This lower performance so far within this coffee year for El Salvador is however not of much significance, in terms of the fact that the new crop is still in its early days of harvest, which is running approximately four weeks late and with the quality strictly high grown coffees only now coming to the market. Thus with the present forecasts for the new El Salvador coffee crop being in the region of 700,000 bags, one can expect a pickup in export volumes in the coming months.

It is not only within El Salvador that there have been delays with the harvest, as the weather conditions in Central America during the second half of last year have delayed cherry maturity over the region, which has seen delays in terms of the delivery of new crop coffees within all of the Central American countries. The crops have however not started to head towards their peak harvest season and one might expect to see rising export volumes from Central America in general, in the coming months.

In terms of fundamentals the El Nino phenomenon is still in play but has seemingly peaked late last year and with Pacific Ocean temperatures tending to cool, which is indicating that the El Nino should be over by April this year. This phenomenon has however been influential in assisting to bring with it good rains for the south east Brazil and to the main arabica coffee districts and for the present, it would look like the rains shall continue through to the start of the traditional dry season in May this year.

On the negative side of the El Nino phenomenon has been the dry weather that it has brought with it to Colombia and Indonesia, with these conditions having lessened the potential of the prospects for the middle in the year new Colombian Mitaca crop. While in terms of Indonesia, the dry weather has brought with it some problems and forecasts for an up to 2.5 million bags dip in the 2016 robusta coffee crop.

There has already been speculation from Indonesia that following the decline of the El Nino that there might be a follow on La Nina phenomenon and therefore, the prospects for crop damaging excessive rains for the Indonesian coffee farmers. However historically an El Nino has more often than not been followed by a neutral year for the Pacific Ocean, but there is nevertheless a relatively high 40% chance that the El Nino would be followed by the La Nina and it would seem that three is good reason to keep a close watch on the this factor for the last quarter of this year.

The March on March contracts arbitrage between the markets broadened yesterday, to register this at 52.26 usc/Lb., while this equates to a 45.68% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, with the good discount most likely due to remain in place for the foreseeable future, in line with steady robusta shipments out of Vietnam.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 26,640 bags yesterday; to register these stocks at 1,635,139 bags. There was meanwhile a smaller in volume 24,052 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 45,985 bags.

The commodity markets experienced something of a corrective rebound yesterday, following the sharp reversal of the previous day and with the overall macro commodity index taking a positive track for the day’s trade. The Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat and Soybean markets had a day of buoyancy, while the 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 1.44% higher; to this Index registered at 358.74. The day starts with the U.S. Dollar steady in early trade and trading at 1.423 to Sterling and 1.083 to the Euro, while North Sea Oil is showing buoyancy in early trade and is selling at 29.50 per barrel.

The London market opened the day on a softer track, while the New York market opened the day with buoyancy and with both markets maintaining this track into the afternoon trade. The New York market came under some pressure as the afternoon progressed and to reduce its gains, but this was short lived and with the added influence of the positive nature of the macro commodity index behind it, the New York market once again took a steady upside track and with the London market following suit and moving into positive territory. The London market came off its new found highs later in the day and ended the day on a modestly positive note and with 0nly 25% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 91.8% of the earlier gains of the day intact. This hesitantly positive close in London and the more convincing positive close in New York tends to send mixed signals and one might expect to see only a near to steady hesitant start for the markets for early trade today, against the price set yesterday, as follows:

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

JAN 1327 + 9                                           MAR 114.40 + 2.80
MAR 1370 + 4                                         MAY 116.60 + 2.70
MAY 1401 + 2                                           JUL 118.65 + 2.65
JUL 1430 – 1                                              SEP 120.60 + 2.65
SEP 1458 – 2                                             DEC 123.05 + 2.50
NOV 1482 – 1                                           MAR 125.50 + 2.40
JAN 1504 – 2                                            MAY 126.85 + 2.25
MAR 1525 – 2                                             JUL 128.00 + 2.05
MAY 1547 – 1                                            SEP 129.05 + 1.85
JUL 1572 – 1                                              DEC 130.10 + 1.50