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

Coffee Market Report

16 Sep 2016

16th September, 2016.
The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 110,467 bags or 1.02% during the month of August, to register these stocks at 6,198,110 bags at the end of the month. These stocks include the New York certified Arabica stocks being held in U.S.A. warehouses at end August, which stood at a modest 372,288 bags. The total green coffee stocks reported do not however include the in transit bulk container coffees, nor the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is fed by these stocks, would conservatively have been at least 1.1 million bags. Thus, with an estimated 560,000 bags of weekly consumption and with the addition of the unreported stocks in North America, the green coffee stocks being held at the end of August would equate to something in the order of 13 weeks of roasting activity. This number remains a safe reserve, in terms of the steady flow of new crop coffees from Colombia, Central America and Vietnam that are already coming to the market, as well as the new crop coffees to come from Brazil.

The November to December contracts arbitrage between the London and New York markets broadened yesterday, to register this at 61.08 usc/Lb., while this equates to a 41.02% 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 2,011 bags yesterday; to register these stocks at 1,272,025 bags. There was meanwhile a drawdown of 1,483 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 10,873 bags.

It was a more positive day for the commodity markets yesterday, supported by the firmer trend in the energy sector, with Oil markets posting gains on the day. This while the latest round of U.S. retail sales data met with a degree of disappointment in view of the continued speculation surrounding a likely (or not) interest rate hike to come for this largest economy. It was a positive day for Oil, Sugar, Cocoa, Soybean, Cotton, Copper, Palladium, a mildly negative day for Coffee, Orange Juice, Wheat and Corn, as well as a softer day in the precious metals sector, with Gold, Silver and Platinum all softer on the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.35% higher; to see this Index registered at 413.91. The day starts with the U.S. Dollar steady in early trade and trading at 1.322 to Sterling and 1.123 to the Euro, while North Sea Oil is steady in early trade and selling at 45.34 per barrel.

The London and New York markets started the day yesterday on a steady to marginally negative track, but with a degree of corrective buoyancy within the thin morning session. The positive move with a vacuum of activity and lacking seller activity to initially cap the gains lead to a quick push higher in both markets to steady out as sellers entered the floor. The latter day session became weighted toward selling activity, to see New York break through the previous day settlement whereas in London, negative pressure found underlying buyer support and a steady and narrowly unchanged trend for this market in the afternoon. The latter day trade within New York saw this market regain a degree of lost ground although attempts to move upward were thwarted and the session finished in both markets hardly changed, to set the close yesterday in both markets after a moderate trading volume day, as follows:

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

SEP    1927 – 6                            SEP    147.60 – 0.20
NOV  1936 – 6                            DEC   148.90 Unch
JAN   1955 – 5                            MAR  152.10 Unch
MAR 1964 – 7                            MAY  153.95 Unch
MAY 1970 – 9                            JUL    155.70 Unch
JUL   1978 – 8                            SEP    157.10 Unch
SEP   1986 – 8                            DEC   158.95 – 0.05
NOV 1996 – 7                            MAR  160.65 – 0.05
JAN   2005 – 7                           MAY  161.70 Unch
MAR 2012 – 7                           JUL    162.65 Unch