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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

20 Nov 2015
The well-respected U.S. Department of Agriculture Foreign Agricultural Service have announced that they have increased their forecast for Colombian production of mostly fine washed arabica coffees for the present October 2015 to September 2016 coffee year, to a total of 13.4 million bags. Within the report there is mention of the prevailing El Nino phenomenon within he Pacific and the resulting drier weather, but while the report does conceded that it might have some negative impact upon the prospects for the middle year Mitaca crop in 2016, it has indicated that this would not be serious and has been considered within this latest forecast.

Following the Colombian report the U.S. Department of Agriculture Foreign Agricultural Service have also released their latest report on the previous year’s results and the prospects for the Indonesian coffee crop over the coming October 2015 to September 2016 coffee year. In this respect they note that despite the severity of the prevailing El Nino phenomenon and the dry weather that it brings with it that it has so far not had much impact upon the rising coffee production levels that came with the good weather earlier in the year. The report does however agree with many other private trade and industry reports, in that it is likely to impact negatively upon coffee production during the coming year and with the north Sumatra arabica coffee production to be perhaps more negatively affected than the rest of the countries crop.

The U.S. Department of Agriculture Foreign Agricultural Service have also updated their report for Brazil and have revised their assessment of the just completed Brazil crop, which they now report to have been 49.4 million bags. But added to this they have estimated carry over coffee stocks into supply for this new October 2015 to September 2016 coffee year of close to 5.2 million bags. Therefore a coffee supply that be more than sufficient to satisfy overall domestic market and consumer market demand, through to the next 2016 new crop.

But it is a report that clearly agrees with most other reports in that by the time of the next Brazil crop, that the Brazil stocks shall be much depleted and that the country does require a good new surplus crop of in excess of 56 million bags, if it is to start rebuilding coffee stocks for the future. Therefore one might not see the report to be bearish for the market, as it rather indicates how important it is that Brazil is in receipt of good rains for the coffee districts over the next five months, it there is not to be a longer term supply problem.

In this respect there are reports of scattered rainfall from most of the main Brazil coffee districts and with not concerns being voiced over the prospects for rains, during the coming month. Therefore it remains business as usual within Brazil for the present, albeit that over the past couple of week’s internal market selling activity has slowed in reaction to the softening of the international reference prices.

The second month arbitrage between the markets broadened yesterday, to register this at 51.30 usc/Lb., while this equates to a 41.98% 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 2,475 bags yesterday; to register these stocks at 1,850,293 bags. There was meanwhile a larger in volume 4,674 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 21,922 bags.

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 2,833 bags on Wednesday 18th. November; to see these stocks registered at 3,353,000 bags on the day.

The commodity markets were mixed in trade again yesterday, but with the U.S. dollar losing some of its muscle the overall commodity index took a more positive track for the day and assisted to buoy confidence within a number of markets. The Sugar, Cocoa, Coffee, Cotton, Wheat, Corn, Gold, Silver and Platinum markets had a day of buoyancy and the Brent Oil, Orange Juice and Soybean markets had a steady day, while the U.S. Oil, Natural Gas and Copper markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.70% higher to see this Index registered at 383.90. The day starts with the U.S. Dollar near to steady in early trade and trading at 1.528 to Sterling and 1.072 to the Euro, while North Sea Oil is steady in early trade and is selling at 42.25 per barrel.

The London and New York markets opened the day yesterday with some modest buoyancy, which set a platform of confidence and for the markets to maintain a positive track into the afternoon trade. There was seemingly little in the way of producer selling over the markets and with the U.S. dollar losing a little muscle the New York market started to surge and to trigger buy stops to extend the gains, with the London market following suit into a sharply higher trading range. The London market continued to end the day on a positive note and with 90.3% of the earlier gains of the day intact, while the New York market ended the day on a very positive note and with 97% of the earlier gains of the day intact. This somewhat unexpected sharp rally within the coffee markets is ahead of today’s Black Consciousness Day partial public holiday in Brazil which shall further limit producer selling activity for the day and one might think that there might be sufficient cautious confidence in play, to inspire a steady start for early trade today against the prices set yesterday, as follows:


NOV 1530 + 56                                        DEC     119.90 + 7.15
JAN 1563 + 56                                         MAR    122.20 + 6.45
MAR 1584 + 55                                       MAY    124.35 + 6.40
MAY 1605 + 53                                         JUL    126.50 + 6.40
JUL 1626 + 53                                           SEP    128.40 + 6.35
SEP 1646 + 53                                          DEC    131.30 + 6.25
NOV 1665 + 52                                        MAR    134.15 + 6.20
JAN 1684 + 52                                         MAY    136.05 + 6.10
MAR 1702 + 51                                          JUL   138.00 + 6.10
MAY 1726 + 50                                         SEP    139.80 + 6.15