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

Coffee Market Report

27 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 increase their net long position within the market by 41.09% during the week of trade leading up to Tuesday 21st. June; to register a net long position of 27,000 Lots on the day. This net long position which is the equivalent of 7,654,380 bags has most likely been since marginally reduced, following the period of mixed but finally sharply negative trade that came with sell off on Friday.

The Uganda Coffee Development Authority has reported that the countries coffee exports of the month of May was 24,154 bags or 9.2% higher than the same month last year, at a total of 286,758 bags. This volume contributes to the countries cumulative coffee exports for the first eight months of the present October 2015 to September 2016 to be 170,336 bags or 8.06% higher than the same period in the previous coffee year, at a total of 2,282,605 bags.

It is noted that in terms of variety that while the countries robusta coffee exports for the first eight months of this year were 3.63% higher, that the arabica coffees exports were 20.91% higher, to contribute to a ratio of 71.28 to 28.72 in terms of robusta to arabica coffees exported. This higher ratio in terms of the arabica coffee exports which still remain a relatively minor player within the countries coffee industry, does assist to add some value to the coffee exports.

However despite the improved contribution from the higher value arabica coffees exported and to the overall increase in coffee exports, the value of the coffee exports for the first eight months of the present October 2015 to September 2016 coffee year was US$ 50,028,019.00 or 18.49% lower than the same period in the previous coffee year. This dip in value that corresponds to the soft nature of the reference prices of the international coffee terminal markets and despite some degree of assistance coming from the firmer U.S. dollar remains something of a concern for the Ugandan coffee farmers.

There was nothing new coming to the world coffee markets in terms of striking news on Friday, which was a day that had the developed world focused more upon the post referendum issues within the United Kingdom and the related volatility for currencies and equity markets, rather than fundamental issues of the commodity markets. The currency markets seemingly having a negative influence upon the commodity markets in general and with the exception of the safe haven precious metals, than any other fundamental news.

The September to September contracts arbitrage between the London and New York markets narrowed on Friday, to register this at 61.45 usc/Lb., while this equates to a 44.8% 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 450 on Friday; to register these stocks at 1,314,135 bags. There was meanwhile a larger in number 604 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 3,701 bags.

The commodity markets and with the U.S. dollar gaining renewed muscle from the post Brexit demise of Sterling and the Euro mostly took a track south on Friday, to see the overall macro commodity index taking a softer track for the day. The Gold and Silver markets had a day of buoyancy, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn and Soybean markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.2% lower; to see this Index registered at 423.02. The day starts with the British pound remaining under pressure and likewise the Euro and with the relatively firm U.S. Dollar trading at 1.338 to Sterling and 1.102 to the Euro, while North Sea Oil is steady is near to steady in early trade and trading at 46.35 per barrel.

The London market and New York markets shrugged off the positive nature of the previous day’s close on Friday, to react rather to the shock conditions for currencies and commodity and equity markets in general which came with the news of the United Kingdom voting to leave the EU, to take and immediate dip south on their opening. This negative stance carried on into the afternoon’s trade and with no relief for the markets, which were along with the overall macro commodity index, under severe pressure from the uncertainty that has come with the negative news of a European divorce due for the United Kingdom. The London market continued to end the day on a soft note and with 87.5% of the earlier losses of the day intact, while the New York market ended the day on a similarly negative note and with 84.6% of the earlier losses of the day intact. This soft close and with the unstable situation within the United Kingdom to the forefront of world news and the corresponding financial issues dominating the morning news does little to inspire confidence, which is likely to keep the markets under some degree of pressure and perhaps little better than a near to steady start for early trade today against the prices set on Friday, as follows:

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

JUL 1643 – 41                                     JUL 134.35 – 4.90
SEP 1669 – 49                                     SEP 137.15 – 5.75
NOV 1686 – 48                                   DEC 139.90 – 5.65
JAN 1699 – 46                                   MAR 142.50 – 5.55
MAR 1714 – 44                                 MAY 143.90 – 5.55
MAY 1731 – 43                                   JUL 145.10 – 5.55
JUL 1743 – 44                                      SEP 146.20 – 5.60
SEP 1757 – 44                                     DEC 147.90 – 5.55
DEC 1776 – 44                                   MAR 149.35 – 5.50
MAR 1772 – 44                                  MAY 150.20 – 5.45