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

Coffee Market Report

13 Jun 2016
The latest Commitment of Traders report from the New York arabica coffee market has seen the Non Commercial Speculative sector of this market decrease their short sold position within the market by 133.56% during the week of trade leading up to Tuesday 7th. June; to switch to and register a net long position of 2,375 Lots on the day. This net long position which is the equivalent of 673,302 bags has most likely been little changed to perhaps marginally increased, following the period of mixed but overall more positive trade, which has since followed.

The Association of Coffee Exporters in Brazil have reported that the countries green coffee exports for the month of May were 317,793 bags or 12.74% lower than the same month last year, at a total of 2,176,868 bags. While added to these exports were the exports of value added soluble coffees that are calculated in terms of their green coffee equivalent, which were 48,716 bags or 16.98% lower than the same month last year, at a total of 238,178. This brings the overall exports for the month of May to have been 366,409 bags or 13.17% lower than the same month last year, at a total of 2,415,046 bags.

What is however noticeable in terms of this dip in May exports was that it was largely related to the rather dramatic dip in exports of Conilon robusta coffees for the month, which were 337,693 bags or 83.47% lower than the same month last year, at a total of a relatively modest 66,868 bags. This sharp decline in exports of Conilon robusta coffees very much related to the lower new Conilon robusta coffee harvest this year which has resulted in the domestic market demand for these coffees to have inflated internal market prices for stocks of these coffees, which is causing the prices to be uncompetitive within the consumer markets.

While in terms of the arabica coffee exports for the month of May out of Brazil were seemingly relatively steady as related to the same month last year, to indicate that with last year’s exports of arabica coffees that were related to a deficit crop and were supplemented by good carryover stocks, were very much able to match demand for Brazil arabica coffees. This might be seen to be an indication that despite a larger new Brazil arabica coffee crop this year that one might expect that export volumes are likely to remain steady for the coming months, which shall allow for some degree of rebuilding of the now much depleted arabica coffee stocks.

It is still very early in the morning in Brazil, but so far there have been no reports of damaging frost coming to the fore over the weekend from the country’s coffee districts. Thus with the cold front soon to pass, it would seem that the frost fears that came to the market during last week, might soon be over and unless there are any reports due to come a little later this morning, one might expect some profit taking selling to come into play for the New York market.

The September to September contracts arbitrage between the London and New York markets broadened on Friday, to register this at 62.92 usc/Lb., while this equates to a 45.31% 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 increase by 3,220 bags on Friday; to register these stocks at 1,312,310 bags. There was meanwhile a larger in volume 6,595 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 23,952 bags.

The commodity markets were mixed but many tended easer on Friday, with the overall macro commodity index tending to take a marginally softer track for the day. The Cocoa, New York arabica Coffee, Cotton, Orange Juice, Soybean, Gold and Silver markets nevertheless had a day of buoyancy, while the Oil, Natural Gas, Sugar, London robusta Coffee, Copper, Wheat and Corn markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.59% lower; to see this Index registered at 431.62. The day starts with the U.S. Dollar steady and trading at 1.421 to Sterling and 1.126 to the Euro, while North Sea Oil is tending softer in early trade and trading at 48.80 per barrel.

The London market started the day on Friday with immediate losses, as the market seemingly caught up with the relatively sharp losses encountered by the New York market on Thursday, while the New York market started the day on a hesitantly steady track. The New York market soon followed the London market into negative territory but this was only a brief dip and the afternoon saw that London market continue to trade in negative territory while the New York market and with Brazil frost fears in play, moved back to show positive buoyancy for the rest of the day’s trade. The London market continued to end the day on a soft note and with 66.7% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 75% of the earlier gains of the day intact. This mixed close and with the New York market somewhat artificially supported by frost fears might with no reports of damage having come to the market over the weekend so far, might indicate the possibility for perhaps a steady start for the London market but some negative pressure coming to the New York market for early trade today against the prices set on Friday, as follows:

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

JUL 1643 – 42                                        JUL 136.95 + 3.00
SEP 1674 – 40                                        SEP 138.85 + 3.00
NOV 1691 – 39                                      DEC 141.25 + 2.85
JAN 1704 – 38                                      MAR 143.60 + 2.70
MAR 1721 – 36                                    MAY 145.20 + 2.75
MAY 1739 – 35                                      JUL 146.85 + 2.85
JUL 1757 – 32                                        SEP 148.40 + 2.90
SEP 1771 – 31                                       DEC 150.30 + 2.80
DEC 1790 – 31                                     MAR 151.80 + 2.60
MAR 1786 – 31                                    MAY 152.70 + 2.60