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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

31 Jul 2015
The largest coffee cooperative in Brazil Cooxupe have announced that their farmer members of mostly arabica coffees have so far harvested 41.6% of their new crop coffees, as opposed to a 64.6% factor for the same time last year. While with the new conilon robusta crop for this year already completed, the Brazil Centre for Advanced Economic Studies has estimated that in excess of 50% of the new crop in the leading arabica coffee producing state of Minas Gerais has been completed.

However despite the rising quantities of new crop coffees now coming to the market, there remains a degree of price resistance within the internal market in Brazil, with farmers looking to force short sold exporter’s prices higher. This is tending to force exporters to firm up on their asking differentials for new business for arabica coffees, relative to the reference prices of the New York market. While with the apparent relative tightness of supply of bolder bean screen 17 plus arabica coffees coming out of the new crop that is overall providing a lower percentage of such coffees, the asking prices for such coffees are tightening up considerably.

The big question is with perhaps as much as 40% of the new arabica coffee crop from Brazil still to be harvested, what might be the bold bean percentages that shall come from the cherries that have spent a longer time coming to maturity on the trees. One might guess that this shall be higher, but the chances for overall new crop bold bean percentage to top a 30% factor from this year’s new crop would appear to be slight. Thus while one might expect that the differentials for bolder bean Brazil arabica coffees comparative to the smaller screen 14 plus coffees shall remain firm through to the next crop in July next year, it is likely to inspire many consumer market industries to start utilising higher percentages of the smaller bean arabica coffees out of Brazil for their roast and ground blends and in this respect, to finally cause something of a cap to the presently broadening premiums for the bolder bean new crop arabica coffees.

The Uganda Coffee Development Authority has reported that the country’s coffee exports for the month of June were 70,794 bags or 26.75% higher than the same month last year, at a total of 335,405 bags. This improve performance does however follow many months of more modest relative export volumes and the countries cumulative coffee exports for the first nine months of the present October 2014 to September 2015 coffee year are still 263,470 bags or 9.71% lower than the same period in the previous coffee year, at a total of 2,450,040 bags.

Meanwhile and despite estimates that farmers and internal traders are still holding as much as 8 million bags of past crop robusta coffees in stock and this only two and half months ahead of the start of the new crop harvest, the internal market is still showing price resistance to the bids from exporters looking to cover their short sold commitments. This is likewise forcing exporters to continue to ask for firm differentials for new short term business, but with the greater part of the consumer markets presently on their summer holidays, this is not really causing and reason for concern for the robusta coffee buyers within the consumer markets. Everyone is aware that at some stage and most probably ahead of the flood of new crop coffees within Vietnam, that the stocks shall need to start coming to the market, if only to clear the way for the storage of the new crop coffees.

The arbitrage between the markets broadened yesterday to register this at 50.15 usc/Lb., while this equates to a 40.15% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, but is perhaps due to widen further in time and when Vietnam stocks start to impact upon the fortunes of the London market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 2,205 bags yesterday; to register these stocks at 2,103,068 bags. There was meanwhile a larger in volume 4,950 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 10,400 bags.

The commodity markets had a relatively steady day yesterday and with the overall macro commodity index taking something of a sideways track for the day, while the U.S. dollar retained its muscle for the day to limit the upside potential for many markets. The Oil, Cocoa, Coffee, Orange Juice, Wheat, Corn, Soybean, Silver and Platinum markets had a day of buoyancy, while the Natural Gas, Sugar, Cotton, Copper and Gold markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.02% higher to see this Index registered at 403.23. The day starts with the U.S. Dollar near to steady and selling at 1.560 to Sterling and 1.093 to the Euro, while North Sea Oil is steady in early trade and is selling at 53.65 per barrel.

The London and New York markets opened the day yesterday with modest buoyancy, within and environment of thin and hesitant trade. This positive stance set the mood for the day and with a lack of producer selling coming into play over the markets and with speculative short covering coming forth for the well sold New York market, both markets started to add value in afternoon trade and to set the basis for a generally positive sideways track through to the end of the day’s trade. The London market ended the day on a positive stance but having fallen back from the highs and with only 47.6% of the earlier gains of the day intact, while the New York market ended the day on a stronger note and with 85.9% of the earlier gains of the day intact. This overall positive close is likely to inspire a follow through steady start for early trade today against the prices set yesterday, as follows:


JUL 1774 + 15
SEP 1648 + 10                              SEP  124.90 + 2.75
NOV 1667 + 9                             DEC  128.10 + 2.85
JAN 1683 + 8                              MAR 131.55 + 2.80
MAR 1704 + 8                            MAY 133.70 + 2.80
MAY 1724 + 7                              JUL 135.85 + 2.80
JUL 1743 + 10                              SEP 137.95 + 2.80
SEP 1763 + 10                             DEC 140.80 + 2.75
NOV 1784 + 10                           MAR 143.55 + 2.70
JAN 1806 + 11                            MAY 145.25 + 2.65