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I. & M. Smith (Pty) Ltd.

Coffee Market Report

22 Apr 2015

April 22 2015

There are signs that the internal market in Vietnam is becoming a little bit easier, but still suffers from a degree of price resistance on the part of the farmers and the internal traders. Thus life still remains somewhat difficult for the countries exporters, who continue to struggle to source coffee stocks at prices that are conducive to the profitable conclusion of their forward sale export commitments. While in the meantime the exporters in their bid to make profit from their new sales and to a degree to compensate for some losses incurred to fulfil existing contracts, continue to demand relatively high export differentials relative to the London market for new robusta coffee sales.

Meanwhile with the month of April coming near to a week away from the forthcoming Labour day long weekend, traders are forecasting that the coffee exports for the month shall be potentially lower than last month’s 2.17 million bags performance, with estimates that April exports of mostly robusta coffees shall only be around 2 million bags. Such a performance would contribute to the countries cumulative exports for the first seven months of the present October 2014 to September 2015 coffee year to only be approximately 12.83 million bags, which would be the lowest export performance since the 2009/2010 coffee year.

The question is what impact such a modest performance might have upon the selling aggression for the last five months of this present coffee year within Vietnam, as with these figures indicating the significant unsold stocks still in farm and internal trader’s hands and with a larger new crop forecasted to start in October, it would suggest that there might be some increased selling activity to soon to come to the market and activity that might with the corresponding price fixation hedge selling activity, be negative for the London market. In this respect one might think that as soon as the new rain summer rain season starts next month and bring with it the security that the next crop shall be as forecasted a good one that it might inspire farmers to wish to liquidate stocks and come to the market with more aggression, which might finally start to bring more coffees to the certified robusta coffee stocks of the London market that were last reported on the 16th. February at a relatively modest 2,871,167 bags.

Sumatra as the main robusta producing island of Indonesia is close to starting to bring in good volumes of its new and potentially 20% to 25% larger new crop harvest and one might expect that by June this year, that there shall be some more aggressive new crop selling of these new crop coffees. Such activity and coming into play in competition to the sales of the large stocks of Vietnam robusta coffees, is also a factor that might contribute to some more aggressive catch up selling within the internal market in Vietnam and for the present unless there is some overall fund inspired recovery for the coffee markets in general, it would appear that with unforeseen supportive weather issues aside to the fore, that the medium term prospects for the London robusta coffee market look to be relatively lacklustre in nature.

In the meantime with the Brazil Reais having recovered some ground against the U.S. dollar and with the new arabica coffee crop harvest still a few weeks away from picking up steam, the internal market selling activity of carry over arabica coffee stocks is slow. This is contributing to some degree of buoyancy for exporters asking differentials for short term new business and has slowed new business activity out of Brazil, but with most consumer roasters already well covered with short to medium term forward contracts, there is unlikely to be any concern over the relative buoyancy in prices for new arabica coffee business out of Brazil.

The arbitrage between the markets has broadened yesterday to register this at 59.92 usc/Lb., while this equates to an attractive 41.99% price discount for the London robusta coffee market. This arbitrage continues to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 7,225 bags yesterday; to register these stocks at 2,266,798 bags. There was meanwhile a smaller in volume 2,050 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 29,805 bags.

The commodity markets were mostly flat yesterday and with many markets taking something of a sideways track for the day, to contribute to a likewise flat overall macro commodity index. The Natural Gas, New York arabica Coffee, Wheat, Gold and Silver markets showed some buoyancy and the London robusta Coffee market was near to steady, while the Oil, Sugar, Cocoa, Cotton, Copper, Orange Juice, Corn, Soybean and Platinum markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.04% lower to see this Index registered at 420.24. The day starts with the marginally lower U.S. Dollar steady and trading at 1.493 to Sterling and 1.073 to the Euro, while North Sea Oil is tending softer in early trade and is selling at 58.50 per barrel.

The London and New York markets started the day yesterday on a hesitantly steady note and with both markets trading either side of par in thin trade, through to the afternoon trade. As the afternoon progressed though there was some underlying and mostly technical support coming forth for the New York market and with this market posting good gains and with the London market following suit, with more modest gains. There was however something of a nearby ceiling for the New York market that slipped back from its highs and seemingly having its influence upon the London market, which drifted back to below par. The London market ended the day on a modestly softer note and with 44.4% of the earlier losses of the day intact, while the New York market ended the day on a positive note but with only 35.8% of the earlier gains of the day intact. This close does little to inspire and one might expect little better than a hesitantly steady start for early trade today against the prices set yesterday, as follows:

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

MAY 1801 – 3 MAY 140.30 + 1.60

JUL 1825 – 4 JUL 142.70 + 1.45

SEP 1849 – 4 SEP 145.45 + 1.50

NOV 1865 – 4 DEC 149.15 + 1.50

JAN 1881 – 2 MAR 152.80 + 1.50

MAR 1899 – 1 MAY 154.90 + 1.50

MAY 1915 – 1 JUL 156.25 + 1.40

JUL 1931 – 1 SEP 157.55 + 1.45

SEP 1949 – 1 DEC 159.10 + 1.45

NOV 1959 + 3 MAR 161.70 + 1.45

 


Coffee Market Report

April 21 2015

The latest Commitment of Traders report from the washed arabica coffee New York market has seen the shorter term in nature Managed Money Fund sector of the market increase their net short sold position within this market by 93.24% in the week of trade leading up to Tuesday 14th. April; to register a net short sold position of 8,914 Lots on the day. Over the same period the longer term in nature and steadier Index Fund sector of this market decreased their net long position within the market by 1.02%, to register a net long on the day of 25,154 Lots.

During this same week of trade the Non Commercial Speculative sector of the market increased their net short sold position within the market by 58.68%, to register a net short of position of 14,381 Lots. This net short sold position which is the equivalent of 4,076,950 bags has most likely been decreased over the period of mixed but overall more positive trade that has since followed and likewise, that of the Managed Money fund sector of the market, which was the equivalent of 2,527,079 bags on the day.

The latest Commitment of Traders report from the London robusta coffee has reported that the more speculative Managed Money sector of this market increased their net long position within this market by 22.85% in the week of trade leading up to Tuesday 14th. April, to see this long position registered at 13,781 Lots, on the day. This speculative net long position within the London market which is the equivalent of a relatively modest 2,296,833 bags has most likely been little changed, over the period of mixed but overall relatively steady trade that has since followed.

The National Export Centre of Nicaragua has reported that the countries coffee exports for the month of March were 57,982 bags or 29.97% higher than the same month last year, at a total of 251,429 bags. This improved performance that follows some positive results over the previous months contributes to the countries cumulative exports for the first six months of the present October 2014 to September 2015 coffee year to be 174,644 bags or 32.92% higher than the same period in the previous coffee year, at a total of 705,146 bags.

There remains very little in the way of fundamental news coming to the coffee markets, as the weather conditions for most producer blocs remain relatively normal, albeit that while still early days for the summer rainfall season in Vietnam, the early rains have so far been mostly lighter than the same time last year. This is however not yet a matter of concern and for the present, the forecasts are for yet another reasonable summer rainfall for Vietnam and likewise, for a larger new crop. Thus there is little in the way of particularly supportive news for the coffee markets, which are tending to remain within the prevailing and relatively soft trading range.

The arbitrage between the markets has narrowed yesterday to register at 58.29 usc/Lb., while this equates to an attractive 41.27% price discount for the London robusta coffee market. This arbitrage continues to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 3,145 bags yesterday; to register these stocks at 2,274,023 bags. There was meanwhile a larger in volume 4,850 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 27,755 bags.

The commodity markets had a mixed day yesterday, but with the overall macro commodity index tending to react to the muscle of the U.S. dollar and taking a softer track through the day. The Oil, London robusta Coffee, Wheat and Soybean markets had a day of buoyancy and the New York arabica Coffee was steady, while the Natural Gas, Sugar, Cocoa, Cotton, Copper, Orange Juice, Corn, Gold, Silver and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.99% lower to see this Index registered at 420.41. The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.487 to Sterling and 1.070 to the Euro, while North Sea Oil is steady in early trade and is selling at 60.80 per barrel.

The London market started the day yesterday with some early buoyancy and the New York market on a near to steady note, but with the New York market soon starting on a downside track and followed by the London market likewise moving back into negative territory and both market taking a negative track into the afternoon trade. The markets did however both recover as the afternoon progressed and started to return towards par but to encounter late afternoon negative pressure, which was short lived and with the markets showing some late in the day hesitant buoyancy. The London market continued to end the day on a modestly positive note but with only 33.3% of the earlier gains of the day intact, while the New York market ended the day on a near to steady note and having recovered 96.7% of the earlier losses of the day by the close. This relatively steady close might however come under some renewed pressure from the early in the day follow through muscle that is being shown by the U.S. dollar, which might see the markets take a cautiously steady to soft track for early trade today against the prices set yesterday, as follows:

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

MAY 1804 + 5 MAY 138.70 unch

JUL 1829 + 3 JUL 141.25 – 0.15

SEP 1853 + 3 SEP 143.95 – 0.05

NOV 1869 + 3 DEC 147.65 + 0.10

JAN 1883 + 2 MAR 151.30 + 0.15

MAR 1900 + 4 MAY 153.40 + 0.20

MAY 1916 + 4 JUL 154.85 + 0.10

JUL 1932 + 4 SEP 156.10 + 0.15

SEP 1950 + 4 DEC 157.65 + 0.25

NOV 1956 + 7 MAR 160.25 + 0.35

 


Coffee Market Report

April 17 2015

17th. April, 2015.

With Brazil having been an active seller over the past months the respected domestic analysts Safras e Mercado have estimated that by late March approximately 87% of the 2014 crop of 48.9 million bags had been sold. This figure they say is in line with the 86% average factor at the same time last year, of sales of the previous 2013 crop coffees. There is likelihood that some of these sales are related to carry over stocks from the previous crop, this while trade has slowed within the Brazil interior as exporters are restrained by a firming Brazil Real against the U.S. Dollar, with the new 2015 harvest soon on the horizon. Meanwhile heading into the spring and summer season in the Northern Hemisphere, consumer markets are mostly well covered nearby.

There is in the meantime very little news coming forth from Mexico and Central America, where farmers are struggling to bear the negative nature of the reference prices of the New York market and remain reluctant sellers to the consumer markets. This while the Colombia fine washed arabica coffee Mitaca harvest has started, with some difficulties being reported by Colombian coffee farmers who are struggling to cater to the increased costs of labour and sufficient pickers as the current mid-crop harvest accelerates. There are indications meanwhile that the main crop that will begin harvest in October 2015 is developing well, with weather conditions conducive and one would anticipate that Colombia will continue to regain their lost international market share subsequent to the two disastrous El Nino and La Nina affected crops of the late 2000’s. This with the assistance of the government coffee authorities positive interventions in the form of replanting more resistant varieties, plantation renewal, finance schemes and subsidies has assisted Colombia in their successful recovery back to production levels of 12 to 13 million bags per annum and secure their position as the largest producer of fine washed arabica coffees to the international consumer markets.

The arbitrage between the markets has broadened yesterday to register at 58.63 usc/Lb., while this equates to an attractive 41.43% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 22,085 bags yesterday; to register these stocks at 2,282,928 bags. There was meanwhile 10,187 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 28,549 bags.

It was a positive day for the commodity markets yesterday, as weaker than expected economic data in the USA continued to weigh in on the U.S. Dollar, to make Dollar denominated commodities more attractive in other major currencies. The day continued firm for Oil, Natural Gas, Copper, Orange Juice and Soybean, as did Sugar and Cocoa end the day on a positive note. The grain markets turned softer with Corn and Wheat lower on the day, as did Cotton lose on the day. It was a steady day for Gold, Silver and a positive close for Platinum and Palladium. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.14% higher to see this Index registered at 426.83. The day starts with the U.S. Dollar softer and trading at 1.494 to Sterling and 1.077 to the Euro, while North Sea Oil is softer in early trade at 61.17 per barrel.

The coffee markets started the day with some buoyancy yesterday, and in light volume with some early pressure capping the gains in both markets, the morning session continued in a positive range. The continuation of a weaker US Dollar lent some support as the America’s came to the floor, and a firmer session ensued for New York, to trigger stops along the way as the initial buying activity met with a void of sellers, to provide little resistance. This activity quickly brought sellers back to the floor, to set the new trading range for the rest of the day. The performance in London was similarly positive but far thinner in volumes and this market finished closer to the middle of the days trading range, while New York lost some ground toward the end of the day, to set the close yesterday in both markets, as follows:

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

MAY 1796 + 2 MAY 139.60 + 3.80
JUL 1827 + 9 JUL 141.50 + 4.15
SEP 1851 + 10 SEP 144.05 + 4.05
NOV 1866 + 11 DEC 147.65 + 3.95
JAN 1879 + 14 MAR 151.35 + 3.85
MAR 1894 + 16 MAY 153.60 + 3.80
MAY 1910 + 16 JUL 155.30 + 3.75
JUL 1926 + 16 SEP 156.50 + 3.55
SEP 1944 + 16 DEC 158.00 + 3.35
NOV 1947 + 16 MAR 160.65 + 3.20

 


Coffee Market Report

April 17 2015

16th. April, 2015.

The Vietnam Customs have reported that the country’s coffee exports of mostly robusta coffees for the month of March were 52.4% lower than the same month last year, at a total of 2,175,000 bags. This volume is higher than general trade and industry expectations which had foreseen exports to register between 1,50 and 1,83 million bags but is in line with the government projection for the same month. This sees the exports for the first six months of the present October 2014 to September 2015 coffee year at a total of 10,833,333 bags and a decline on that of the same time in the previous coffee year, of 25.40%.

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 116,443 bags or 2.31% during the month of March, to register these stocks at 5,035,109 bags at the end of the month. These stocks do not include the in transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is fed by these stocks of 490,000 bags per week, would conservatively have been at least 1 million bags. These stocks include the certified coffee stocks that were being held in U.S.A. warehouses for the exchange at the end of the month, at a relatively modest total of 693,243 bags on the day.

The arbitrage between the markets has broadened yesterday to register at 54.43 usc/Lb., while this equates to a now less attractive 40.07% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 3,929 bags yesterday; to register these stocks at 2,305,013 bags. There was meanwhile 3,463 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 18,362 bags.

The commodity markets were mixed yesterday, with some degree of buoyancy returning to the Oil markets with the release of lower than anticipated crude oil inventory data in the leading US consumer market. The US Dollar meanwhile, initially firmer in morning trade, to apply pressure on US Dollar priced commodities, slipped back toward the latter half of the day. It was a firmer day for Oil, Natural Gas, Copper, Orange Juice, Corn, Soybean, arabica Coffee, Gold, Silver, Platinum and Palladium. It was a softer day for Sugar, Cocoa, robusta Coffee, Cotton and Wheat markets, which tended easier for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.73% higher to see this Index registered at 422.00. The day starts with the U.S. Dollar steady and trading at 1.483 to Sterling and 1.069 to the Euro, while North Sea Oil is showing buoyancy in early trade and is selling at 63.15 per barrel.

The coffee markets started the day yesterday in a relatively muted tone, in low volume and with trade mildly to the positive in London and narrowly softer in New York. The morning progressed in a lacklustre manner lacking directional news to provide inspiration to the speculative sector, whereas the softer US Dollar in latter day trade provided impetus to the arabica market. This market gathered momentum as the Americas’ came to the floor and after a hefty volume day of trade, settled on a positive note. It was an inside day for London however, which continued to trade within a mostly positive but narrow range, to set the close marginally softer on the day, to register the close on both markets against the prices set yesterday, as follows:

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

MAY 1794 + 1 MAY 135.80 + 1.30
JUL 1818 – 2 JUL 137.35 + 0.70
SEP 1841 – 4 SEP 140.00 + 0.55
NOV 1855 – 5 DEC 143.70 + 0.40
JAN 1865 – 5 MAR 147.50 + 0.35
MAR 1878 – 8 MAY 149.80 + 0.35
MAY 1894 – 8 JUL 151.55 + 0.30
JUL 1910 – 8 SEP 152.95 + 0.30
SEP 1928 – 8 DEC 154.65 + 0.45
NOV 1931 – 8 MAR 157.45 + 0.60

 


Coffee Market Report

April 15 2015

The Brazilian Institute of Geography and Statistics have come forth with their latest forecast for the new Brazil coffee crop at a very modest 42,525,683 bags, which is 2,624,751 bags or 5.81% lower than their assessment of the previous 2014 crop. This forthcoming new crop they relate to 31,342,467 bags of arabica coffees and 11,183,216 bags of conilon robusta coffees, which is a forecast in terms of the arabica coffees that falls well below most others, while the conilon robusta figure is in line with many others that have come into play over the last month.

This forecast follows the latest forecast by Citi Commodity News which has significantly increased by 7.3% its previous forecast at the beginning of December 2014 for a new 2015 Brazil crop, to now forecast the new Brazil coffee crop at 48 million bags. Thus adding to the wide range of forecasts that over the past few weeks indicate new crop figures that range between 42.7 million and 49.75 million bags, as against a combined domestic market and export market demand that one might foresee to be approximately 53 million bags.

This latter demand figure for Brazil coffees in the coming twelve months and including approximately 21 million bags of coffee for their domestic market has been lowered in terms of the export market demand over the previous twelve months, as this demand included relatively high volumes of surplus to domestic market demand conilon robusta coffee exports. Thus with the generally agreed perception that conilon robusta crop this year shall be lower and advantageous international buyers of these robusta coffees over the past year shall revert back to the Asian and African robusta coffees, while one might expect to see arabica exports to remain relatively steady to the fore.

The International Coffee Organisation have forecasted that for the present October 2014 to September 2015 coffee year that the world production is approximately 142 million bags and therefore, shall result in an 8 million bags deficit production. This figure does however include a Brazil 2014 crop of 45,342,000 bags, which is approximately 2.5 million bags to 3.5 million bags below many leading and well respected trade house estimates and might by nature; lessen the deficit to a more modest 4.5 million to 5.5 million bags. This is really a deficit factor that shall easily be covered by the substantial world coffee stocks that were on hand, at the start of this present crop year.

The arbitrage between the markets has broadened yesterday to register this at 54.10 usc/Lb., while this equates to a now less attractive 39.59% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices. Especially so as the price resistance within the majority of arabica producer countries, continues to buoy asking export differentials for new business.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 598 bags yesterday; to register these stocks at 2,308,942 bags. There was meanwhile a larger in volume 6,405 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 21,825 bags.

The commodity markets were mixed yesterday, with some degree of support coming to many markets from a marginal easing of the value of the dollar. The Oil, Natural Gas, Sugar, Cocoa, Coffee, Orange Juice, Corn and Soybean markets had a day of buoyancy, while the Cotton, Copper, Wheat, Gold, Silver and Platinum markets tended easier for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.61% lower; to see this Index registered at 417.03. The Reuters Equal Weight Commodity Index that is made up from 17 markets is 0.46% higher; to see this Index registered at 418.97. The day starts with the U.S. Dollar steady and trading at 1.476 to Sterling and 1.064 to the Euro, while North Sea Oil is showing buoyancy in early trade and is selling at 58.20 per barrel.

The London market started the day on a softer note, while the New York market started the day on a hesitantly steady note. The New York market did however soon start to show some modest buoyancy, while the London market remained south of par and with the New York market faltering and joining the London market on a modestly negative track into the afternoon trade. Both markets did however recover and move back into positive territory as the afternoon progressed, albeit a very erratic time for the New York market which struggled to maintain the new found gains. The day progressed with erratic trade and the London market ended the day on a modestly positive note and with 31.2% of the earlier gains of the day intact, while the New York market ended the day with likewise modest gains and with 23.1% intact. This provides little in the way of direction and one might think that there shall be only a hesitantly near to steady start for early trade today against the prices set yesterday, as follows:

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

MAY 1793 + 4 MAY 134.60 + 0.85

JUL 1820 + 5 JUL 136.65 + 0.45

SEP 1845 + 6 SEP 139.45 + 0.40

NOV 1860 + 8 DEC 143.30 + 0.35

JAN 1870 + 8 MAR 147.15 + 0.35

MAR 1886 + 8 MAY 149.45 + 0.30

MAY 1902 + 8 JUL 151.25 + 0.30

JUL 1918 + 8 SEP 152.65 + 0.35

SEP 1936 + 8 DEC 154.20 + 0.40

NOV 1939 + 8 MAR 156.85 + 0.30

 


Coffee Market Report

April 14 2015

The latest Commitment of Traders report from the washed arabica coffee New York market has seen the shorter term in nature Managed Money Fund sector of the market decrease their net short sold position within this market by 53.47% in the week of trade leading up to Tuesday 7th. April; to register a net short sold position of 4,613 Lots on the day. Over the same period the longer term in nature and steadier Index Fund sector of this market increased their net long position within the market by 0.75%, to register a net long on the day of 25,412 Lots.

During this same week of trade the Non Commercial Speculative sector of the market decreased their net short sold position within the market by 36.52%, to register a net short of position of 9,063 Lots. This net short sold position which is the equivalent of 2,569,320 bags has most likely been increased over the period of mixed but overall more negative trade that has since followed and likewise, that of the Managed Money fund sector of the market.

The latest Commitment of Traders report from the London robusta coffee has reported that the more speculative Managed Money sector of this market decreased their net long position within this market by 1.27% in the week of trade leading up to Tuesday 7th. April, to see this long position registered at 11,218 Lots, on the day. This speculative net long position within the London market which is the equivalent of a relatively modest 1,869,667 bags has most likely been little changed, over the period of mixed but overall relatively steady trade that has since followed.

The National Coffee Council in El Salvador have announced that the countries coffee exports for the month of March were 22,914 bags or 27.08% higher than the same month last year, at a total of 107,530 bags. This improved performance has contributed to the countries cumulative exports for the first six months of the present October 2014 to September 2015 coffee year to be 39,870 bags or 15.25% higher than the same period in the previous coffee year, at a total of 301,307 bags.

These figures based on the month by month announcements from the El Salvador Coffee Council, as in yesterday’s report there have been some marginal historic adjustments to bring the exports for the first six months to be marginally higher, at a total of 303,065 bags. They are nevertheless positive numbers for this small Central American producer, which was particularly devastated by the Roya or Leaf Rust infestation over the previous two years and is now on an upside recovery track.

The Department of Agriculture of the Chinese province of Yunnan have reported in a press interview that the province that accounts for over 85% of Chinese coffee production had last year 124,667 hectares of coffee farms, which produced 1.97 million bags of coffee in 2014. Of this they report 807,150 bags or close to 41% of the production of mostly washed arabica coffee, was exported during the year and with earnings of 141.91 million U.S. dollars, which made coffee the provinces third largest agricultural export income earner, after vegetables and tobacco. One cannot however confirm how accurate these quoted figures are, as they do exceed many other private trade and industry figures, but there remains no doubt that China is both steadily increasing its arabica coffee production, as has it become an active exporter of arabica coffees to the consumer markets.

Within the report, they also note that there is a slow but steadily growing domestic coffee market and that the forecast are that with Yunnan’s coffee farmers presently gaining relatively reasonable financial returns from coffee and gaining technical support from international consumer market companies such as Nestle and Starbucks and some of the international coffee traders, that the province is due to see many more farmers coming into the industry. In this respect they forecast that over the next five years that coffee farms shall expand to cover approximately 166,667 hectares and with a potential production by 2020, which shall exceed 3.3 million bags per annum.

The arbitrage between the markets has narrowed yesterday to register this at 53.87 usc/Lb., while this equates to a now less attractive 39.55% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices. Especially so as the price resistance within the majority of arabica producer countries, continues to buoy asking export differentials for new business.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 6,049 bags yesterday; to register these stocks at 2,308,344 bags. There was meanwhile a smaller in volume 4,734 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 28,230 bags.

The commodity markets were mixed yesterday but are now not only under pressure from the muscle of the U.S. dollar, but also from indications of less than forecasted growth for the Chinese economy. The Oil, Sugar, Cocoa and Cotton markets had a day of buoyancy, while the Natural Gas, Coffee, Copper, Orange Juice, Wheat, Corn, Soybean, Gold, Silver and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.61% lower; to see this Index registered at 417.03. The day starts with the U.S. Dollar steady and trading at 1.466 to Sterling and 1.055 to the Euro, while North Sea Oil is steady in early trade and is selling at 57.65 per barrel.

The London market started the day on a marginally softer note, while the New York market showed some modest buoyancy, but with both markets tending softer in early afternoon trade. The New York market did however pick us some support as the afternoon progressed and recovered its losses of last Friday, while the London market remained under pressure and extended the earlier losses. The New York market continued to extend its recovery but faltered later in the afternoon and to tumble back to join the London market in negative territory. The London market continued to end the day on a soft note and with 64.7% of the losses of the day intact, while the New York market ended the day on a likewise softer note and with 71.7% of the earlier losses of the day intact. This overall soft close is unlikely to inspire and is most likely to influence a follow through steady to soft start for early trade today against the prices set yesterday, as follows:

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

MAY 1789 – 24 MAY 133.75 – 1.35

JUL 1815 – 22 JUL 136.20 – 1.65

SEP 1839 – 21 SEP 139.05 – 1.70

NOV 1852 – 23 DEC 142.95 – 1.70

JAN 1862 – 25 MAR 146.80 – 1.65

MAR 1878 – 25 MAY 149.15 – 1.65

MAY 1894 – 25 JUL 150.95 – 1.60

JUL 1910 – 25 SEP 152.30 – 1.20

SEP 1928 – 25 DEC 153.80 – 0.75

NOV 1931 – 25 MAR 156.55 – 0.60

 


Coffee Market Report

April 13 2015

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 36.52% during the week of trade leading up to Tuesday 7th. April; to register a net short sold position of 9,063 Lots. This net short sold position which is the equivalent of 2,569,320 bags has most likely been increased over the period of overall negative trade, which has since followed.

The repetitive forecasts for a lower Brazil new crop by many trade and industry players and repeated on Thursday last week by the Florida based coffee traders with Wolthers Douque USA, as they are not unsurprisingly supported by the traditionally conservative official forecasts, are presently not have too much in the way of supportive influence within the New York arabica coffee market. This is perhaps related to the fact that these forecasts mostly indicate a larger new arabica crop is due this year and with the their foreseen dip in production being related to a sharp dip in conilon robusta production from within the province of Espirito Santo, which experienced an approximately six weeks dry spell at the start of this year.

The New York market with the Brazil new crop factor aside thus ended the week on the back foot last week, with the firm U.S. dollar and the soft macro commodity index having a negative impact, while in terms of fundamentals there are still relatively large stocks of new crop Central American coffees still due to come to the market and with the resulting negative impact of price fixation hedge selling that shall come with these coffees. While on the near horizon is the larger new Peru fine washed arabica coffee crop which shall come into play with the potential for a large new Mitaca crop from Colombia, to add to potentially add to the producer selling activity over the market.

With the prospects for a sharp dip in conilon robusta exports from Brazil as the year progresses and with continued price resistance on the part of farmers within Vietnam who have been slowing the delivery of their new crop robusta coffee stocks, there remains a degree of buoyancy for the London robusta coffee market. The question in this respect remains with the pending selling activity that can be expected to come with the prospects for a larger new Indonesian robusta coffee crop that is soon to start coming to the market in more volume and shall the competition of these coffees, finally start to trigger some more selling aggression within the internal market in Vietnam.

Meanwhile with these activities within the internal market in Vietnam contributing to relatively firm asking differentials for exporters of robusta coffees, the consumer market industries only have to work on a need to buy basis and maintain a steady fill in buying policy. In this respect one should keep in mind that finally with the forecasts for the prospects for another larger new robusta crop due for the last quarter of this year and the possibility that should the summer rain season in Vietnam prove to be normal and support such forecasts, that this might aside from rising supply from Indonesia, influence more internal market supply within Vietnam and more market related export differentials for medium to longer term robusta supply from the country. Thus it would seem that while Vietnam is still showing price resistant restraint and so long as there are no weather issues for the country in the coming months, that there has to be a break to this resistance due on the medium term.

The arbitrage between the markets has narrowed on Friday to register this at 54.53 usc/Lb., while this equates to a now less attractive 39.56% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices. Especially so as the price resistance within the majority of arabica producer countries, continues to buoy asking export differentials for new business.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 6,391 bags on Friday; to register these stocks at 2,302,295 bags. There was meanwhile a larger in volume 10,632 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 32,964 bags.

The commodity markets were mixed on Friday and with many markets still under pressure from the firm U.S. dollar, but with fundamentals seemingly assisting to support many of the markets, to steady the overall macro commodity index for the day. The Oil, Natural Gas, Sugar, London robusta Coffee, Copper, Wheat, Gold, Silver and Platinum markets had a day of buoyancy, while the New York arabica Coffee, Cocoa, Cotton, Orange Juice, Corn and Soybean markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.04% higher; to see this Index registered at 419.60. The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.458 to Sterling and 1.058 to the Euro, while North Sea Oil is steady in early trade and is selling at 57.30 per barrel.

The London market started the day on a steady note on Friday and the New York market with a degree of buoyancy, but this was short lived and while the London market maintained a steady stance the New York market slipped back into negative territory and started to experience increasing selling pressure and further losses as volume picked up through the afternoon trade. The London market shrugged off any negative influences coming from the soft New York market and started to build on its gains through the afternoon and to end the day on a positive note and with 83.3% of the gains of the day intact, while the New York market ended the day on a soft note and with 63.9% of the losses of the day intact. This mixed close likewise provides mixed signals, but with the apparent softness seen within the New York market one might expect to see a marginally softer start for the London market and perhaps a hesitantly steady start for the New York market for early trade today against the prices set on Friday, as follows:

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

MAY 1813 + 22 MAY 135.10 – 2.35

JUL 1837 + 20 JUL 137.85 – 2.30

SEP 1860 + 19 SEP 140.75 – 2.25

NOV 1875 + 19 DEC 144.65 – 2.25

JAN 1887 + 19 MAR 148.45 – 2.25

MAR 1903 + 19 MAY 150.80 – 2.20

MAY 1919 + 19 JUL 152.55 – 2.20

JUL 1935 + 19 SEP 153.50 – 2.10

SEP 1953 + 19 DEC 154.55 – 2.05

NOV 1956 + 19 MAR 157.15 – 2.10

 


Coffee Market Report

April 10 2015

The Florida based coffee traders with Wolthers Douque USA who have a traditionally strong Brazilian relationship have forecasted that the new Brazil crop that is already starting in terms of the conilon robusta harvest, shall be 3.14% higher than their estimate for the past 2014 crop, at a total of 45.6 million bags. There is however already some question on their assessment of the previous crop being approximately 3.5 million to 4 million bags lower than many other reliable private trade and industry assessments of the past crop and therefore, there might be some question on the relatively modest figure that this trade house is forecasting for the new crop.

Meanwhile within Brazil the internal market supply of stock coffees has slowed, with a the firmer nature of the Brazil Reais contributing to price resistance and thus impacting upon very short term selling activity on the part of the exporters. Most exporters do however already have good volumes of forward sales commitments to still fulfil, as have most consumer market industries got good short to medium term cover on their books and this slowing of sales activity has no significant impact upon global supply of Brazil coffees. But it is something of a problem for consumer buyers looking for short term fill in supply of Brazil coffees, as they have to pay up relatively high differentials to secure such coffees.

There are no weather issues presently coming to the markets from Brazil, following the past few weeks of good rains and to contrary and while there are many months still to the fore in terms of weather, the trees are looking to be in very good shape for the prospects for a good flowering in October and a good follow on crop in the coming year. These are however early days and with the unlikely to be damaging frost season on the nearby horizon aside, the big question shall be what will be the quality of the new spring and summer rain season that comes into play late in September, which shall be critical for the prospects for the next 2016 crop.

The well-respected Climate Prediction Centre in the USA has raised their potential for the pending El Nino phenomenon to a 70% factor, which might contribute towards a degree of confidence in the prospects for a normal to good spring and summer rain season for South Eastern Brazil and including the main coffee growing districts. Traditionally an El Nino within the Pacific Ocean, brings with it higher rainfall for this region in Brazil and therefore, lessens the risk of a delayed start to the next rain season. It might however as this phenomenon is expected to come into play in the coming month or two, bring rains into play during the traditionally relatively dry winter harvest season in Brazil, which might cause interruptions during this harvest and some risk of damage in quality rather than volume, for harvest coffees in their patio drying process.

The pending joining of the Mondelez International and D. E. Master Blenders 1753 coffee business in Europe which is still awaiting approval by the EU competitions board is seemingly going to encounter further delays, as the sale of the Mondelez International Carte Noire Brand to Lavazza that would be expected to satisfy the competitions board, is apparently still some way from being concluded. This indicated by a report yesterday that Lavazza only expects to make a decision on the matter by late June this year, which would most likely delay the prospects for the finalisation of an amalgamation of Mondelez International and D. E. Master Blenders 1753 into the second half of the year.

The arbitrage between the markets has broadened yesterday to register this at 57.73 usc/Lb., while this equates to a now less attractive 41.19% price discount for the London robusta coffee market. This arbitrage is continuing to inspire consumer market roaster interest in robusta coffees, which assist to take some of the bite out of the comparative firm arabica coffee prices. Especially so as the price resistance within the majority of arabica producer countries, continues to buoy asking export differentials for new business.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 3,912 bags yesterday; to register these stocks at 2,295,904 bags. There was meanwhile a smaller in volume 222 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 43,596 bags.

The commodity markets were mixed yesterday, but with many experiencing a softer day’s trade and impacting negatively upon the overall macro commodity index for the day. The Oil and New York arabica Coffee markets had a day of buoyancy and the London robusta Coffee market was steady, while the Natural Gas, Sugar, Cocoa, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Gold, Silver and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.65% lower; to see this Index registered at 419.42. The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.469 to Sterling and 1.067 to the Euro, while North Sea Oil is steady in early trade and is selling at 55.90 per barrel.

The London and New York markets started the day on a softer track yesterday, which continued into the afternoon’s trade. There was however support at the lows and the markets recovered in late afternoon trade, but while the New York market managed to hold on to its gains, the London market slipped back to par in late trade. The London market continued to end the day on a steady note, while the New York market ended the day with modest buoyancy and with 66.7% of the gains of the day intact. This rather uncertain close is unlikely to be supportive for confidence and one might expect that the markets are due for little better than a cautiously steady start for early trade today against the prices set yesterday, as follows:

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

MAY 1791 + 1 MAY 137.45 + 1.75

JUL 1817 unch JUL 140.15 + 1.40

SEP 1841 + 1 SEP 143.00 + 1.35

NOV 1856 + 2 DEC 146.90 + 1.35

JAN 1869 + 3 MAR 150.70 + 1.35

MAR 1884 + 3 MAY 153.00 + 1.45

MAY 1900 + 3 JUL 154.75 + 1.75

JUL 1916 + 3 SEP 155.60 + 1.75

SEP 1934 + 3 DEC 156.60 + 1.95

NOV 1937 + 3 MAR 159.25 + 2.05

 


Coffee Market Report