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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

01 Apr 2016
With the month of March passed the government trade data from Sumatra the leading coffee producing island within Indonesia have reported that the islands robusta coffee exports for the month were 116,058 bags or 37.74% lower than the same month last year, at a total of 218,046 bags. This dip in exports has contributed to the islands cumulative robusta coffee exports for the first six months of the present October 2015 to September 2016 coffee year to be 615,089 bags or 30.54% lower than the same period in the previous coffee year, at a total of 1,399,195 bags.

The National Coffee Council of El Salvador has reported that the country’s coffee exports for the month of February were 34,117 bags or 38.95% lower than the same month last year, at a total of 53,480 bags. This dip in exports for the month has contributed to the countries cumulative coffee exports for the first five months of the present October 2015 to September 2016 coffee year to be 83,180 bags or 42.93% lower than the same period in the previous coffee year.

This dip in exports for the coffee year so far from El Salvador is not seen to be any indication of problems with the new crop, but is more related to the late start in the new crop harvest and with the harvesting of the higher grown quality coffees now in full swing. Thus one might expect to see exports start to catch up in the coming months to total close to 590,000 bags, by the end of the coffee year.

The International Coffee Organisation has reported that the Global coffee exports for the Month of February were 160,000 bags or 1.7% higher than the same month last year, at a total of 9.21 million bags. This performance has contributed to the official ICO export figures for the first five months of the present October 2015 to September 2016 coffee year to be 898,000 bags or 2% higher than the same period in the previous coffee year, at 45,205,000 bags.

Internal market trading activity in Brazil is slow for the present, with the firmer Brazil Real as against the still relatively soft reference prices of the international coffee markets tending to dampen selling spirits. But in the meantime and with a larger new crop harvest on the horizon the Monetary Council of Brazil has approved support for new funding to forward loans of the equivalent of 1.3 billion U.S. dollars, for Brazil’s coffee farming sector. This allocation of finance one might suggest shall further assist farmers to show some degree of price resistance to the price offerings from the countries exporters, which might further contribute to the prevailing lack of selling aggression within the internal market.

The July on July contracts arbitrage between the London and New York markets broadened yesterday, to register this at 59.97 usc/Lb., while this equates to a 46.29% 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 405 bags yesterday; to register these stocks at 1,430,806 bags. There was meanwhile a larger in volume 3,085 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 27,499 bags.

The commodity markets were mixed in trade yesterday and with the softer U.S. dollar assisting to provide support within selected markets, which assisted to retain a degree of buoyancy for the overall macro commodity index for the day. The Oil, New York arabica Coffee, Cotton, Orange Juice, Wheat, Gold and Silver markets had a day of buoyancy and the London robusta Coffee market was near to steady, while the Natural Gas, Sugar, Cocoa, Copper, 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 0.06% higher; to see this Index registered at 387.83. The day starts with a near to steady U.S. Dollar trading at 1.436 to Sterling and 1.138 to the Euro, while North Sea Oil is showing a degree of buoyancy in early trade and is selling at 38.35 per barrel.

The London and New York markets started the day yesterday on a steady note and with both markets remaining steady into the early afternoon trade, but with the London market coming under some pressure and heading south into negative trade, while the New York market started to add value. As the afternoon progressed, the New York market slipped back to join London in negative territory but with the New York market soon attracting support and moving back up into positive territory, while the London market barely recovered to take an erratic sideways track and moving either side of par, for the rest of the day. The London market ended the near to steady and having recovered 91.7% of the earlier losses of the day by the close, while the New York market ended the day on a modestly positive note and with 43.5% of the earlier gains of the day intact. This closer provides little in the way of direction and with the charts not looking constructive for the present, one would expect to see little better than a hesitantly steady and low volume start for early trade today against the prices set yesterday, as follows:


MAY 1501 – 3                                          MAY 127.45 + 0.45
JUL 1534 – 1                                               JUL 129.55 + 0.50
SEP 1555 – 2                                               SEP 131.25 + 0.55
NOV 1571 – 2                                            DEC 132.90 + 0.55
JAN 1586 – 3                                            MAR 134.60 + 0.50
MAR 1606 – 3                                          MAY 136.05 + 0.50
MAY 1626 – 5                                            JUL 137.00 + 0.55
JUL 1647 – 8                                               SEP 137.70 + 0.65
SEP 1670 – 8                                              DEC 138.85 + 0.75
DEC 1670 – 8                                            MAR 140.30 + 0.65