Coffee Market Report April 12 2017

The Brazilian Exporters Association Cecafé have commented on the fact that March was the second consecutive month of relatively low coffee exports, with green coffee exports having been 14.8% lower than the same month last year which is only partially due to the lack of conilon robusta coffee exports, as it was mostly due to a 13.33% dip in arabica coffee exports.   As by this time last year and with the new conilon robusta coffee crop that was starting to be harvested and clearly due to be a dismal low and deficit crop, the internal market demand had already priced the available conilon coffee stocks out of the price competitive export market.   

The tight supply of conilon robusta coffees had however in terms of the Brazil coffee year that runs from July to June has had its affect upon the countries coffee exports for the present coffee year and despite some aggressive arabica coffee export sales for the second half of last year, as the country’s coffee exports for the first nine months of the July 2016 to June 2017 Brazil coffee year are seen to be 2.31 million bags or 9.1% lower than the same period in the previous coffee year, at a total of 23.05 million bags.   The Cecafé comment being that this is despite the free flow supply of arabica coffees, which came with the bumper arabica coffee crop last year.  

Perhaps the significant factors for the steady rather than aggressive Brazil arabica coffee sales, are that in the meantime the Brazil Real had been firming over the past nine months that made international prices less attractive for coffee sales.   This along with the perspective that this year’s new arabica coffee harvest is due to be lower, which might inspire many farmers to hold back stocks to supplement their forthcoming lower new crop inventories. 

The big question is what shall be the size of this new crop in Brazil, with forecasts that range between a 10% and 15% dip in overall coffee production this year, which is mainly attributed to the biennial bearing effect upon the arabica coffee farms.    But with many private trade and industry forecasts looking to a new crop that shall be little more than a 10% lower crop of close to 50 million bags, while the traditionally conservative official forecasts talk of numbers that are closer to 47 million bags and perhaps even lower.  

The July to July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 42.66 usc/Lb., while this equates to 29.96% 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 6,807 bags yesterday; to register these stocks at 1,387,072 bags.  There was meanwhile a larger in number 11,740 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 51,825 bags. 

The commodity markets were mixed yesterday and with the U.S. dollar tending softer, to assist the overall macro commodity index to take a steady and modestly buoyant sideways track for the day.  The Oil, Sugar, Cocoa, Coffee, Copper, Wheat, Gold and Silver markets had a day of buoyancy, while the Natural Gas, Cotton, Orange Juice, 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 0.36% higher, to see this Index registered at 418.91.  The day starts with the U.S. Dollar steady and trading at 1.248 to Sterling and at 1.060 to the Euro, while North Sea Oil is steady and is selling at $ 55.45 per barrel. 

The London market started the day on a modestly softer note yesterday, while the New York market started the day with a degree of buoyancy and soon followed by the London market recovering to trade around par and with both markets trading around par into the early afternoon trade.  As the afternoon progressed the New York market started to add value and to look to have the potential of some renewed muscle but to falter and to fall back to join the London market in its sideways track close to either side of par.   But while the London market finally broke out of the doldrums of it sideways track for the day and experienced something of mini rally for late in the day trade, the New York market maintained its lacklustre sideways track through to the close.  The London market ended the day on a positive note and with 86.4% of the earlier gains of the day intact, the New York market ended the day on a more modest positive note and with only 33.3% of the earlier gains of the day intact.   It was nevertheless a positive close for the day and one might think a close that shall inspire some degree of confidence in the sideways rather than negative nature of the markets and therefore, the prospects for a steady start for early trade today against the prices set yesterday, as follows: 

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

MAY     2176 + 22                                             MAY   140.20 + 0.35

JUL      2199 + 19                                              JUL    142.40 + 0.25

SEP      2203 + 18                                             SEP    144.70 + 0.20

NOV     2204 + 19                                              DEC   148.15 + 0.25

JAN      2199 + 18                                             MAR   151.45 + 0.25

MAR     2201 + 18                                             MAY   153.60 + 0.20

MAY     2205 + 18                                              JUL    155.40 + 0.15

JUL      2213 + 18                                              SEP    157.00 + 0.20

SEP      2221 + 18                                              DEC   159.15 + 0.20

NOV     2228 + 18                                              MAR   161.25 + 0.20