Coffee Market Report April 05 2017

The National Coffee Institute in Honduras have come to the fore with concerns that with they have identified a new and virulent strain of Roya or Leaf rust within eight out of the countries fifteen coffee districts, which could be damaging for their forthcoming year end new crop.   Noting that unless quick steps are taken to counter this problem, it could potentially be more devastating than the last major outbreak in 2012. 

This is of course not only a Honduras problem but with the Central American producers so close to each other and the ability of Roya or Leaf Rust to spread, it becomes a regional problem.  However, one must believe that with the last regional devastating Roya experience still very much in mind, that the agricultural authorities within all of the Central American countries shall be more alert and quicker this time, to step in and assist farmers to control the threat.   Thus, for the present, one would not expect that the threat of Roya shall prove to be supportive for market sentiment, within the New York market. 

The coffee markets remained within their narrow trading range yesterday, while the physical coffee market remains relatively slow in its activity for the present.   It is however noted that with the new Central American coffee crop long since completed that there are seemingly rising volumes of new crop coffees now heading towards the alternative buyer, being the New York certified stocks.   This further indicating the lacklustre nature of the physical trade, which is being dictated by the relatively well stocked and somewhat complacent consumer market industry buyers. 

However, in terms of the New York markets washed arabica coffee certified stocks the producer bloc of Mexico and Central America who traditionally dominate these stocks, still only account for 38.38% of the stocks and followed by Colombia with 23.13% of the stocks, Peru with 17.14% of the stocks and East African producer bloc with 14.68% of the stocks.   The balance of these stock being related to relatively small contributions from Brazil, India and Papua New Guinea.  But one might expect that in the coming months that there shall be increased volumes of Central American and Peru coffees coming to these stocks and that the evidence of rising stocks, might prove to dampen bullish spirits within the market. 

The July to July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 41.53 usc/Lb., while this equates to 29.65% 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 165 bags yesterday; to register these stocks at 1,364,179 bags.  There was meanwhile a larger in number 18,870 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 61,224 bags. 

The commodity markets were mixed in trade yesterday, but with the positive nature of the influential Oil markets assisting to buoy the overall macro commodity index for the day.   The Oil, Natural Gas, Copper, Orange Juice, Gold and Silver markets had a day of buoyancy and the Coffee and Wheat markets were steady for the day, while the Sugar, Cocoa, Cotton, Corn and Soybean markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.26% higher, to see this Index registered at 415.86.  The day starts with the U.S. Dollar near to steady and trading at 1.244 to Sterling and at 1.067 to the Euro, while North Sea Oil is showing a degree of buoyancy and is selling at $ 53.55 per barrel. 

The London and New York markets both started the day yesterday on a softer note and with both markets maintaining this stance, into the early afternoon trade.   There was however a great deal of hesitancy and seemingly indecision and as the afternoon progressed, there was a recovery to par for the London market, while the New York market moved back into modest positive territory.   This modest recovery within the New York market was however short lived and both markets took something of a sideways track for the rest of the day and towards a near to steady and close to par close for the day.   The London market ended the day on a steady note and having recovered 88.2% of the earlier in the day’s losses, while the New York market ended the day on a likewise steady note and having recovered 87.9% of the earlier losses of the day by the close.   This close provides little indication of direction and one might think the ability of the market to shrug off the earlier in the day’s negative pressure, shall set the markets for a cautious and hesitant near to steady start for early trade today, against the prices set yesterday, as follows: 

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

MAY     2144 – 6                                                MAY   137.75 – 0.10

JUL      2172 – 2                                                JUL    140.05 – 0.20

SEP      2182 – 2                                               SEP    142.40 – 0.20

NOV     2184 – 4                                                DEC   145.80 – 0.15

JAN      2180 – 3                                               MAR   149.00 – 0.10

MAR     2182 – 2                                               MAY   151.15 – 0.05

MAY     2185 – 3                                                JUL    152.85 – 0.05

JUL      2191 – 3                                                SEP    154.40 – 0.05

SEP      2199 – 3                                                DEC   156.55 unch

NOV     2206 – 3                                                MAR   158.70 unch