Coffee Market Report April 07 2017

The National Coffee Institute in Costa Rica and indicating a rain damaged new crop to have been below 1.4 million bags, is indicating that as much as 75% of this new crop has already been sold.  This is however not really striking news for the markets, as Costa Rica is these days a relatively small player in terms of regional Central American production and a small dip in Costa Rica supply is overshadowed by the surge in coffee supply from Honduras.  

It has been a dry month so far for the main coffee districts in Brazil, but with a cold front now coming in from the south of the country, to bring much needed rains for the coming weekend.    However, while it has been hotter and mostly dry over the past few weeks, there are reasonable levels of ground water retention and for the present the Brazil weather news is not a striking item in terms of market sentiment.  

Rather focus within Brazil is the new conilon robusta coffee crop that is starting to be harvested and with the local industries who have been paying up in recent months for the tight in supply robusta coffees, holding back for more affordable value from the new crop coffees.   

The Brail Crop Supply Agency sold all 3,733 bags which was the last of the Brazil governments aged retention stocks on Wednesday, to tee these stocks at zero for the first time for over a decade.    This modest quantity of coffee that sold for the equivalent of 117 usc/Lb., was directed towards the countries price sensitive domestic roasting industry. 

Yesterday saw commercial activity in Vietnam off the field of play and it shall be the case again today, as the country commemorate and celebrates the Hung Kings, who are considered to have been the founders of Vietnam and ruled for eighteen generations.    Thus, with the major producer player within the London market off the field so to speak, there was only limited activity and direction for the day and is likely unless the funds find some reason to play, to be the case again today.   

The July to July contracts arbitrage between the London and New York markets broadened yesterday, to register this at 41.72 usc/Lb., while this equates to 29.78% 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. 

Meanwhile there is really noting in the way of striking news related to the coffee markets and with ample supply of short term arabica coffee supply while the tighter supply of robusta coffees has already been factored into the value of the London market, the markets continue to move sideways within a relatively narrow trading range.  With little indication that this is going to change, until at least post the interruptions of the pending Easter holidays.  

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 4,648 bags yesterday; to register these stocks at 1,372,217 bags.  There was meanwhile a larger in number 12,022 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 66,171 bags. 

The commodity markets were mixed in trade yesterday, but with buoyancy for many markets and the overall macro commodity index took a positive track for the day.   The Oil, Natural Gas, Sugar, New York arabica Coffee, Orange Juice, Gold and Silver markets had a day of buoyancy and the Cocoa, London robusta Coffee, Cotton, Copper, Wheat, 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 0.23% higher, to see this Index registered at 417.88.  The day starts with the U.S. Dollar steady and trading at 1.247 to Sterling and at 1.064 to the Euro, while North Sea Oil is near to steady and is selling at $ 54.70 per barrel. 

The London market started the day yesterday on a marginally softer note, while the New York market started the day with modest buoyancy and with both markets retaining this track into the early afternoon trade.  As the afternoon progressed the New York market added some more value and the London market moved closer to par, but with the New York market soon sliding back to maintain a modest sideways track for the rest of the day’s trade and matched by the London market, which maintained a lacklustre sideways track to the south of par through to the close.    The London market ended the day on a soft note and with 90.9% of its modest losses for the day intact, while the New York market ended the day on a modestly positive note and with 29.4% of the earlier gains of the day intact.   This close does little to inspire or provide any indication of direction and one might expect to see little better than a steady start for early trade today against the prices set yesterday, as follows: 

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

MAY     2143 – 10                                              MAY   137.75 + 0.45

JUL      2169 – 10                                              JUL    140.10 + 0.50

SEP      2176 – 12                                             SEP    142.45 + 0.55

NOV     2178 – 11                                              DEC   145.85 + 0.55

JAN      2175 – 11                                             MAR   149.05 + 0.60

MAR     2177 – 11                                             MAY   151.20 + 0.60

MAY     2181 – 11                                              JUL    153.05 + 0.70

JUL      2187 – 11                                              SEP    154.60 + 0.70

SEP      2195 – 11                                              DEC   156.70 + 0.65

NOV     2202 – 11                                              MAR   158.80 + 0.65