sales and shipments in July. But there was also the much smaller new Conilon robusta coffee crop in Brazil this year, which very much removed this variety of coffee from the overall Brazil exports and is related to the prevailing tighter robusta coffee supply that has developed this year.

There was furthermore the truckers strike within Colombia, which stalled deliveries of new Mitaca crop coffees to the mills and likewise, milled coffees to the export ports, which contributed to a dip in Colombian exports for the month. This therefore, is only a hiccup in delivery of arabica coffees to the global markets in July, rather than being related too global arabica coffee supply. There was however a contribution to the dip in exports in July from the smaller robusta crop in Indonesia this year, which is a factor that further contributes to the prevailing tighter robusta coffee supply.

The November to December contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 60.27 usc/Lb., while this equates to a 40.61% 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 with the exchange were seen to post no change yesterday; to register these stocks at 1,269,342 bags. There was meanwhile also no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 13,363 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to decline by 10,000 bags or 0.42% over the week of trade leading up to Monday 12th. September, to register these stocks at 2,345,667 bags, on the day.

The commodity markets encountered some buoyancy for the U.S. dollar and a softening of the Oil markets, to see the overall macro commodity index taking a softer track for the day. The Natural Gas, Sugar, Cocoa, London robusta Coffee, Cotton, Copper and Orange Juice markets had a day of buoyancy, while the Oil, New York arabica Coffee, 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 0.97% lower; to see this Index registered at 413.31. The day starts with the U.S. dollar steady in early trade and trading at 1.320 to Sterling and 1.122 to the Euro, while North Sea Oil is near to steady in early trade and trading at 46.65 per barrel.

The London and New York markets opened the day yesterday on a positive note and with both market taking a positive track into the afternoon trade, but as the afternoon developed and with trading volumes building up the New York market started to come under pressure and slipped back into negative territory, while the London market retained its buoyancy. This remained the direction for the day and with the fundamental of longer term tighter supply assisting to buoy the London market on a steady upside track, while the New York market took an opposite steady downside track for the rest of the day. The London market continued to end the day on a very positive note and hitting new eighteen months high with 94.4% of the earlier gains of the day intact, while the New York market ended the day on a soft note and with 90.9% of the earlier losses of the day intact. This mixed close shall most probably inspire a degree of caution and a hesitant near to steady start for early trade today against the prices set yesterday, as follows:

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

SEP 1936 + 17                                        SEP  147.35 – 2.35
NOV 1943 + 17                                      DEC 148.40 – 2.50
JAN 1959 + 13                                       MAR 151.60 – 2.50
MAR 1969 + 10                                     MAY 153.45 – 2.55
MAY 1977 + 8                                         JUL 155.20 – 2.55
JUL 1984 + 5                                           SEP 156.55 – 2.55
SEP 1994 + 4                                          DEC 158.45 – 2.60
NOV 2005 + 3                                       MAR 160.20 – 2.60
JAN 2022 + 11                                       MAY 161.20 – 2.60
MAR 2029 + 11                                        JUL 162.15 – 2.65