Coffee Market Report March 02 2017

The National Coffee Institute in Costa Rica has reported that the countries coffee exports for the month of February were 36,193 bags or 25.05% lower than the same month last year, at a total of 108,276 bags.   This has contributed to the countries cumulative coffee exports for the first five months of the present October 2016 to September 2017 coffee year to being 32,883 bags or 10.49% lower than the same period in the previous coffee year, at a total of 280,276 bags. 

The National Coffee Institute in Honduras has reported that the countries coffee exports for the month of February were 250,306 bags or 35.58% higher than the same month last year, at a total of 953,831 bags.  This improved performance and if one is to apply the month by month figures reported by the National Coffee Institute for the coffee year so far, would contributed to the countries cumulative coffee exports for the first five months of the present October 2016 to September 2017 coffee year to have been 907,265 bags or 54.6% higher than the same period in the previous coffee year. 

However, within the report yesterday that confirmed the countries coffee exports for the month of February, the report indicated that the countries cumulative coffee exports for the first five months of the coffee year were only a more modest 36% higher, at 2,314,000 bags.   Whichever is the correct number though, there is no doubt that Honduras is surging ahead in coffee production and is likely to exceed 5.7 million bags in coffee exports for the present coffee year. 

The dip in coffee exports from Costa Rica for this coffee year so far and in terms of the downgraded new crop estimates by the National Coffee Institute was not unexpected, with the country now forecasting coffee exports for the coffee year, which might be little better than 1.1 million bags.   It is however not a scare story in terms of regional coffee supply, as with the larger players Honduras, Guatemala and Mexico estimated to have had larger new crops, the coffee supply from the producer bloc of Mexico and Central America is still estimated to be approximately 1.3 million bags higher for the present coffee year, from a regional crop of in excess of 18 million bags. 

It is early in the month but with evidence of forward contract commitments in hand, the trade in Vietnam is already estimating that the country shall export between 2.3 million and 2.7 million bags of mostly robusta coffees during the month of March.  This forecast in terms of the limited competition from Indonesia ahead of the start of their new robusta coffee harvest and no competition from Brazil post the dismal 2016 conilon robusta coffee crop, is a most likely scenario. 

The May to May contracts arbitrage between the London and New York markets broadened yesterday, to register this at 47.32 usc/Lb., while this equates to 32.68% price discount for the London robusta coffee market.  This once again narrowing arbitrage is now becoming less 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 to increase by 1,665 bags yesterday; to register these stocks at 1,332,634 bags.  There were meanwhile a larger in number 3,865 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 31,495 bags. 

The commodity markets while there was not that much clarity coming to the fore from the President address to the U.S. congress, took some heart from improved economic figures from both China and the Euro zone countries, to see the overall macro commodity index taking a positive track yesterday.  The Natural Gas, Sugar, Coffee, Cotton, Copper, Wheat, Corn, Soybean and Silver markets had a day of buoyancy, while the Oil, Cocoa, Orange Juice and Gold markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.79% higher, to see this Index registered at 429.79.  The day starts with the U.S. Dollar showing a degree of buoyancy and trading at 1.228 to Sterling and at 1.053 to the Euro, while North Sea Oil is steady and is selling at $ 55.25 per barrel. 

The London and New York markets started the day yesterday on a steady note and taking a steady to modestly buoyant track into the early afternoon trade, but with both markets coming under pressure and heading south into negative territory as the afternoon progressed.    However, the reversal in the fortunes for the markets was somewhat short lived as both markets bottomed out and with industry buying coming into play and buy stops being triggered both markets recovered and moved back into positive territory, with the New York market in particular end the day on a strong upside track.   The London market ended the day on a modestly positive note and with 60% of the earlier gains of the day intact, while the New York market ended the day on a very positive note and with 83% of the earlier gains of the day intact.    This close assists to paint something of a positive technical picture and one might think that it shall assist to inspire confidence for a steady to perhaps buoyant start for the markets for early trade today against the prices set yesterday, as follows: 

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

MAR     2113 + 10                                              MAR   142.65 + 1.95

MAY     2149 + 6                                                MAY    144.80 + 2.20

JUL      2165 + 5                                                 JUL    147.15 + 2.25

SEP      2173 + 5                                                SEP    149.45 + 2.25

NOV     2176 + 4                                                 DEC   152.55 + 2.25

JAN      2179 + 4                                                MAR   155.60 + 2.20

MAR     2181 + 4                                                MAY   157.50 + 2.25

MAY     2183 + 5                                                 JUL    159.05 + 2.25

JUL      2185 + 6                                                 SEP    160.50 + 2.20

SEP      2193 + 6                                                 DEC   162.65 + 2.25