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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

04 May 2016
The latest Commitment of Traders report from the New York arabica coffee market has seen the shorter term in nature Managed Money fund sector of this market decrease their net long position within the market by 33.51% over the week of trade leading up to Tuesday 26th. April; to register a net long position of 6,790 Lots. Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 1.06%, to register a net long position of 33,963 Lots on the day.

Over the same week the Non Commercial Speculative sector of this market decreased their net long position within the market by 67.12%, to register a net long position of 1,807 Lots. This net long position which is the equivalent of 512,276 bags has most likely been decreased and possibly even moved back into a net short position, over the period of mixed but overall softer trade that has since followed and likewise, one would think that the net long position of the Managed Money fund sector of the market has been sharply reduced.

The National Coffee Institute in Costa Rica has reported that the countries coffee exports for the month of April were 21,653 bags or 14.58% higher than the same month last year, at a total of 170,169 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 1.4% higher than the same period in the previous coffee year, at a total of 653,887 bags.

These cumulative exports from Costa Rica with the latest forecasts for a marginal increase in production and exports from the recently competed new crop, would indicate that the country is well on track towards exports for the present coffee year of approximately 1.2 million bags and would therefore indicate 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 steady export volumes out of Central America in general and accompanied by continued good volumes of exports of fine washed arabica coffees out of Colombia so far this year, tend to depress sentiment within the New York arabica coffee market. Likewise the many forecasts that have come to the fore that indicate a good arabica coffee crop out of Brazil this year and albeit that this shall only be a potentially small surplus crop, contributes to the lacklustre nature of this market. It is however early days as of yet and one has not seen what the effects of the dry weather in Colombia over the past six months that came with the now close to the end El Nino phenomenon might have had upon the prospects of the new middle year Colombian Mitaca crop, which many still predict might dip by in excess of 1 million bags and could if this proves to be reality, be supportive for market sentiment on the longer term.

The July on July contracts arbitrage between the London and New York markets broadened yesterday, to register this at 47.63 usc/Lb., while this equates to a 39.94% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, continues to inspire support for the robusta coffee sector of the industry.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 362 bags yesterday; to register these stocks at 1,378,815 bags. There was meanwhile a larger in volume 3,110 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 3,430 bags.

The commodity markets with disappointing growth forecasts coming to the fore from China, the Euro zone and Great Britain remain within something of a doldrums, despite some degree of recent recovery that has been assisted by a weaker U.S. dollar. However the overall macro commodity index with the dollar posting a modest recovery during yesterday’s trade, tending softer for the day. The Natural Gas, Sugar and Orange Juice markets had a day of buoyancy yesterday, while the Oil, Cocoa, Coffee, Cotton, Copper, Wheat, Corn, Soybean, 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 1.05% lower; to see this Index registered at 405.01. The day starts with some buoyancy for the U.S. Dollar which is trading at 1.453 to Sterling and 1.148 to the Euro, while North Sea Oil is near to steady in early trade and is selling at 43.25 per barrel.

The London market started the day yesterday and following the long weekend Bank Holiday for the market on a softer note, while the New York market predictably showed some early buoyancy and to see the markets maintain this stance into early afternoon trade. The positive nature of the New York market that had peaked at gains of 1.85 usc/Lb. did seemingly have some degree of influence upon sentiment within the London market which recovered and joined the New York market within positive territory, but as the afternoon progressed and with the negative influences of the negative nature of the macro commodity index assisting to dampen spirits, both markets slipped back into negative territory later in the day. The London market continued to end the day on a negative note and with 56.2% of the earlier losses of the day intact, while the New York market ended the day on a modestly negative note and with 80% of the earlier losses of the day intact. This close provides little in the way of direction and one might expect to see a hesitantly near to steady start for early trade today against the prices set yesterday, as follows:


MAY 1554 – 2                                       MAY 118.60 – 0.50
JUL 1579 – 9                                            JUL 119.25 – 0.40
SEP 1599 – 8                                            SEP 121.15 – 0.35
NOV 1617 – 8                                         DEC 123.75 – 0.25
JAN 1635 – 6                                         MAR 126.30 – 0.15
MAR 1648 – 7                                       MAY 127.80 – 0.05
MAY 1663 – 10                                       JUL 129.10 – 0.05
JUL 1676 – 15                                         SEP 130.25 – 0.10
SEP 1692 – 17                                        DEC 132.10 – 0.10
DEC 1711 – 17                                      MAR 133.85 – 0.10