The Agricultural Ministry of Brazil Crop Supply Agency CONAB has come forth and with the new crop harvest already taking place, with their latest forecast for this new crop. In this respect they have forecasted the new crop to be 49.7 million bags, which shall be made up from 40.27 million bags of arabica coffees and 9.43 million bags of conilon robusta coffees.

This forecast in terms of the most of the other trade and industry forecasts that are already in the market is a relatively modest number, but this had to be expected, as CONAB are traditionally conservative and with their figures most usually proving to be between 10% and 15% below the eventual reality that comes with the evidence of domestic consumption and exports. Thus this forecasts is not seen to be in any way bullish as it actually is supportive for the new crop forecast that have talked of a new crop in excess of 55 million bags, as could be seen by the relatively soft nature of the coffee markets following this report.

On the weather front the somewhat delayed start to the new summer rain season in Vietnam is seen to be over and most of the main coffee districts in Vietnam have reported some good rains over the past couple of weeks, which has tended to brush aside the earlier talk of the threat of partial drought and the resulting damage to the potential of the next year end crop. This has not however changed attitude of the farmers and internal traders in Vietnam who continue to show price resistance to the price dictates of the London market and by nature of this, are forcing the countries mills and exporter to pay up for new stocks and thus maintaining positive price differentials for new robusta coffee business out of Vietnam.

The general view is that the London market would need to add approximately US$ 180.00 per Mt. to the present value of this market, before value from the reference prices in the London market would be sufficient for Vietnamese farmers to start to accept prices that would allow for Vietnamese robusta coffees to be exported at tenderable values. But one would suspect that even should he London market increase in value to this degree that the Vietnamese farmers knowing that there is little in the way of alternative origin competition in any volume for their robusta coffees, that they would still follow the market higher and continue to show some degree of price resistance.

The news that the largest coffee roaster in the U.S.A. has announced a 6% reduction for its wholesale prices of its high profile Folgers and Dunkin’ Donuts coffee brands and a move that shall most likely be followed by its main stream competitors, tends to take more wind out of the sails of the speculative sector of the market. As it indicates that even though this is probably more a bid to increase market share, that the industry does not believe in any short term recovery for the coffee markets.

The July on July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 47.05 usc/Lb., while this equates to a 38.63% 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 1,511 bags yesterday; to register these stocks at 1,355,237 bags. There was meanwhile a larger in volume 3,273 bags decline to the number of bags pending grading for this exchange; to register these pending grading stocks at 10,174 bags.

The Certified Robusta Coffee stocks held against the London market were seen to decrease by 43,500 bags or 1.6% over the week of trade leading up to Monday 23rd. May, to register these stocks at 2,671,500 bags on the day. These stocks on a steady decline but not quite as aggressively as many had expected, in terms of the positive differentials that consumer roasters are obliged to pay for new robusta coffee business from the origin countries.

The commodity markets continue to battle against the negative pressure of the renewed muscle of the U.S. dollar, which is once again becoming quite robust in terms of the growing speculation for an interest rate hike and this speculation further fuelled yesterday, by the news of good housing data from the U.S.A. This contributed to the overall macro commodity index taking a softer track for the day, in yesterday’s trade. The Oil, Cocoa, London robusta Coffee, Cotton, Copper, Wheat, Corn and Soybean markets nevertheless had a day of buoyancy, while the Natural Gas, Sugar, New York arabica Coffee, Orange Juice, 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 0.29% lower; to see this Index registered at 403.52. The day starts with a degree of buoyancy for the U.S. Dollar which is trading at 1.461 to Sterling and 1.115 to the Euro, while North Sea Oil is steady in early trade and is selling at 48.75 per barrel.

The London market and New York markets started the day yesterday with some degree of hesitant buoyancy, but with the New York market losing its way as the market headed into the afternoon trade, while the London market traded within a relatively narrow band either side of par. It remained a relatively lacklustre day for the rest of the day and with the New York market struggling to remain close to par, while the London market retained some modest buoyancy for the day. The London market continued to end the day on a modestly positive note and with 41.7% of the earlier gains of the day intact, while the New York market ended the day on a modestly negative note and with 58.3% of the earlier losses of the day intact. This close provides little in the way of direction and one might expect to see little better than a steady start for early trade today against the prices set yesterday, as follows:

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

MAY 1620 + 5
JUL 1648 + 5                                      JUL 121.80 – 0.35
SEP 1660 + 3                                      SEP 123.80 – 0.30
NOV 1670 + 4                                   DEC 126.55 – 0.35
JAN 1677 + 1                                   MAR 129.25 – 0.30
MAR 1686 – 2                                 MAY 131.00 – 0.30
MAY 1696 – 7                                    JUL 132.60 – 0.10
JUL 1707 – 11                                    SEP 133.00 + 0.05
SEP 1722 – 11                                   DEC 135.80 + 0.20
DEC 1741 – 11                                 MAR 137.50 + 0.20