The summer rain season continues in Vietnam and with a wet weekend and through to the first half of next week being forecasted for the main central highlands coffee districts, while to the south in Ho Chi Minh city, there are flood warnings being announced. Thus with almost half the month past, it is becoming clear that the new crop harvest shall be delayed into the coming month. Albeit that given opportunities of dry days for drying, that there is already some light harvesting taking place.

This is further assisting to buoy internal market prices in Vietnam, which are seeing robusta coffee prices now registering their highest domestic currency value since May 2013. Somewhat heartening news for the Vietnamese robusta coffee farmers ahead of their new crop harvest, as with the potential for a smaller crop this year, they can gain reasonable overall value from the prices expected for their new crop coffees. One would think that with the knowledge of reduced competition over the next eight months in terms of global robusta coffee supply, that this internal market price resistance shall continue even when the new crop robusta coffees start to flow in volume and therefore, that there might not be intense price fixation selling pressure due for the London market during the last quarter of the year.

Underpinning the supportive news for the London market and confirming the tighter supply of robusta coffees in Indonesia, was the report from the Association of Indonesian Coffee Exporters who have estimated that coffee imports of mostly robusta coffees to fuel the price competitive domestic coffee marker shall increase by 43% to total approximately 1.67 million bags. These imports do of course assist to allow for more exports but the Association has forecasted that despite the imports, that this year’s coffee exports might not exceed 5 million bags.

Thus for the present and with still some uncertainty as to the prospects for next year’s Brazil and Indonesia robusta coffee crops that start to impact from May onwards, there would appear to be merit for the bulls within the London market, which hit new 20 month highs in trade yesterday. While with the lack of any cheaper alternative to robusta coffees in any volume in terms of low grade arabica coffees, the consumer industries shall have no alternative but to pay up and by nature, provide further support for the London market.

The March to March contracts arbitrage between the London and New York markets broadened yesterday, to register this at 61.47 usc/Lb., while this equates to a 39.52% price discount for the London robusta coffee market. This arbitrage is perhaps becoming a less attractive factor for the roasters who have considered robusta coffees to be an opportunist discount component, within their mostly arabica coffee blends.

The Certified washed Arabica coffee stocks held against the New York exchange registered were seen to increase by 3,274 bags yesterday; to register these stocks at 1,259,554 bags. There were meanwhile a smaller in number 2,806 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 30,302 bags.

The commodity markets and with renewed US dollar muscle in play had a generally soft day yesterday, to see the overall macro commodity index taking a modestly softer track for the day. The Coffee and Cotton markets nevertheless bucked the trend to have a day of buoyancy and the Soybean market was steady for the day, while the Oil, Natural Gas, Sugar, Cocoa, Copper, Orange Juice, Wheat, Corn, 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 0.44% lower; to see this Index registered at 415.91. The day starts with the U.S. dollar showing a degree of follow through buoyancy in early trade and trading at 1.218 to Sterling and 1.101 to the Euro, while North Sea Oil is steady in early trade and trading at 49.25 per barrel.

The London and New York markets started the day yesterday on a buoyant note, which carried through to the early afternoon trade. There was a brief dip back to below par for both the markets and perhaps coming with the negative influence of the soft overall macro commodity index but this was short lived and both markets took a positive sideways track for the rest of the day’s trade. The London market ended the day on a positive note and with 78.6% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 63.4% of the earlier gains of the day intact. It has to be noted though that with Brazil on holiday yesterday that there was reduced producer price fixation selling pressure coming to the New York market and one might suspect that in anticipation of some catch up selling due later in the day and with the strong dollar in play, that while the London market might take a follow through steady track that the New York market might show a degree of hesitancy in early trade today, against the prices set yesterday, as follows:

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

NOV 2038 + 10                                    DEC 152.10 + 1.30
JAN 2070 + 11                                    MAR 155.55 + 1.35
MAR 2074 + 9                                    MAY 157.65 + 1.35
MAY 2072 + 5                                      JUL 159.50 + 1.30
JUL 2076 + 6                                        SEP 161.15 + 1.30
SEP 2079 + 2                                       DEC 163.40 + 1.35
NOV 2087 + 2                                     MAR 165.40 + 1.30
JAN 2097 + 2                                       MAY 166.55 + 1.25
MAR 2104 + 2                                       JUL 167.55 + 1.25
MAY 2107 + 2                                       SEP 168.55 + 1.25