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

Coffee Market Report

03 May 2016
The National Coffee Institute in Honduras has reported that the countries coffee exports for the month of April were 22,397 bags or 3.15% higher than the same month last year, at a total of 732,321 bags. This volume they report has contributed to the countries cumulative coffee exports for the first seven months of the present October 2015 to September 2016 coffee year to be approximately 1% lower than the same period in the previous coffee year, at a total of 3.073 million bags.

These cumulative exports from Honduras with the Coffee institute forecasting a 10% rise in in exports for the present coffee year and a total of 5.52 million bags, would indicated that there shall be good volumes of coffee due to come to the consumer markets over the next five months. Most likely though to be weighted towards the months of May to July, as by August and with the aging of the new crop coffees, the export volumes traditionally tend to slow.

The preliminary coffee export figures from Brazil for the month of April have been announced and indicate that the countries green coffee exports for the month were 582,704 bags or 20.7% lower than the same month last year, at a total of 2,232,243 bags. This dip in export performance which is also a 19.57% lower figure than the previous month being related to the combination of the significant decline in arabica coffee stocks following the past two deficit crop years, the smaller new conilon robusta coffee crop and also, the recovery of the Brazil Real that from trading at over 4 to the U.S. dollar earlier in the year, is now trading at 3.49 to the dollar. The declining stocks and the firm Real are both and while the reference prices of the New York arabica coffee market remain relatively soft, is resulting in internal market price resistance towards the countries exporters.

The well-respected Brazilian analysts Safras e Mercado have reaffirmed their positive view towards the new Brazil crop which in terms of the conilon robusta coffees is already making progress and with fly picking of the new arabica crop now starting, to forecast a new crop of 56.4 million bags. In this respect they have forecasted the new arabica coffee crop to be a healthy 42.8 million bags, while the new conilon robusta crop shall be 13.6 million bags and with most of the latter conilon robusta coffees destined for the healthy domestic coffee market of approximately 21 million bags per annum, along with a major contribution to the value added soluble coffees that are both exported and consumed locally.

The International Coffee Organisation have reported that the world coffee exports for the month of March were 1% higher than the same month last year, at a total of 10.39 million bags. This figure contributing to the world coffee exports for the first six months of the present October 2015 to September 2016 coffee year, to be 1.6% higher than the same period in the previous coffee year, at a total of 55.461 million bags. This increase being related to higher export volumes of arabica coffees, as the robusta coffee exports for the first six months of the present coffee year are 7.7% lower than the same period in the previous coffee year.

The July on July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 47.62 usc/Lb., while this equates to a 39.80% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, is however related to the London market being closed yesterday and is likely to broaden again today, when both markets shall be trading.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 2,209 bags yesterday; to register these stocks at 1,379,177 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 320 bags.

The commodity markets and with many international players celebrating a May Day holiday long weekend yesterday and with the London markets closed for a Bank Holiday, were relatively steady yesterday and with the overall macro commodity index maintaining a degree of buoyancy. The Cocoa, Orange Juice, Corn and Soybean markets had a day of buoyancy and the Oil, Natural Gas, Copper and Silver markets were steady for the day, while the Sugar, New York arabica Coffee, Cotton, Wheat and Gold markets tended easier for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.05% higher; to see this Index registered at 409.32. The day starts with a softer U.S. Dollar which is trading at 1.473 to Sterling and 1.156 to the Euro, while North Sea Oil is near to steady in early trade and is selling at 44.90 per barrel.

The London market was closed yesterday and leaving to New York market to trade solo for the day, with this market opening the day on a steady note and making some early gains in thin trade, but this buoyancy was short lived and the market soon drifted back below par and to take a steady downside track for the rest of the day’s trade, but the steady itself at close to the lows near to the end of the day and with the New York market ending the day on a soft note, with 90.2% of the earlier losses of the day intact. This soft close does little to inspire but one might think that there might be some degree of support due from the soft nature of the U.S. dollar, to assist for a degree of buoyancy for the New York market and perhaps some catch up softness for the London market for early trade today, against the prices set in London on Friday and in New York yesterday, as follows:

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

MAY 1556 + 14                                      MAY 119.10 – 1.75
JUL 1588 + 10                                           JUL 119.65 – 1.85
SEP 1607 + 9                                             SEP 121.50 – 1.85
NOV 1625 + 8                                          DEC 124.00 – 1.75
JAN 1641 + 7                                           MAR 126.45 – 1.65
MAR 1655 + 6                                         MAY 127.85 – 1.65
MAY 1673 + 4                                           JUL 129.15 – 1.65
JUL 1691 + 4                                             SEP 130.35 – 1.65
SEP 1709 + 4                                            DEC 132.20 – 1.55
DEC 1728 + 3                                          MAR 133.95 – 1.50