Coffee Market Report February 22 2017

The latest figures emanating from the official coffee institute in Costa Rica and with the new crop close to completion, are pointing to a new crop of close to 1.4 million bags, as opposed to pre-harvest forecasts that had been indicating a new crop of in excess of 1.5 million bags.   While there are some internal trade players in Costa Rica are talking the new crop even lower, at less than the latest 1.4 million bags forecast. 

This said and with the latest reports indicating a new Costa Rica crop that might be between 100,000 and 150,000 below expectations, there have been no indications that the larger regional Central American producers will not be in receipt of larger new crops this year.   In this respect, Honduras, Guatemala and Mexico are still expected to bring in larger new crop this year, with the expectations despite the problems being encountered by Costa Rica that the producer bloc of Mexico and Central America shall have a new crop of close to 18 million bags. 

This is aside from the expectations of a modest increase in production by Colombia for the present October 2016 to September 2016 coffee year, while the new Peru crop that shall start being harvested in April, is likewise expected to be a larger new crop.    Thus for the present there would appear to be not threat to the medium term supply of fine washed arabica coffees, but this is presently not dampening the speculative spirits within the related New York market, which with only light volumes of producer selling in play, has been attracting good speculative and fund support over the past few days. 

The National Office of Coffee and Cocoa in the Cameroon have reported that for their 2015/2016 coffee year the country exported 2.66% more coffee than the previous coffee year, to see exports total 408,333 bags, while the countries domestic roaster consumption 9.8%, to total 63,100 bags.  This improved performance the NOCC report, is due to the increased support that is now coming from the countries Ministry of Agriculture, in the form of sponsored coffee seedlings and improved extension services that are being forwarded to the countries mostly robusta coffee small scale coffee farmers. 

The May to May contracts arbitrage between the London and New York markets broadened yesterday, to register this at 52.56 usc/Lb., while this equates to 34.61% price discount for the London robusta coffee market.  This broadening arbitrage is now becoming more of an attractive factor for the many price sensitive roast and ground roasters who have considered robusta coffees to be an opportunist discount component, within their mostly arabica coffee blends. 

The Certified washed Arabica coffee stocks held against the New York exchange were seen decrease by 1,907 bags yesterday; to register these stocks at 1,326,527 bags.  There were meanwhile a larger in number 2,757 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 30,839 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 42,000 bags or 1.56% over the week of trade leading up to Monday 20th. February, to register these stocks at 2,739,500 bags, on the day. 

The U.S. dollar remained buoyant for the day yesterday and had some impact upon many of the markets, but the markets had mixed fortunes for the day and with the overall macro commodity index taking something of a sideways track for the day.   The Oil, Sugar, Cocoa, Coffee, Cotton, Copper and Corn markets had a day of buoyancy, while the Natural Gas, Orange Juice, Wheat, 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 0.25% lower, to see this Index registered at Friday’s level of 430.37.  The day starts with the U.S. Dollar steady and trading at 1.250 to Sterling and at 1.054 to the Euro, while North Sea Oil is showing a degree of buoyancy and is selling at $ 56.15 per barrel. 

The London market started the day on a near to steady note yesterday, while the New York market post the Presidents Day long weekend holiday started the day with immediate buoyancy.   This remained the track for the markets into the early afternoon trade, with the London market trading around par and the New York market retaining its modest positive stance and setting a positive base for sentiment within the markets.   As the afternoon progressed the New York market added value and with the London market gaining some confidence and moving into modes positive territory and with the markets continuing towards a positive close.   The London market ended the day on a modestly positive note and with 37.5% of the gains of the day intact, while the New York market ended the day on a very positive note and with 78% of the earlier gains of the day intact.   This close assist to paint a positive technical picture for the markets and is likely to buoy confidence and thus, one might expect to see some follow through buoyancy for the London market and a near to steady start for the New York market for early trade today against the prices set yesterday, as follows: 

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

MAR     2158 + 2                                                MAR   150.35 + 2.55

MAY     2189 + 3                                                MAY    151.85 + 2.30

JUL      2202 + 6                                                 JUL    154.10 + 2.30

SEP      2207 + 6                                                SEP    156.40 + 2.30

NOV     2210 + 6                                                 DEC   159.50 + 2.25

JAN      2211 + 7                                                MAR   162.45 + 2.20

MAR     2214 + 7                                                MAY   164.10 + 2.15

MAY     2215 + 7                                                 JUL    165.55 + 2.10

JUL      2216 + 7                                                 SEP    166.95 + 2.00

SEP      2224 + 7                                                 DEC   169.00 + 2.00