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

 

I. & M. Smith (Pty) Ltd.

Coffee Market Report

12 Aug 2016

The National Coffee Association of Guatemala have reported that the countries coffee exports for the month of July were 20,009 bags or 6.23% higher than the same month last year, at a total of 340,964 bags. This figure contributes to the countries cumulative coffee exports for the first ten months of the present October 2015 to September 2016 coffee year to being 13,563 bags or 0.54% higher than the same period in the previous coffee year, at a total of 2,521,219 bags.

The Brazil analysts Safras & Mercado who have forecasted the new Brazil crop to be 54.9 million bags have estimated that 81% of this new crop has so far been harvested, to indicate that the new crop has peaked and shall be mostly completed by the end of this month and thus, well ahead of the late September start of the spring and summer rain season and the early flowerings for the next 2017 crop. This estimate would indicate that with the new conilon robusta coffee crop completed that by now approximately 32 million bags of the new arabica coffee crop has already been harvested.

Brazil’s Commodity Export Association CECAFE have noted that the countries coffee exports for the first seven months of this year are 13.5% lower than the averages for the same period over the past two years, at a total of 16.05 million bags. One has to comment though that the dip in exports from Brazil this year has been heavily weighted towards the exports of conilon robusta coffees, which are coffees that aside from some special support from roasters in North America, were mostly price competitive opportunist exports and with a good volume of these coffees going to the certified stocks of the London exchange, rather than fuelling consumer market industry demand.

Thus in terms of the dip in coffee exports so far this year, it really does not indicate any tightness of supply for the very much in demand by consumer market industries Brazil arabica coffees. Albeit that with the majority of the internal market arabica coffee stocks having been liquidated over the past two years of deficit arabica coffee crops, there has been a slowing of arabica coffee exports over the past couple of months. However, with the new and much larger new Brazil arabica coffee crop now getting close to completion and the main northern hemisphere consumer markets heading towards the higher volume winter roasting season, one might expect to see Brazil arabica coffee exports start to pick up in volume from September onwards.

Meanwhile with many leading industry players distracted by the summer holiday season the physical coffee markets are lacklustre in nature and with little in the way of buying interest, which is likewise stalling the selling activity out of the producer countries. This lacklustre trading environment more than likely to continue until post Monday 5th. September Labour Day holiday in the U.S.A., when the industry players shall start to look to the fore and the higher volume winter roasting season.

The November to December contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 57.64 usc/Lb., while this equates to a 40.84% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, continues to inspire support for the robusta coffee sector of the industry.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 4,764 bags yesterday; to register these stocks at 1,283,976 bags. There was meanwhile a smaller in volume 1,710 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 15,760 bags.

The commodity markets were mostly on a negative track in trade yesterday and gaining little support from the dull Chinese growth figures and the retained muscle of the U.S. dollar, but with the recovery of the Oil markets the overall macro commodity index was able to post a modest positive track for the day. The Oil, Cotton, Copper, Orange Juice and Soybean markets had a day of buoyancy, while the Natural Gas, Sugar, Cocoa, Coffee, Wheat, Corn, Soybean, Gold and Silver markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.18% higher; to see this Index registered at 420.32. The day starts with the U.S. dollar near too steady and trading at 1.297 to Sterling and 1.114 to the Euro, while North Sea Oil is showing a degree of follow through buoyancy in early trade and trading at 44.85 per barrel.

The London and New York markets started the day yesterday on a negative note and maintain this negative track into the afternoon trade, but while the New York market continued to come under pressure as the afternoon progressed the London market did claw its way back towards close to par, but to continue to falter close to the mark and to take a mostly sideways and modestly negative track and with the New York market likewise somewhat sideways in nature, but within stronger negative territory. The London market continued to end the day on a modestly softer note and with 53.8% of the earlier losses of the day intact, while the New York market ended the day on a soft note and with 60% of the earlier losses of the day intact. This close does little to inspire and is tending to point to a negative technical picture for the markets and one might think that it will inspire little better than a steady start for early trade today against the prices set yesterday, as follows:

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

SEP 1808 – 10                                      SEP  137.70 – 0.95
NOV 1841 – 7                                      DEC 141.15 – 1.20
JAN 1860 – 7                                       MAR 144.40 – 1.15
MAR 1871 – 6                                     MAY 146.30 – 1.15
MAY 1883 – 6                                       JUL 148.05 – 1.15
JUL 1897 – 6                                         SEP 149.65 – 1.20
SEP 1909 – 6                                        DEC 151.85 – 1.20
NOV 1922 – 6                                     MAR 153.95 – 1.25
JAN 1931 – 6                                      MAY 155.20 – 1.30
MAR 1938 – 6                                       JUL 156.25 – 1.50