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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

07 Oct 2015
The National Coffee Growers Federation of Colombia have reported that the countries coffee production for the month of September was 146,000 bags or 16.01% higher than the same month last year, at a total of 1,058,000 bags. This improved number has contributed to the cumulative production figures for the just completed October 2014 to September 2015 coffee year to being 1,209,000 bags or 9.97% higher than the previous coffee year, at a total of 13,333,000 bags.

Similarly positive for the countries coffee industry, the National Coffee Growers Federation of Colombia have reported that the countries coffee exports for the month of September were 263,000 bags or 31.69% higher than the same month last year, at a total of 1,093,000 bags. This improved performance having contributed to the countries cumulative exports for the October 2014 to September 2015 coffee year to have been 1,327,000 bags or 12.1% higher than the previous coffee year, at a total of 12,291,000 bags.

Accompanying the production and export report for the month of September and for the previous coffee year, the Federation has seemingly ignored the recent references to the threat of the prevailing El Nino phenomenon within the Pacific ocean, as they forecast that production shall remain similar for the coming October 2015 to September 2016 coffee year.

Thus so far with the confidence shown by Colombia and with the forecasts from the coffee authorities in Honduras looking towards a 9% increase in exports for this new coffee year at in excess of 5.5 million bags, there should be no concerns over the prospects for Central and South American fine washed arabica coffee supply for this new coffee year.

This good supply from Colombia and Honduras shall be important, as the fine washed arabica coffee crops from the neighbouring countries Mexico, Guatemala, Nicaragua and Costa Rica are so far not being forecasted to improve by only between 2% to 4% for this new coffee year, while there are concerns that El Salvador shall struggle to maintain is presently modest production with their new harvest. In the meantime it is early days still to assess the potential production next year in Peru, whose crops start coming in six months later than that of the Central American producers. Nevertheless and unless there are any unforeseen negative weather issues forthcoming for the main arabica coffee producer blocs, there presently remains little reason for concern over medium to longer term arabica coffee supply.

With the new coffee year starting and the potentially larger new crop that is forecasted to be In excess of 28.5 million bags due to start being harvested in a couple of weeks’ time, there are conflicting estimates on the size of the carry over internal market and trade stocks of robusta coffees into this new coffee year. These forecasts vary between 5.8 million bags to as much as 8.3 million bags, but whichever figure one might wish to believe in, it shall remain a record carry over stock and one that seemingly guarantees Vietnam coffee supply of in excess of 34 million bags for this new coffee year and continues to allay any fears on the part of the consumer industries as to the security of medium to longer term robusta coffee supply.

The second month arbitrage between the markets broadened yesterday, to register this at 57.99 usc/Lb., while this equates to a 44.20% 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 decrease by 14,222 bags yesterday; to register these stocks at 1,972,214 bags. There was meanwhile a smaller in volume 6,445 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 39,245 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 500 bags on Monday, to see these stocks registered at 3,376,000 bags.

The commodity markets continued to attract support in trade yesterday and with most markets showing a degree of buoyancy and assisted by the weaker U.S. dollar, to see the overall macro commodity index taking a positive track for the day. The Oil, Natural Gas, New York arabica Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Gold, Silver and Platinum markets had a day of buoyancy, while the Sugar, Cocoa and London robusta Coffee markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.37% higher to see this Index registered at 401.77. The day starts with the U.S. Dollar near to steady and trading at 1.524 to Sterling and 1.126 to the Euro, while North Sea Oil is steady is showing a degree of buoyancy in early trade and is selling at 52.40 per barrel.

The London and New York markets started the day yesterday on a softer note and both market remained in negative territory and against thin and lacklustre trade into the afternoon, when the New York market started to pick up support and moved back into positive territory, while leaving the London behind in negative territory. This remained the track for the day with the New York market bouncing around on the positive side of par, while the London market took and erratic track within the negative side of par. The London market continued to end the day on a marginally softer note and with 42.1% of the earlier losses of the day intact, while the New York market assisted by the softer dollar and positive influences of the overall macro commodity index ended the day on a modestly positive note and with 35.7% of the earlier gains of the day intact. This is a somewhat uncertain close but with the charts still tending to look positive and with the softer U.S. dollar in play, one might expect to see a hesitantly steady start for early trade today against the prices set yesterday, as follows:


NOV 1600 – 9                                         DEC    128.10 + 0.55
JAN 1614 – 8                                          MAR    131.20 + 0.50
MAR 1630 – 8                                         MAY   133.30 + 0.50
MAY 1649 – 9                                           JUL   135.05 + 0.45
JUL 1669 – 9                                             SEP   136.80 + 0.60
SEP 1688 – 10                                          DEC   139.10 + 0.65
NOV 1707 – 11                                        MAR  141.25 + 0.55
JAN 1727 – 11                                         MAY  142.80 + 0.55
MAR 1745 – 11                                         JUL   144.15 + 0.35
MAY 1761 – 11                                         SEP   145.15 + 0.05