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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

16 Nov 2015
The National Coffee Council of El Salvador have reported that the countries coffee exports for the month of October were 5,351 bags or 261.53% higher than the same month last year, at a total of 7,397 bags. These exports are however ahead of the start of the introduction of new crop coffees most likely related to past crop forward sold stocks, which indicates little in terms of the countries new crop. It has however been forecasted by the authorities in El Salvador that despite some concerned earlier forecasts, that the new crop harvest that is now starting shall bring forth a marginally improved new crop.

The annual Sintercafe conference in Costa Rica came to a close over the weekend, but with the presentations proving to be somewhat bearish for the market. In this respect the presentation by Olam International who have a strong presence within the Brazil coffee market have forecasted that Brazil is due for a new 2016 crop of between 60 million and 62 million bags, but they did note that this crop would be chasing rising global consumption and that it might not contribute towards a surplus global supply. This said the figure is nevertheless in terms of it being sharply up on the past two Brazil crops, still a figure that does little to support short term market confidence.

Contrary to this note of caution that accompanied the Olam forecast, the well-respected global commodity bank Rabobank have forecasted a less modest Brazil new crop of approximately 58 million bags, but that this crop shall contribute to a global surplus supply for the October 2016 to September 2017 coffee year of approximately 3.7 million bags. This against their assessment that the global deficit coffee supply for the present October 2015 to September 2016 coffee year of 2.7 million bags, which would indicate a small recovery of the world stocks following the present coffee year.

Perhaps most significant with such reports that indicate that the while Brazil is having to utilise and liquidate stocks to supplement their smaller deficit crop this year, that there is some substance to the earlier forecasts that have come to the market for a much improved new crop for Brazil next year. This view having been supported in recent weeks by the fair to good rainfall reports that have come to the fore from Brazil and rainfall that with the El Nino phenomenon in play that is historically supportive of improved rainfall for South East Brazil, indicating no reason to fear that the rainfall is a short term factor.

On the African front the National Coffee Institute in Angola and with the support of international investors, is actively working to encourage farmers to resuscitate the countries coffee industry, which prior to independence and the Civil War saw the country as a leading global producer and with crops that peaked at close to 4 million bags per annum of mostly robusta coffees. It is early days though and with coffee production presently in the region of 50,000 bags per annum; one might suggest that this has to be a very long term project to get the Angolan coffee industry on its feet again.

The second month arbitrage between the markets narrowed on Friday, to register this at 45.40 usc/Lb., while this equates to a 39.21% 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 6,995 bags on Friday; to register these stocks at 1,865,077 bags. There was meanwhile a smaller in volume 413 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 29,877 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to decline by 333 bags on Thursday 12th. November; to see these stocks registered at 3,339,667 bags on the day.

The commodity markets were mixed in trade on Friday, but with the overall commodity index remaining on the back foot and taking a softer track for the day. The Natural Gas, Sugar and Cocoa markets nevertheless had a day of buoyancy, while the Oil, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, 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 0.69% lower to see this Index registered at 384.35. The day starts with the U.S. Dollar steady in early trade and trading at 1.521 to Sterling and 1.073 to the Euro, while North Sea Oil is steady in early trade and is selling at 42.85 per barrel.

The London market started the day on Friday on a near to steady note, while the New York market registered some modest buoyancy and to assist to bring some stability to the London market and a pip back up to positive territory, but this was short lived and the afternoon brought with it a move back into negative territory for both markets. There was a degree of resistance in the early afternoon trade but as that afternoon progressed and perhaps in reaction to some of the latest crop forecasts for the next 2016 Brazil crop, both market started to come under increased selling pressure and lacking active industry buying support under the markets, the sell stops started to be triggered within the markets and both markets took sharp move to the south and with the New York market hitting twenty three month lows. The London market ended the day on a soft note and with 98.3% of the losses of the day intact, while the New York market ended the day on a likewise soft note and with 85.5% of the earlier losses of the day intact. This close does little to inspire, but it might attract some light industry buying and a steady to perhaps even modestly buoyant start for early trade today against the prices set on Friday, as follows:


NOV 1518 – 57                                         DEC    112.15 – 3.15
JAN 1552 – 57                                         MAR    115.80 – 2.95
MAR 1567 – 55                                       MAY    118.00 – 2.95
MAY 1588 – 54                                         JUL    120.10 – 3.00
JUL 1608 – 53                                           SEP    122.05 – 2.90
SEP 1627 – 53                                          DEC    125.00 – 2.85
NOV 1646 – 54                                       MAR    127.85 – 2.80
JAN 1660 – 54                                        MAY    129.85 – 2.75
MAR 1678 – 54                                        JUL    131.85 – 2.65
MAY 1698 – 54                                        SEP    133.70 – 2.70