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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

16 Mar 2017

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 123,007 bags or 1.02% during the month of February, to register these stocks at 6,445,774 bags at the end of the month. These stocks do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of 560,000 bags per week, would conservatively have been at least 1.1 million bags. If one is to consider the additional unreported stocks the end month stocks would equate to approximately 7.54 million bags, it would have equated to something in the order of at least 13 and a half weeks of roasting activity. This number may be considered a very safe reserve, in combination with the steady flow of new crop arabica coffees from Brazil, Colombia and Central America coming to the market.

Brazils Official Crop Supply Agency CONAB have announced that it will organise an auction to facilitate local roasters and soluble coffee producers to bid locally for robusta coffees. This in an effort to assist the local industry players to access robusta coffee and likely to delay the prospects of any possibility on the part of the industry to gain approval from government for alternative sources of robusta coffee to be permitted to be imported to the country, ahead of the new Brazil conillon robusta crop that is due to begin harvest in the next months. The Agency regularly holds auctions of government held coffee stocks thus the structures are all in place for an auction of this nature and this robusta auction is scheduled to take place next week.

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 42.02 usc/Lb., while this equates to 29.82% price discount for the London robusta coffee market. This once again narrowing arbitrage is now becoming less of an attractive factor for the many price sensitive roast and ground roasters who have considered robusta coffees to be an opportunist discount component, within their mostly arabica coffee blends.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 7,150 bags yesterday; to register these stocks at 1,332,561 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 31,295 bags.

The Certified Robusta coffee stocks held against the London market were seen to decline by 6,333 bags over the week of trade leading up to Monday 13th. March, to see these stocks registered at 2,728,833 bags, on the day.

It was a mixed day in the commodity markets yesterday, ahead of the U.S. Federal Reserve announcement to confirm the increase in interest rates yesterday by 0.25 basis points to a range of 0.75 to 1.00%, in line with general market expectations. The U.S. Dollar had a mixed but softer day toward the close and the Oil markets posted a positive day. It was a similarly positive finish for Sugar, Cotton, Copper, London robusta Coffee, Orange Juice, Wheat, Corn, a flat day for Gold, with a softer day posted for New York arabica Coffee, Cocoa, Soybean, Silver, Platinum and Palladium. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.55% lower, to see this Index registered at 419.14. The day starts with the U.S. Dollar tending softer and trading at 1.226 to Sterling and at 1.072 to the Euro, while North Sea Oil is buoyant and selling at $ 51.11 per barrel.

The London and New York markets started the day with a degree of buoyancy yesterday, in what was to be a lower overall volume day. The morning buoyancy in New York held within a narrow range while London robusta took a softer track leading into the afternoon in that market. The latter reaction to the macro influence and the turning tide of the U.S. Dollar, provided a boost to the London robusta market toward the end of the day, to see this market clamber higher as the session drew to a close and finish on the day’s high in this market. The New York market managed to retain levels around par toward the middle of the day and the session remained in a tight range which turned negative as the day drew to a close, and in relatively thin volume, sellers came in to quickly push the market lower met as quickly by underlying buyer cover activity, which was not enough to push the market back into positive territory. Thus, a close in both markets after a muted session in low volumes, a positive close for London and a mildly negative finish on the day in New York, to set the close yesterday as follows:

MAR      2161 + 10                     MAR  139.20 – 0.40
MAY      2180 + 11                     MAY  140.90 – 0.35
JUL        2198 + 12                     JUL    143.20 – 0.40
SEP        2209 + 13                     SEP    145.50 – 0.35
NOV      2213 + 14                     DEC   148.80 – 0.35
JAN       2210 + 11                      MAR 152.10 – 0.30
MAR     2211 + 11                      MAY  154.20 – 0.25
MAY     2212 + 11                      JUL    156.10 – 0.15
JUL       2214 + 11                      SEP    157.70 – 0.20
SEP       2222 + 11                      DEC   159.90 – 0.20