|The Brazilian analysts Safras & Mercado have reported that as at Tuesday 21st. June that 41% of their forecasted new Brazil crop of 56.4 bags had been harvested, which they note is close to the 42% harvested at the same time last year. This forecasted to what they estimate is 77% of the new conilon robusta crop has been harvested, while so far only 30% of the new arabica coffee crop has been harvested.
Meanwhile Brazil’s and the world’s largest coffee cooperative Cooxupe have estimated that as a result of the unseasonal rains that have been falling off and on during the harvest season, that only 60% to 65% of arabica coffees being harvested would be of the better cupping qualities, as opposed to the more usual 70% to 80% factor. This perhaps market manipulative in nature assessment being related to the negative effects of the rains in terms of knocking cherries off the trees which would not be in terms of volume lost coffee, but cherries that might see a percentage suffer from degrees of ferment and unclean drying conditions.
One has to consider however that with the price sensitive domestic market taking in approximately eleven million bags of conilon robusta coffees and a further ten million bags of the arabica coffee crop, that this market would most likely easily absorb the less than perfect cupping arabica coffees from the new crop. This being reason not to fear that this lower percentage of better cupping coffees shall actually cause any severe tightness in supply of suitable in quality coffees to fulfil consumer market demand, albeit on the short term it is causing a degree of internal market price resistance for the quality arabica coffees, which is likely to buoy asking export differentials and prices relative to the price dictates of the presently buoyant New York market. Especially so as with the Brazil Real that was at the beginning of the year trading at above 4 to the U.S. dollar, is presently trading at 3.34 to the U.S. dollar.
There have been some concerns on the part of the Brazil coffee farming sector over proposals within the Brazil government that in order to counter the growing deficit for the countries social programs, that a tax should be levied upon export agricultural products. The countries Minister of Agriculture has however publically come out against the proposals, which would be negative to the profitability of the Brazil’s farmers.
For the present and while so far and so long as there is not an intense La Nina coming to the fore to damage the potential for overall coffee supply for the coming year, there remains no fear for longer term overall coffee supply. There are however some concerns that with the next Vietnam crop of mostly robusta coffees that is due to being harvested during the last quarter of the year being potentially 7% lower, while there is presently a more modest new Brazil conilon robusta coffee crop being harvested and likewise a more modest new Indonesian robusta coffee crop, that robusta coffee supply shall tighten on the medium to longer term.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 4,183 yesterday; to register these stocks at 1,314,585 bags. There was meanwhile a smaller in number 1,040 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 4,305 bags.
The commodity markets and with the U.S. dollar tending to soften had a mostly positive day yesterday, to see the overall macro commodity index taking a positive track for the day. The Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice and Silver markets had a day of buoyancy, while the Wheat, Corn, Soybean and Gold markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.46% higher; to see this Index registered at 428.15. The day starts with the British voting to leave the EU and a resulting sharp recovery for the U.S. Dollar which is trading at 1.369 to Sterling and 1.106 to the Euro, while North Sea Oil is steady is sharply lower in early trade and trading at 46.45 per barrel.
The London market started the day under some pressure yesterday and moving into modest negative territory, while the New York market started the day with a degree of buoyancy and shrugging off a brief dip into negative territory. The New York market soon attracted support and took a positive track into the afternoon trade and with the London market recovering to trade just ahead of par, with the New York market continuing to build upon its gains as the afternoon progressed, to be followed by a more modest but similarly positive stance being taken within the London market. This positive stance continued for the rest of the day and to see the London market end the day on a modestly positive note and with 71.4% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 90.1% of the earlier gains of the day intact. This close would most usually be seen to be constructive for market confidence, but with the sharply firmer U.S. dollar in play following the UK vote to leave the EU and some degree of uncertainty, one might expect to see a softer start for early trade today against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
JUL 1684 + 9 JUL 139.25 + 2.30