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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

05 Jan 2016
The latest Commitment of Traders report from the New York arabica coffee market has seen the Non Commercial Speculative sector of this market decrease their net short sold position within the market by 4.59% during the week of trade leading up to Tuesday 29th. December; to register a net short sold position of 20,556 Lots. This net short sold position which is the equivalent of 5,827,535 bags has most likely been little changed, following the period of mixed but mostly positive trade, which has since followed.

The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative sector of this market decrease their net short sold position within the market by 0.62% over the week of trade leading up to Tuesday 29th. December; to register a net short sold position of 23,392 Lots on the day. This net short sold position that is the equivalent of 3,898,667 bags has most likely been little changed over the period of mixed but overall sideways trade, which has since followed.

The Brazil Trade Ministry has announced the preliminary coffee exports for the month of December, which they have reported to have been 67,986 bags or 2.23% lower than the same month last year, at a total of 2,976,727 bags. This figure indicating that despite the soft reference prices of the international coffee markets that with the assistance of the significantly lower Brazil exchange rate to the U.S. dollar to buoy internal market coffee prices, that it is business as usual out of Brazil. This exchange rate and with dismal economic prospects forecasted for 2016 for Brazil, having fallen yesterday to 4.04 Real to the U.S. dollar.

Traders in Vietnam with the larger new coffee crop having peaked and this coming in on top of good carryover stocks from the past crop, have forecasted that coffee exports of mostly robusta coffees for the month of January are likely to be between 2.17 million and 2.33 million bags. Noting that with the weeklong Tet New Year (Year of the Monkey) holiday due to close down the country for the second week of February, that farmers are expected to be more aggressive sellers ahead of the holidays, in their bid to raise finance for the New Year celebrations.

An official of the Ethiopian Trade Ministry has voiced confidence that with increased commercial investment into coffee farms and with state sponsored extension services to assist small scale farmers who still dominate the countries coffee industry, that they foresee rising production over the coming years and likewise, export volumes. In this respect and with coffee export volumes presently ranging between 3 million and 3.1 million bags per annum, they are targeting coffee exports to rise to 4.3 million bags per annum.

The March on March contracts arbitrage between the markets narrowed yesterday, to register this at 54.59 usc/Lb., while this equates to a 44.06% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, but is perhaps due to widen further in time and when Vietnam stocks start to impact in more volume upon the fortunes of the London market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 2,356 bags yesterday; to register these stocks at 1,730,059 bags. There was meanwhile a larger in volume 5,806 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 32,556 bags.

The Certified Robusta coffee stocks held against the London market were seen to decline by 18,333 bags on Thursday 31st. December; to see these stocks registered at 3,274,667 bags.

The commodity markets were mixed in trade yesterday, but with the news of forecasts for weaker economic prospects for China for this year and following weaker U.S. manufacturing data for the U.S.A. in December, there was negative pressure within many markets. The Oil markets did however limit their losses, as they gained support from the developing tension within the Middle East and thus, the overall macro commodity index only took a modestly softer track for the day. The Natural Gas, Orange Juice, Gold and Silver markets had a day of buoyancy and the London robusta Coffee market was near to steady, while the Oil, Sugar, Cocoa, New York arabica Coffee, Cotton, Copper, Wheat, Corn, Soybean and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.35% lower to see this Index registered at 377.98. The day starts with the U.S. Dollar taking a steady track in early trade and trading at 1.472 to Sterling and 1.083 to the Euro, while North Sea Oil is showing buoyancy in early trade and is selling at 36.75 per barrel.

The London market started the day yesterday with modest buoyancy, while the New York market started the day on a softer note. This remained the track for both markets into the afternoon trade, but with the negative influences of a weakening Brazil currency and the softer nature of the overall macro commodity index, the New York market started to attract selling pressure and with sell stops coming into play, to accentuate the losses. This reversal of the fortunes for the New York market finally had its influence and with the London market shedding its gains and dipping back to trade in modest negative territory, but unlike the rising volumes within the New York market, the trade was more muted for the London market. As the afternoon progressed however, the New York market soon started to recover and to limit its losses to more modest numbers, which was followed by a recovery track being taken within the London market. The London market continued to trade only marginally below par, while the New York market remained within negative territory. The London market ended the day on a modestly softer note and having recovered 80% of the earlier losses of the day, while the New York market ended the day on a soft note and with 60.2% of the earlier losses of the day intact. This close does little to inspire and one would expect little better than a cautiously near to steady start for early trade today against the prices set yesterday, as follows:


JAN 1481 – 10                                             MAR 123.90 – 2.80
MAR 1528 – 2                                             MAY 126.00 – 2.80
MAY 1556 – 1                                               JUL 127.95 – 2.80
JUL 1583 unch                                               SEP 129.65 – 2.90
SEP 1606 + 1                                                DEC 132.00 – 3.05
NOV 1626 – 1                                              MAR 134.20 – 3.10
JAN 1643 – 1                                               MAY 135.60 – 3.25
MAR 1662 – 2                                                JUL 136.95 – 3.45
MAY 1684 – 3                                                SEP 138.00 – 3.85
JUL 1709 – 4                                                  DEC 139.45 – 4.00