Coffee Market Report March 08 2017

The Colombian Coffee Federation have reported that the countries coffee production for the month of February was 197,000 bags or 17.97% higher than the same month last year, at a total of 1,293,000 bags.   This improved performance has contributed to the countries cumulative coffee production for the first five months of the present October 2016 to September 2017 coffee year to being 576,000 bags or 9% higher than the same period in the previous coffee year, at a total of 6,979,000 bags. 

In terms of coffee exports from Colombia the Coffee Federation have reported that the countries coffee exports for the month of February were 75,000 bags or 6.79% higher than the same month last year, at a total of 1,180,000 bags.   This contributes to the countries cumulative exports for the first five months of the present October 2016 to September 2017 coffee year to being 528,000 bags or 9.19% higher than the same period in the previous coffee year, at a total of 6,276,000 bags. 

These are impressive figures and it would appear that Colombia is well on target for the forecasted 15 million bags crop for the present coffee year, which is related to the recent years of an extensive replanting program of aged trees and along with improved farm husbandry and inputs.   However there have been reports of relatively excessive rains within many of the countries districts and with this having had some impact in terms of less stress on the trees and the resulting, less than perfect flowerings towards the next crops. 

So far nothing quantifiable has been forthcoming in terms of official figures and forecasts from Colombia, but these reports to indicate that perhaps the steady growth in Colombian coffee production might well taper off a close to present levels, for the short term.   However, with unforeseen weather problems aside and so far, there is no indication of a severe El Nino due for later in the year, one might expect and with more and more recently planted new coffee trees coming to maturity, to see Colombian production once again increasing during the second half of next year.   

The physical coffee markets are in somewhat with the doldrums for the present, with evidence of only relatively thin producer selling and consumer industry buying activity impacting upon the terminal markets, which remain within a relatively thin trading range for the present.   The question being which direction might they now take and this is perhaps very much in the hands of the unpredictable funds, albeit that fundamentally in terms of medium term tightening supply as against modestly rising demand, there would appear to be little reason to be bearish about the markets. 

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 42.32 usc/Lb., while this equates to 30.08% 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 2,731 bags yesterday; to register these stocks at 1,342,565 bags.  There were meanwhile a smaller in number 2,010 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 32,772 bags. 

The commodity markets and working within an environment of renewed muscle for the U.S. Dollar were mostly softer for the day yesterday, to see the overall macro commodity index took a softer track for the day.    The Oil markets did nevertheless experience a degree of buoyancy, while the Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice, 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 0.76% lower, to see this Index registered at 423.70.  The day starts with the U.S. Dollar near to steady and trading at 1.221 to Sterling and at 1.057 to the Euro, while North Sea Oil is tending softer and is selling at $ 54.15 per barrel. 

The London and New York markets started the day on a near to steady note and both markets were very much trading on par into the early afternoon trade, when the both markets came under pressure and lost a little weight.  As the afternoon progressed the New York market did however briefly bounce back into positive territory for a couple of times, but with no assistance from the negative nature of the overall commodity index that was in play, the New York market settled back to join the London market towards a softer close for the day.   The London market ended the day on a modestly softer note and with 50% of the losses of the day intact, while the New York market ended the day on a likewise modestly softer note and with 53.6% of the earlier losses of the day intact.    This close contributes towards a negative technical picture and does little to inspire confidence but one might think that with the fundamentals for the coffee markets actually not really bearish that there might be some cautious hesitancy to follow the charts south and therefore, the markets might be due for a hesitant and thinly traded steady start for early trade today against the prices set yesterday, as follows: 

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

MAR     2143 – 7                                                MAR   139.00 – 0.65

MAY     2169 – 7                                                MAY    140.70 – 0.75

JUL      2188 – 5                                                 JUL    143.00 – 0.75

SEP      2198 – 4                                                SEP    145.30 – 0.75

NOV     2201 – 5                                                 DEC   148.55 – 0.75

JAN      2200 – 9                                                MAR   151.75 – 0.70

MAR     2202 – 8                                                MAY   153.70 – 0.75

MAY     2204 – 6                                                 JUL    155.45 – 0.60

JUL      2206 – 6                                                 SEP    157.00 – 0.65

SEP      2214 – 6                                                 DEC   159.20 – 0.70