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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

19 Aug 2015
The National Coffee Association of Guatemala have reported that the countries coffee exports for the month of July were 27,643 bags or 9.42% higher than the same month last year, at a total of 320,955 bags. This improved performance does not however detract from the relatively low volumes of exports for many of the first eight months of the present coffee year, due partially to the internal market price resistance and the resulting inflated asking export differentials. Therefore the cumulative exports for the first ten months of the present October 2014 to September 2015 coffee year are still 167,064 bags or 6.25% lower than the same period in the previous coffee year, at a total of 2,506,656 bags.

With the new crop coffees from the lower grown coffee districts now only approximately eight weeks to the fore, there is little doubt that this year’s less price resistant countries within the region such as Honduras and Nicaragua are sold out of stocks from the previous harvest, but there might possibly still be some small quantities of unsold Guatemala, Costa Rica and El Salvador coffees still to come to the market. While exporters in Honduras and Nicaragua are still holding some small stocks in hand, to fulfil their forward sold export commitments. But for the present there is little in the way of active prompt shipment selling activity from Mexico and Central America, with exporters and consumer market buyers now focused upon the sales of new crop coffees for shipment in the first quarter of next year.

Meanwhile with stocks of new crop coffees from Peru well sold, the consumer markets look mainly to the sales of the new main crop coffees from Colombia to fill the gap within the South and Central American quality sector of their blends, for short term coffee requirements. There being with the increasing production levels within Colombia, no shortage of fine coffees coming from this leading fine washed arabica coffee producer.

Despite the pending surge of new crop robusta coffee supply due for Vietnam during the last quarter of this year, the farmers and internal traders are yet to bit the bullet and liquidate their what is estimated to be significant volumes of past crop stocks, which is keeping the exporters asking differentials for new prompt shipment coffees relatively high. But it would seem to be a waiting game on the part of the farmers and internal traders that they cannot win, as the consumer market buyers not fearing any medium term robusta coffee supply problems, are content to likewise play the waiting game and look to step in with more volume once the pressure of the new crop makes Vietnam robusta coffee relatively more affordable.

With many consumer market buyers only due back at work at the end of this month and those presently returning to work needing time to catch up with administrative commitments, the physical coffee market is slow and lacklustre for the present. However one might suspect that by the start of next month there shall be some more activity within the market, which might assist at least the New York arabica coffee market to maintain its recovery and to hold within the present improved trading range. But there is no accounting for the funds and with their present lack of confidence in the commodity markets in general, they still threaten the medium term fortunes of the coffee markets.

The arbitrage between the markets broadened yesterday to register this at 60.94 usc/Lb., while this equates to a 43.83% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, but is perhaps due to widen further in time and when Vietnam stocks start to impact upon the fortunes of the London market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 3,700 bags yesterday; to register these stocks at 2,086,553 bags. There was meanwhile a larger in volume 6,050 bags decline to the number of bags pending grading for this exchange; to register these pending grading stocks at 16,605 bags.

The commodity markets had another overall soft and lacklustre day of trade yesterday, to see the overall macro commodity index taking a sideways to softer track for trade yesterday. The U.S. Oil, Sugar, Cocoa, Coffee, Cotton and Corn markets had a day of buoyancy, while the Brent Oil, Natural Gas, Copper, Orange Juice, Wheat, Soybean, Gold, Silver and Platinum markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.31% lower to see this Index registered at 397.90. The day starts with the U.S. Dollar steady and selling at 1.567 to Sterling and 1.105 to the Euro, while North Sea Oil is near to steady in early trade and is selling at 47.05 per barrel.

The London and New York markets started the day yesterday on a relatively slow and steady note and with the New York market experiencing some modest buoyancy, while the London market struggled to remain close to par. This was the track taken into the afternoon trade when with the entry of the Americans to the field of play the New York market came under some pressure and took a slip back into negative territory, while the London market continued on its near to steady sideways track. Selling pressure did however slacken and both markets bounced back into positive territory later in the day, to set the coffee markets for an overall steady close. The London market ended the day on a modestly positive note and with 77.8% of the gains of the day intact, while the New York market likewise ended the day on a modestly positive note, but with only 31.2% of the earlier gains of the day intact. This relatively unconvincing close is unlikely to inspire anything better than a near to steady start for early trade today against the prices set yesterday, as follows:


SEP 1731 + 27                                 SEP   135.30 + 0.55
NOV 1722 + 7                                 DEC  139.05 + 0.50
JAN 1732 + 1                                  MAR 142.50 + 0.55
MAR 1750 unch                              MAY 144.55 + 0.55
MAY 1771 unch                                JUL 146.50 + 0.55
JUL 1792 – 1                                     SEP 148.20 + 0.55
SEP 1809 unch                                 DEC 150.60 + 0.55
NOV 1827 unch                               MAR 152.95 + 0.55
JAN 1845 – 1                                   MAY 154.45 + 0.65
MAR 1860 – 1                                   JUL 156.00 + 0.70