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

 

I. & M. Smith (Pty) Ltd.

Coffee Market Report

17 Mar 2016
The National Coffee Association of Guatemala have reported that the countries coffee exports for the month of February were 70,078 bags or 28.61% higher than the same month last year, at a total of 315,037 bags. This figure contributes to the countries cumulative coffee exports for the first five months of this new October 2015 to September 2016 coffee year to being 100,043 bags or 15.47% higher than the same period in the previous coffee year, at a total of 746,736 bags.

It is somewhat remarkable that this seemingly free flow of exports from Guatemala for this coffee year so far, is despite the strong internal market price resistance within the country, which has resulted in relatively firm export differentials being demanded by the countries exporters. But with Guatemala coffee something of a brand name in the mostly Japanese and North American markets, it would seem that rather alike the situation in Hawaii, Costa Rica, Kenya, Sumatra and for the washed coffees from Ethiopia, there is little in the way of consumer market price resistance from within the speciality sectors of these markets, for their Guatemala coffee requirements.

The Coffee Federation of Colombia and with the new Mitaca crop soon to start coming to maturity has announced that due to the El Nino inspired dry weather for the last quarter of last year and so far this year, that they estimate that coffee production for this year might be as much as 1.2 million bags lower than last year’s 14.2 million bags crop. This forecast cannot be seen to be market manipulative in nature as there has been clear evidence that due to the weather that the flowering of the new Mitaca crop within many coffee districts has been relatively poor and likewise with ground water conditions low, there could be some impact upon the prospects for the year end new main crop within the country.

This much expected news and its impact upon fine washed arabica coffee supply for the longer term, is seen to be supportive for the fortunes of the related New York arabica coffee market in the coming months, while it provides a modest degree of sentimental support for the farmers within Central America where there has been a degree of internal market price resistance in play for their new crop coffees. Thus with the funds recently seen to be liquidating their extensive short position within the New York market, there has been something of a mood change within this market this week and with the resulting buoyancy for the market.

The May on May contracts arbitrage between the London and New York markets broadened yesterday, to register this at 64.37 usc/Lb., while this equates to a 49.88% 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 133 bags yesterday; to register these stocks at 1,454,683 bags. There was meanwhile a larger in volume 6,160 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 20,630 bags.

The commodity markets and with a softening of the U.S. dollar in play had a generally positive day yesterday, with the overall macro commodity index taking a positive stance for the day. The Oil, Natural Gas, Sugar, New York arabica Coffee, Cotton, Copper, Soybean, Gold and Silver markets had a day of buoyancy and the London robusta Coffee market had a steady day, while the Cocoa, Wheat and Corn markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.66% higher; to see this Index registered at 387.63. The day starts with the weaker U.S. Dollar showing near to steady and trading at 1.424 to Sterling and 1.122 to the Euro, while North Sea Oil is showing a degree of buoyany in early trade and is selling at 39.10 per barrel.

The London and New York markets had a near to steady start to trade yesterday and with both markets holding this track into the afternoon trade, when the New York market started to pick up some support and leaving the London market behind. As the afternoon progressed and with buy stops coming into play, the New York market added some more weight, while the London market struggled along on a sideways track that was mostly just south of par. The New York market and with the combination of the more positive macro commodity index and the weakening dollar having an added influence continued to add value and with the London market briefly following suit and taking a positive stance, but with the London market shedding most of its gains and heading back towards par for late in the day trade. The London market continued to end the day on a steady note and to the positive side of par but having shed 80% of the earlier gains of the day by the close, while the New York market and with the fundamental of tightening supply in support ended the day on a very positive note and with 77.9% of the earlier gains of the day intact. This positive close for the New York market and the weaker U.S. dollar can be seen to be somewhat positive for market sentiment and one might expect to see a degree of buoyancy for the London market and a steady start for the New York market for early trade today against the prices set yesterday, as follows:

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

MAR 1395 + 3                                       MAR 127.40 + 3.30
MAY 1426 + 3                                       MAY 129.05 + 3.35
JUL 1456 + 5                                            JUL 130.75 + 3.25
SEP 1482 + 7                                            SEP 132.25 + 3.15
NOV 1503 + 7                                         DEC 133.90 + 3.05
JAN 1522 + 6                                          MAR 135.60 + 3.05
MAR 1544 + 6                                        MAY 136.75 + 3.05
MAY 1566 + 5                                           JUL 137.45 + 2.95
JUL 1590 + 5                                             SEP 137.85 + 2.75
SEP 1613 + 5                                            DEC 139.20 + 2.70