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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

19 Nov 2015
The largest coffee cooperative in Brazil and the world Cooxupe have forecasted that the next 2016 Brazil crop shall be between 50 million and 55 million bags and thus, countering the recent forecasts that came to the fore during the Sintercafe coffee meetings in Costa Rica, which were talking numbers of close to 60 million bags. This lower and potentially matching demand to a marginal deficit crop from Cooxupe that is being conservative in terms of dry weather in particularly the state of Espirito Santo, might however be seen to be somewhat market manipulative in nature and attracted little in the way of positive market reaction yesterday.

The same report did however make mention that following some good sales of new crop coffees and in reaction to the softening nature of the international coffee terminal markets, that there is now a degree of price resistance coming to the fore within the internal market in Brazil. This is not unexpected and is a scenario that prevails worldwide, with many internal markets within the leading producer countries experiencing disbelieving farmer and internal trader price resistance.

The big question is however how long producers in general can resist the price dictates of the soft international coffee markets, as in the coming four months the world coffee supply is due to encounter the combination of the potentially larger new crops from Vietnam, Mexico, Central America and India, which are over and above the relatively modest but still in play new 2015 Brazil crop and the larger new main Colombian crop that is likewise steadily coming to the market.

Thus with such a weight of coffee already looking for a home and soon to come into play, there has to be competition between producers for market share and for the present the consumer market buyers are able to take a wait and see stance towards the market and cherry pick so to speak, the offers from the various producers. In this respect, the many producers who do not have their currencies pegged to the fortunes of the presently firm U.S. dollar, being much more able to utilise the advantages of their weaker domestic currencies to still gain profitability out of their relatively low dollar value new coffee sales.

The Agriculture, Fisheries and Food Authority in Kenya have voiced their confidence that with their new programs to offer seedlings and low interest loans to farmers in new areas for coffee within the country, that they shall inspire a longer term increase in production. These programs to be accompanied by improved agricultural extensive services to both the existing and new farmers, so as to improve the overall farm yields.

The second month arbitrage between the markets narrowed yesterday, to register this at 47.39 usc/Lb., while this equates to a 40.94% 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 7,533 bags yesterday; to register these stocks at 1,852,768 bags. There was meanwhile a smaller in volume 1,651 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 26,596 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 20,333 bags on Tuesday 17th. November; to see these stocks registered at 3,355,833 bags on the day.

The commodity markets were mixed in trade again yesterday, but with the overall commodity index remaining on the back foot and taking only a near to steady track for the day. The Cotton and Orange Juice markets had a day of buoyancy and the Brent Oil market and Platinum markets were steady, while the U.S. Oil, Natural Gas, Sugar, Cocoa, Coffee, Copper, Wheat, Corn, Soybean, Gold and Silver markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.12% lower to see this Index registered at 381.22. The day starts with the U.S. Dollar near to steady in early trade and trading at 1.527 to Sterling and 1.070 to the Euro, while North Sea Oil is steady in early trade and is selling at 42.10 per barrel.

The London market opened the day yesterday with some modest buoyancy, while the New York market started the day marginally south of par. Both markets did however take a negative track into the afternoon trade and with the markets extending their losses, within and environment of thin and lacklustre trading activity. There was a degree of support returning to the New York market but this was very brief and with volumes of trade picking up steam within both markets, the track was south and with both markets triggering sell stops and taking a downside track. The London market continued to end the day on a soft note and with 78.3% of the earlier losses of the day intact, while the New York market ended the day on a likewise soft note and with 96.2% of the earlier losses of the day intact. This overall dismal close to the markets does little to inspire confidence and one might expect to see little better than a steady start to early trade today against the soft prices set yesterday, as follows:


NOV 1474 – 50                                          DEC    112.75 – 1.50
JAN 1507 – 47                                           MAR   115.75 – 2.50
MAR 1529 – 44                                         MAY   117.95 – 2.50
MAY 1552 – 42                                           JUL   120.10 – 2.50
JUL 1573 – 41                                             SEP   122.05 – 2.50
SEP 1593 – 41                                            DEC   125.05 – 2.45
NOV 1613 – 42                                         MAR   127.95 – 2.45
JAN 1632 – 41                                          MAY   129.95 – 2.40
MAR 1651 – 41                                          JUL   131.90 – 2.40
MAY 1676 – 43                                          SEP   133.65 – 2.45