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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

06 Dec 2016

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative Non-Commercial sector of this market decrease their net long position within this market by 3.99% during the week of trade leading up to Tuesday 29th. November; to register a long position of 30,549 Lots. This net long position which is the equivalent of 5,091,500 bags has most likely been marginally decreased, following the period of mixed but overall softer trade that has since followed.

The Coffee Federation in Colombia have reported that the country’s coffee production for the month of November was 331,000 bags or 25.04% higher than the same month last year, at a total of 1,653,000 bags. This improved performance has contributed to the countries cumulative production the first two months of the new October 2016 to September 2017 coffee year to being 331,000 bags or 12.18% higher than the same period in the previous coffee year, at a total of 3,048,000 bags.

In terms of exports, the Coffee Federation in Colombia have reported that the country’s coffee exports for the month of November were 159,000 bags or 14.6% higher than the same month in the previous year, at a total of 1,248,000 bags. This improved performance contributes to the countries cumulative exports for the first two months of the new October 2016 to September 2017 coffee year to being 159,000 bags or 6.8% higher than the same period in the previous coffee year, at a total of 2,497,000 bags.

This improved performance during the new Colombian main crop harvest and following the last October 2015 to September 2016 crop of 14,009,000 bags that fuelled exports of 12,291,000 bags, tends to underline the forecasts for a Colombian crop for the October 2016 to September 2017 coffee year that shall exceed 14.5 million bags. A crop that one would think, would likewise fuel exports for the present coffee year that shall exceed 12.5 million bags.

The well-respected USDA Foreign Agricultural Service has revised downwards their coffee production figures for Vietnam for the completed October 2015 to September 2016 coffee year by 370,000 bags or 1.26%, to now report the last crop at 28,930,000 bags. This crop having been made up by a 96.2 to 3.8 ratio, of robusta and arabica coffees. They have also and with the new crop harvest presently peaking, revised downwards by 2.42% their new crop forecast, to now forecast this crop to be 8% lower than the past crop, at a total of 26,616,000 bags.

Added to this they have estimated that the carryover stocks at the start of this new crop were down to 3,800,000 bags, which with a close to 3 million bags of domestic consumption, is a forecast that confirms the view that Vietnam shall export significantly less robusta coffee during this new coffee year. Which with a lack of supply of conilon robusta coffees for at least the first eight months of the new coffee year and likewise the tighter supply of Indonesian robusta coffees for the same period, has to be seen to be supportive for the relative fortunes of the London robusta coffee market.

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 51.83 usc/Lb., while this equates to a 35.87% price discount for the London robusta coffee market. This arbitrage remains an 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 were seen to remain unchanged yesterday; to register these stocks at 1,259,753 bags. There was meanwhile a larger in number 4,716 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 19,627 bags.

The commodity markets were mixed but with many markets gaining support from a softer U.S. dollar yesterday, to see the overall commodity index taking a positive track for the day. The Oil, Natural Gas, Cotton, Copper, Wheat, Corn and Soybean markets had a day of buoyancy and the London robusta Coffee and Silver markets were steady, while the Sugar, Cocoa, New York arabica Coffee, Orange Juice and Gold markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.74% higher; to see this Index registered at 425.59. The day starts with the U.S. dollar steady and trading at 1.274 to Sterling and 1.075 to the Euro, while North Sea Oil is tending steady and is selling at 52.80 per barrel.

The London market and New York markets started the day yesterday taking a softer stance, but with both markets recovering to move back up into positive territory in the early afternoon trade. The New York market did however soon falter and fell back into negative territory, while the London market lost some weight and traded most of the day close to and either side of par. The London market ended the day on a steady note and with the active second month unchanged, while the New York market ended the day on a soft note and with 86.7% of the earlier losses of the day intact. The soft nature of the close in the New York market does little to inspire confidence, but with the more positive nature of the London market in play and a stance that has some degree of fundamental reality, one might expect to see a hesitantly steady start due for early trade today against the prices set yesterday, as follows:


JAN 2064 unch                                               DEC 140.20 – 1.00
MAR 2043 unch                                            MAR 144.50 – 1.30
MAY 2050 + 1                                               MAY 146.85 – 1.35
JUL 2055 unch                                                 JUL 149.00 – 1.35
SEP 2060 – 1                                                    SEP 151.00 – 1.30
NOV 2065 – 1                                                 DEC 153.90 – 1.25
JAN 2067 – 1                                                  MAR 156.50 – 1.20
MAR 2077 – 1                                                MAY 157.95 – 1.15
MAY 2093 – 1                                                  JUL 159.10 – 1.15
JUL 2111 – 1                                                     SEP 160.30 – 1.15