Coffee Market Report March 22 2017

Reports from the internal market in Vietnam are indicating that farm and internal trade stocks are diminishing and with reference that the stocks might be less than 30% of the last robusta crop, with expectations that internal market stocks shall be at a three-year low.   Such reports do not however take into account the Ho Chi Minh City trade stocks and while there is no doubt that robusta coffee supply in Vietnam following the smaller new crop that came in over October 2016 to January 2017, it is questionable that once there is more alternative supply coming to the fore from the new Indonesian and Indian crops, that this will be matter of great concern to the consumer market buyers of robusta coffees.  But is does remain a supportive factor for the fortunes of the related London market, for the medium term. 

In the meantime, there was a report in the Vietnam press yesterday that the temporary ban on Indian importation of Vietnam coffees has been lifted, but this has not been officially confirmed.   This if it is true, would allow for the Indian soluble coffee manufacturers to continue to import approximately 64,000 bags of Vietnam robusta coffees per month, which these industries have grown accustomed to over the past few years.   It is news however if it proves to be true, that is unlikely to be market supportive news as in terms of Vietnam robusta coffee exports, the volumes that go to India have always been factored in to the figures that related to estimated demand for Vietnam coffees.  

Physical coffee trade for the arabica coffees remains lacklustre and with the Brazil Real that is presently trading at 3.08 to the dollar assisting to slow sales, it is leaving the New York more in the hands of the speculative and fund sector for direction.   But in the meantime the more cash and carry nature of robusta coffee trade, results in there being more influence from this sector upon the range bound nature of the London market. 

The May to May contracts arbitrage between the London and New York markets broadened yesterday, to register this at 46.28 usc/Lb., while this equates to 31.97% 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 decrease by 284 bags yesterday; to register these stocks at 1,341,948 bags.  There was meanwhile a larger in number 8,477 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 22,651 bags. 

The commodity markets encountered some degree of softening of the U.S. dollar yesterday and it assisted to buoy many markets, but with the negative fundamentals pressurising the influential Oil markets lower, the overall macro commodity index took a softer track for the day.   The Natural Gas, Cocoa, Orange Juice, Soybean, Gold and Silver markets had a day of buoyancy, while the Oil, Sugar, Coffee, Cotton, Copper, Wheat and Corn markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.03% lower, to see this Index registered at 422.60.  The day starts with the U.S. Dollar steady and trading at 1.248 to Sterling and at 1.080 to the Euro, while North Sea Oil is near to steady and is selling at $ 49.60 per barrel. 

The London market started the day yesterday on a steady note, while the New York market started the day marginally on the positive side of par and with the London market soon recovering and to see both markets taking a modest positive stance into the early afternoon trade.   As the afternoon progressed both markets attracted support and moved into positive territory but to falter and to slip back into negative territory, to take a negative track through to the close of the day’s trade.   The London market ended the day on a soft note and with 73.5% of the earlier losses of the day intact, while the New York market ended the day on a modestly softer note and having recovered 52.4% of the earlier losses of the day by the close.   This close in terms of the more speculative and volatile New York market might perhaps be seen to be more of a profit taking correction than a reversal of fortunes and while it does not assist to buoy confidence, one might expect to see a steady to perhaps even in terms of the London market buoyant start for early trade today, against the prices set yesterday, as follows: 

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

MAR     2147 – 27                                               MAR   143.50 – 0.50

MAY     2171 – 25                                               MAY   144.75 – 0.50

JUL      2191 – 23                                                JUL    147.10 – 0.50

SEP      2201 – 23                                               SEP    149.45 – 0.45

NOV     2205 – 22                                                DEC   152.75 – 0.40

JAN      2198 – 22                                               MAR   155.90 – 0.45

MAR     2197 – 22                                               MAY   157.95 – 0.45

MAY     2199 – 22                                                JUL    159.70 – 0.50

JUL      2201 – 22                                               SEP    161.35 – 0.45

SEP      2209 – 22                                               DEC   163.45 – 0.40