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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

28 Oct 2015
The Guatemala National Coffee Association have announced that the country’s coffee exports for the month of September were 10,128 bags or 5.29% lower than the same month last year, at a total of 181,465 bags. This more modest performance and following many months of similar lower figures has contributed to the countries cumulative coffee exports for the just completed October 2014 to September 2015 coffee year to have been 206,526 bags or 6.59% lower than the previous coffee year, at a total of 2,925,816 bags.

With the new crop cherries presently maturing in Guatemala and the lower grown districts harvest soon to start and the higher grown districts to follow in the next six to eight weeks, the forecasts are for Guatemala to bring in a 6% to 7% larger new crop. Thus while the export performance for the just completed October 2014 to September 2015 coffee year has been relatively flat, one might expect that this new October 2015 to September 2016 coffee year might provide for a better performance.

Meanwhile with dedicated single origin support for Guatemala coffees coming from the North American and Japanese markets, the farmers have been able to continue with price resistance and to pressure the exporters in Guatemala to demand and receive relatively high price differentials relative to the soft prices of the New York market. Thus while Guatemala with its currency tracking the fortunes of the U.S. dollar has not been able to take advantage of the exchange rate to counter the relatively soft international coffee prices, the value of coffee sales over the last coffee year have remained profitable and have afforded most of the coffee farmers the ability to continue with inputs towards what is potentially a larger new crop.

While the Vietnam authorities have reported that the country’s exports of mostly robusta coffees for the just completed October 2014 to September 2015 coffee year were 22.7% lower than the previous coffee year and at a total of only 21 million bags, there remains strong price resistance within the internal market where farmers and internal traders hold substantial stocks of past crop robusta coffees. These stocks that are estimated to be in excess of 5 million bags and some even suggesting as much as 8 million bags are hanging over the market, which with the new crop of in excess of 28 million bags having already started to be harvested, continue to restrain speculative support for the London robusta coffee market.

The second month arbitrage between the markets narrowed yesterday, to register this at 49.88 usc/Lb., while this equates to a 41.36% 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 in more volume upon the fortunes of the London market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 8,370 bags yesterday; to register these stocks at 1,900,683 bags. There was meanwhile a larger in volume 17,477 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 62,246 bags.

Mexico and their neighbouring Central American producers presently account for 842,566 bags or 44.33% of the New York certified stocks, while Colombia accounts for 429,798 bags or 22.61% of the stocks and followed by Peru, with 326,266 bags or 17.17% of the stocks. Thus as is tradition, the Central and South American producer continue to dominate the stocks and in this respect one could add the 18,527 bags or 0.97% of the stocks, which are related to Brazil washed arabica coffees. The balance of the stocks being related to the African producers Burundi, Rwanda, Tanzania and Uganda, who account for 253,185 bags or 13.32% of the stocks and India who account for 30,341 bags or 1.6% of the stocks.

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 1,000 bags on Monday 26th. October; to register these stocks at 3,357,500 bags on the day.

The commodity markets were mixed in trade yesterday, but with the overall macro commodity index still remaining on a softer track for the day. While in terms of the dollar there is once again focus upon the forthcoming meetings of the Federal Reserve Bank and with some starting to suggest the remote possibility of an interest rate hike in December, which would with the resulting firmer dollar be a negative factor within many markets. The Cocoa, London robusta Coffee, Cotton, Copper, Orange Juice and Soybean markets had a day of modest buoyancy, while the Natural Gas and New York arabica Coffee markets were relatively steady for the day and the Oil, Wheat, Corn, 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 0.22% lower to see this Index registered at 397.84. The day starts with the U.S. Dollar showing some degree of buoyancy in early trade and trading at 1.530 to Sterling and 1.103 to the Euro, while North Sea Oil is steady in early trade and is selling at 45.70 per barrel.

The London market and New York markets started the day yesterday with a degree of hesitant buoyancy, but with the markets dipping back into negative territory during early afternoon trade. The markets did however register a recovery as the afternoon progressed and with both markets starting to show some modest muscle, albeit that the recovery came with some erratic and uncertain trade. The markets did however falter late in the day and with the London market ending off the day on the positive side of par and the New York market closing the day just about on par. The London market ended the day on a modestly positive note and with 46.2% of the gains of the day intact, while the New York market ended the day on a steady note and having recovered 85.7% of the earlier in the day’s losses by the close. This was an uncertain close and one that is accompanied by relatively negative charts and one might expect little better than a hesitantly steady start for early trade today against the prices set yesterday, as follows:


NOV 1526 + 2                                        DEC    117.30 unch
JAN 1559 + 6                                         MAR   120.60 – 0.10
MAR 1570 + 5                                       MAY   122.70 – 0.15
MAY 1590 + 7                                         JUL   124.65 – 0.15
JUL 1609 + 6                                           SEP   126.55 – 0.15
SEP 1629 + 6                                           DEC  129.30 – 0.20
NOV 1649 + 6                                         MAR  131.95 – 0.25
JAN 1669 + 6                                          MAY  133.65 – 0.30
MAR 1689 + 6                                          JUL  135.15 – 0.30
MAY 1718 + 1                                          SEP  136.50 – 0.30