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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

16 Mar 2018

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks decreased by 88,613 bags or 1.34% during the month of February, to register these stocks at 6,524,867 bags at the end of the month. It must be noted though that this is only the seventh month that these stocks have declined and despite this further dip in stocks for the month of February, they remain relatively substantial.

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 approximately 570,000 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, this would equate to more than 13 weeks of roasting activity, which most would consider to be more than a safe reserve.

The respected Brazil analysts Safras & Mercado who had pegged the 2017 Brazil coffee crop at 50.45 million bags, have estimated that by the beginning of this week that farmers had sold approximately 43.1 million bags or 85.43% of the crop. A good percentage of these sales would be related to the countries approximate 1.8 million bags per month domestic market demand, while the exporters would no doubt have taken on arabica coffee stocks to fulfil as much as possible of their much of their forward shipment commitments.

This might make one speculate that with domestic roasters more likely to be hand to mouth in their buying activity, that they shall be the more active buyers of the remaining 2017 crop coffee stocks, over the coming weeks. While the exporters for presently only arabica coffees ahead of the larger new conilon robusta coffee crop, are likely to remain with relatively low export volumes for the next four months.

But what is clear is that by the time the new arabica coffee crop starts to come into play in August, that the farm stocks of past crop coffees shall be almost completely depleted. Which makes one further speculate that as an insurance against the possibility of a smaller 2019 crop to the fore, that farmers shall be encouraged to not become too aggressive in the selling of their new crop arabica coffees, as they look to build up stocks for the coming year. Stocks that might very possibly, we selling into a higher value market.

Meanwhile in terms of the prospects for the new 2018 Brazil crop the rain fall reports from Brazil have been above average for the month of March for the northern coffee districts of the country and fair for most of the districts, with forecasts for more rain to fall for all the main coffee districts in the coming days. Reports that further support the many forecasts, that indicate something of a bumper Brazil crop for this year.

The new Indonesian robusta coffee crop is starting, but in low volumes and with a vibrant domestic market demand the internal market prices for these coffees remain buoyant and uncompetitive in terms of the export market, which is a scenario that is likely to remain until the new crop picks up in volume around July. Leaving the short term consumer market focus upon Vietnam for their robusta coffee supplies, albeit that there remains some contribution in short to medium term robusta coffee supply from India and Uganda.

The May 2018 to May 2018 contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 40.37 usc/Lb., while this equates to 34% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 3,141 bags yesterday; to register these stocks at 1,927,447 bags. There was meanwhile a larger in number 4,920 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 25,067 bags.

The commodity markets were mixed in trade yesterday but with many of the markets on the back foot for the day, to see the overall macro commodity index taking a softer track for the day. The Oil, Cotton and Soybean markets had a day of buoyancy, while the Natural Gas, Sugar, Cocoa, Coffee, Copper, Orange Juice, Wheat, Corn, Gold and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.5% lower; to see this index registered at 428.13. The day starts with the U.S. Dollar steady and trading at 1.395 to Sterling, at 1.232 to the Euro and with the dollar buying 3.285 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 63.80 per barrel.

The London market started the day marginally south of par, while the New York market started the day with some degree of modest buoyancy and soon followed by a recovery for the London market, to see both markets showing buoyancy into the early afternoon trade. However, this did not last and both markets soon slipped back into negative territory and as the afternoon progressed the New York market started to trigger sell stops and to accentuate its gains and register sharp losses before registering a modest recovery, which was accompanied by a steady erosion in value for the London market.

The London market ended the day on a negative note and with 92.3% of the earlier losses of the day intact, while the New York market ended the day on a negative note, with 64.8% of the earlier losses of the day intact. This close does very little to inspire, but one might think that with the New York market possibly over sold that there shall once again be a cautious and hesitant steady start for the markets in early trade today, against the soft prices set yesterday, as follows:


MAR 1776 – 28                                              MAR 117.65 – 2.30
MAY 1728 – 24                                              MAY 118.75 – 2.30
JUL 1758 – 20                                                JUL 120.95 – 2.25
SEP 1760 – 19                                                SEP 123.20 – 2.15
NOV 1764 – 17                                               DEC 126.60 – 2.10
JAN 1768 – 16                                                MAR 130.15 – 2.05
MAR 1779 – 14                                              MAY 132.50 – 2.00
MAY 1792 – 14                                              JUL 134.60 – 1.90
JUL 1805 – 16                                                SEP 136.55 – 1.85
SEP 1821 – 17                                                DEC 139.30 – 1.70