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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

14 Jul 2016
The Brazil Export Association Cecafe have reported that the modest 2.6% increase in arabica coffee exports for the month of June compared to the same month last year were countered by the 79.5% decline in conilon robusta coffee exports, as compared to the same month last year. With arabica coffee exports reported at 1.98 million bags, as against a very modest 83,300 bags of conilon robusta coffee exports, to total 2,063,300 bags and an overall green coffee export performance that is 11.7% lower than the same month last year.

This more modest performance has contributed to the July 2015 to June 2016 green coffee exports being 3.2% lower than the same period over 2014 to 2015, at a total of 31.79 million bags. While they forecast in terms of the present October 2015 to September 2016 coffee year shall be 3.2% lower than the previous coffee year, at a total of 35.42 million bags.

However Cecafe do forecast that with the new crop coming in and including a significantly larger arabica coffee crop, as against a smaller conilon robusta coffee crop, that arabica coffee exports shall start to pick up in volume in the coming months and with stable Brazil arabica coffee supply due for the October 2016 to September 2017 coffee year. They do though note that the carryover Brazil coffee stocks into this new crop are very much depleted and are at historic lows, which is news that one would very much have expected following the steady liquidation of stocks over the past two years of deficit Brazil crops.

One might however comment that with the export volumes of conilon robusta coffees for the new October 2016 to September 2017 coffee year due to be very modest in volume following the near to completion smaller conilon robusta coffee harvest, that it is likely to impact negatively upon the overall Brazil coffee exports for this coming coffee year. In this respect and at a guess, as there are no significant carryover stocks of arabica coffees at hand, it is likely to dictate overall Brazil coffee exports for the coming coffee year to be a more modest 32 million to 33 million bags.

This scenario would with a domestic consumption of close to 21 million bags per annum, result in total coffee absorption post this new crop of 53 million to 54 million bags and with most forecasts for the new crop now pointing towards 55 million bags, little in the way of recovery for the carryover stocks into the next 2017 Brazil coffee crop. Thus one might with time in hand to cash in the new crop coffee stocks, not expect to see selling aggression with the internal market in Brazil for the foreseeable future, which might be seen to be a modestly supportive factor for the longer term prospects for the New York arabica coffee market.

Meanwhile the Brazil analyst Safras & Mercado who now forecast the new Brazil crop at 54.6 million bags have reported that they asses that by Tuesday this week that 58% of this new crop had already been harvested, while so far approximately 31% of the estimated new crop coffees had been sold by the farmers. This they note is well ahead of the average 26% factor for forward sales on the part of farmers at this time of the year, which might be seen to be further reason to assume that it shall result in slow and steady rather than aggressive selling activity within the internal market in Brazil in the coming months.

The September to September contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 65.28 usc/Lb., while this equates to a 44.21% 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 decline by 1,765 bags yesterday; to register these stocks at 1,296,127 bags. There was meanwhile a larger in volume 3,870 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 14,510 bags.

The commodity markets were mixed in trade yesterday and with the Oil markets once again coming under pressure, but with the U.S. dollar losing a little weight and proving to be supportive within many markets, the overall macro commodity index had a day of modest buoyancy. The Natural Gas, Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets had a day of buoyancy, while the Oil and Sugar markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.28% higher; to see this Index registered at 434.43. The day starts with the U.S. dollar steady and trading at 1.326 to Sterling and 1.112 to the Euro, while North Sea Oil is showing a degree of buoyancy in early trade and trading at 45.15 per barrel.

The London market and New York markets started the day yesterday on a softer, but with the New York market attracting some support and taking a positive track in the early afternoon trade, which as followed by a more positive track for the London market as the afternoon progressed. This renewed stability did not however trigger follow through buying support and both markets came off the boil late in the day, to see the markets taking something of a sideways track for the rest of the day. The London market ended the day on a positive note and with 53.8% of the earlier gains of the day intact, while the New York market ended the day on a very modest positive note and with only 12.5% of the earlier gains of the day intact. This close does little to inspire confidence and while the charts presently are neutral to supportive, the lack of strong support for what might be seen to be somewhat overbought coffee markets, might see the markets look to a softer start for early trade today against the prices set yesterday, as follows:


JUL 1810 + 3                                       JUL 146.20 + 0.25
SEP 1816 + 7                                       SEP 147.65 + 0.25
NOV 1834 + 7                                    DEC 150.55 + 0.30
JAN 1847 + 6                                    MAR 153.30 + 0.35
MAR 1857 + 6                                  MAY 154.80 + 0.30
MAY 1870 + 8                                    JUL 156.00 + 0.25
JUL 1882 + 8                                       SEP 157.10 + 0.25
SEP 1895 + 8                                      DEC 158.70 + 0.15
NOV 1914 + 8                                   MAR 160.20 + 0.20
JAN 1910 + 8                                    MAY 161.00 + 0.20