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

Coffee Market Report

04 Nov 2015
The National Coffee Institute in Honduras have reported that the countries coffee exports for the month of October were 517 bags or 2.49% higher than the same month last year, at a total of 21,315 bags. It is however early in the year and with the new crop coffees still to impact; one would not be surprised to see such modest exports for the month. The National Coffee Institute of Honduras and with the evidence of new crop cherries presently maturing on the trees, is still forecasting in excess of 9% larger new crop and exports for the present October 2015 to September 2016 coffee year to be approximately 5.52 million bags.

The National Coffee Institute of Costa Rica have reported that the countries coffee exports for the month of October were 8,381 bags or 29.29% lower than the same month last year, at a total of 20,234 bags. It is also for this country early in the year and with early forecasts for a modestly larger new crop due to be harvested between now and February next year, one might expect to see coffee exports for the present October 2015 to September 2016 coffee year of approximately 1.2 million bags.

The preliminary coffee exports for the month of October have been announced in Brazil and with exports for the month having been reported to have been 212,199 bags or 6.86% higher than the same month last year, at a total of 3,306,499 bags. Thus while Brazil has once again encountered a deficit production this year and following last year’s deficit production, the combination of good carryover stocks from 2013 and the weaker exchange rate that takes the bite out of the negative effects of the prevailing weak international coffee prices, allows for Brazil to continue with relatively high volumes of coffee exports to the consumer markets.

While it is still early in the month to truly assess the potential for November exports out of Vietnam and with the internal market still slow sellers, there are some early trade forecasts for exports of between 1.5 million and 1.8 million bags. These exports which shall mostly be robusta coffees and almost all coffees from the past crop carryover stocks, might however be increased should the reference prices of the London market recover further and encourage some more short term selling aggression.

In the meantime with scattered rain showers still interrupting the early new crop harvest activity, there is not yet much pressure upon the Vietnamese farmers and internal trade to sell off more of their significant carryover robusta coffee stocks. However one might think that should the rains come to an end in the coming days and the harvest starts to pick up, that there might be some more pressure to and some degree of increase in selling activity.

There were further reports of good general rains over the South East Brazil coffee districts yesterday and with further rains forecasted for the week, while the medium terms forecasts are for further rains to follow in the coming weeks. Thus so far in terms of the month of November, the issues of threatening dry weather are very much side lined from market sentiment but the reports were somewhat old news and did had not contribute towards negative pressure within the markets.

The second month arbitrage between the markets broadened yesterday, to register this at 48.98 usc/Lb., while this equates to a 39.63% 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 8,741 bags yesterday; to register these stocks at 1,889,137 bags. There was meanwhile a smaller in volume 7,443 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 37,877 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to decline by 6,333 bags on Monday 2nd. November; to register these stocks at 3,339,833 bags on the day.

The commodity markets were mixed yesterday, but with the Oil markets taking the lead and assisting the overall macro commodity index to take a positive track for the day. The Oil, Sugar, Coffee, Copper, Orange Juice, Wheat and Corn markets had a day of buoyancy and the Soybean market was steady, while the Natural Gas, Cocoa, Cotton, 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 0.45% higher to see this Index registered at 401.61. The day starts with the U.S. Dollar steady in early trade and trading at 1.541 to Sterling and 1.095 to the Euro, while North Sea Oil is steady in early trade and is selling at 48.60 per barrel.

The London and New York markets started the day yesterday on a near to steady note and took a hesitant marginally softer track, into the afternoon trade. Both markets did however shrug off the negative influences of further rainfall reports from Brazil and with a firmer Brazil exchange rate assisting to build some confidence, started to attract support and post a relatively good recovery into positive territory, as the afternoon progressed. This recovery and with the added supportive influences of the positive nature of the macro commodity index assisting to buoy sentiment within the New York market saw both market maintain an erratic but positive track, for the rest of the day’s trade. The London market continued to end the day on a positive note and with 53.3% of the gains of the day intact, while the New York market likewise ended the day on a positive note and with 50.9% of the earlier gains of the day intact. This overall positive close and accompanied by some modest muscle for the Brazil real that might slow selling from Brazil today, is likely to inspire some degree of modest confidence and a relatively steady start for early trade today against the prices set yesterday, as follows:

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

NOV 1608 + 13                                     DEC    120.25 + 1.45
JAN 1645 + 16                                      MAR   123.60 + 1.45
MAR 1655 + 16                                    MAY   125.70 + 1.50
MAY 1673 + 15                                      JUL   127.75 + 1.55
JUL 1690 + 12                                        SEP   129.65 + 1.50
SEP 1707 + 9                                         DEC   132.45 + 1.50
NOV 1724 + 8                                      MAR   135.20 + 1.55
JAN 1738 + 5                                       MAY   136.95 + 1.60
MAR 1756 + 5                                       JUL    138.45 + 1.65
MAY 1779 + 5                                       SEP    139.90 + 1.70