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

Coffee Market Report

25 Sep 2015

24th. September, 2015.

The National Coffee Association of Guatemala have reported that the countries coffee exports for the month of August were 29,334 bags or 10.98% lower than the same month last year, at a total of 237,695 bags. This performance has contributed to the relatively low volume of exports for the first eleven of the present coffee year, partially due to internal price resistance as the Guatemala Quetzal is fixed to the fortunes of the U.S. Dollar and unlike Brazil, Colombia and other key coffee exporters, there is no home advantage to buffer the pain of a softer New York market, against the prevailing slide of developing country currencies against the U.S. Dollar. This is resulting in inflated demands for export differentials from Guatemala and somewhat gloomily and should the circumstances not change any time soon, market dynamics may gradually remove this fine washed arabica producer from the competitive field of play within consumer markets. The cumulative exports for the first eleven months of the present October 2014 to September 2015 coffee year are 195,398 bags or 6.64% lower than the same period in the previous coffee year, at a total of 2,745,351 bags.

The arbitrage between the markets narrowed yesterday, to register this at 46.34 USc/Lb., while this equates to a 39.88% 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 592 bags yesterday; to register these stocks at 2,038,950 bags. There was a larger in volume 7,230 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 28,797 bags.

The commodity markets had an unsteady day yesterday, with concerns within financial markets over a prospective global economic contraction gathering momentum. The troubles at world leading car brand Volkswagen hit the press with resultant speculative withdrawal from commodities that could be seen to be affected by this leading brand in the auto sector. The Platinum markets took on some of this pressure as one of the commodity markets that were affected by this latest development yesterday. It was otherwise, a steady day for the Oil markets although these registered a softer end to the day. A steady day for Gold, Silver and Palladium markets, Wheat, Corn, Soybean, Cocoa, Coffee, Sugar, had a better day, although it was a softer close for Orange Juice, Cotton and Copper markets. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.43% lower to see this Index registered at 387.70. The day starts with the U.S. Dollar trading at 1.527 to Sterling and 1.12 to the Euro, the Brazil Real is trading at 4.176, while North Sea Oil is steady in early trade and is selling at 46.73 per barrel.

The London and New York markets started the day on a marginally softer note, within an environment of thin volume in New York and a busier start to the morning session in London. Both markets managed to move back into positive territory where the markets hovered above opening and steady, although both markets took a turn to negative toward the middle of the session, with sell stops triggered in New York to set the floor. The later day brought in some short covering to see both markets recovery the losses incurred earlier on in the day and this positive track continued in London right to the end. The performance in New York however was a little less convincing as the buoyant and positively trading afternoon gave way to sellers toward the latter final moments of the day, to see this market settle in positive territory but close to unchanged, to set the close yesterday with a degree of sustained buoyancy in London and a New York market that held its own for most of the session but likely took a further knock as the Brazil Real hit new lows against the US Dollar, bringing sellers back in at the last moments, to set the close yesterday, as follows:

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

NOV 1540 + 29                            DEC 116.20 + 0.75
JAN 1548 + 22                             MAR 119.45 + 0.70
MAR 1561 + 21                           MAY 121.65 + 0.65
MAY 1580 + 19                           JUL 123.55 + 0.55
JUL 1599 + 19                             SEP 125.40 + 0.45
SEP 1617 + 19                             DEC 128.20 + 0.40
NOV 1636 + 19                           MAR 130.95 + 0.40
JAN 1655 + 19                            MAY 132.80 + 0.40
MAR 1675 + 19                           JUL 134.60 + 0.30