Coffee Market Report March 31 2017

The weather reports from Brazil indicate that the countries rain during the month of March over all the main coffee districts have been below average for the month, but with good ground water retention levels following the earlier months of fair rains, this is not being seen to be a major problem for the main arabica coffee districts.  It might however in terms of the leading conilon robusta coffee state of Espirito Santo, which has suffered from poor rains for most of the summer, be supportive for forecasts for another modest conilon crop. 

Meanwhile in terms of the tight internal market supply of conilon robusta coffees in Brazil, there is once more talk of the possibility that the Brazil government might resuscitate the earlier but stalled decision, to allow for the import of up to 1 million bags of robusta coffee.   However, there is nothing formal that has been announced, while the latest rumours also indicate some form of tariff protection for the countries conilon farmers for any imports, which would most likely make such imports should they finally come about, somewhat uncompetitive for the countries soluble coffee industry, who have been lobbying for the import approval. 

One would further question if there might be any short-term justification for the approval of robusta coffee imports as with the new conilon robusta coffee crop starting to come to the market in the coming month, there would be no real short term shortage of internal market conilon robusta coffee supply.   The only problem being for the export orientated soluble coffee industries in Brazil, is their ability to compete within the consumer markets with alternative supply from India, Vietnam, Ecuador, Colombia and Mexico. 

The physical coffee market is presently lacklustre and slow and with consumer market industries apparently quite complacent, which is bringing little in the way of industry excitement to the terminal markets.   Thus leaving the terminal markets very much in the hands of the funds and speculative sectors of the markets, which presently lack any striking fundamental news items to provide for any aggression within the markets and they continue to trade within a relatively narrow price range.   

The May to May contracts arbitrage between the London and New York markets broadened yesterday, to register this at 41.28 usc/Lb., while this equates to 29.63% 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 1,054 bags yesterday; to register these stocks at 1,352,101 bags.  There was meanwhile a larger in number 3,547 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 44,025 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 40,500 bags or 1.47% over the week of trade leading up to Monday 27th. March, to register these stocks at 2,789,667 bags, on the day. 

The commodity markets were mixed in trade yesterday but with the influential Oil markets further recovering, it assisted for the overall macro commodity index to take a near to steady track for the day.   The Oil and Natural Gas markets had a day of buoyancy and the New York arabica Coffee and Cocoa markets had a steady day, while the Sugar, London robusta Coffee, Copper, Orange Juice, Grains, 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 0.35% lower, to see this Index registered at 417.87.  The day starts with the U.S. Dollar steady and trading at 1.248 to Sterling and at 1.067 to the Euro, while North Sea Oil is steady and is selling at $ 52.10 per barrel. 

The London market and New York markets started the day yesterday with modest buoyancy but with both markets drifting back into modest negative territory for early afternoon trade.   The New York market did however recover and to trade in a lacklustre manner and taking a sideways track for the rest of the day with value erratically changing either side of par, while the London market took a modestly negative sideways track through the close of the day.    The London market ended the day on a modestly negative note and with 58.8% of the earlier losses of the day intact, while the New York market ended the day on a steady note and with no change from the previous day’s close.   The ability of the markets to hold relatively steady might be somewhat encouraging for sentiment and one might expect to see a follow through hesitantly steady start for early trade today against the prices set yesterday, as follows: 

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

MAR     2146 – 10  

MAY     2171 – 10                                              MAY   139.30 unch

JUL      2190 – 11                                               JUL    141.70 unch

SEP      2199 – 13                                              SEP    144.05 unch

NOV     2202 – 13                                               DEC   147.40 + 0.05

JAN      2198 – 14                                              MAR   150.65 + 0.05

MAR     2198 – 14                                              MAY   152.75 + 0.05

MAY     2201 – 13                                               JUL    154.55 unch

JUL      2209 – 12                                               SEP    156.20 unch

SEP      2217 – 12                                               DEC   158.25 unch

NOV     2200 unch                                             MAR   160.30 + 0.05