Coffee Market Report November 10 2016

The Brazil Exporters Association Cecafe have reported that the countries green coffee exports for the month of October were 320,000 bags or 10.32% lower than the same month last year, at a total of 2.89 million bags.  But one has to put this into perspective as the arabica coffee exports for the month were 1.3% higher than the same month last year, whereas following this year’s dismal conilon robusta coffee crop, the conilon coffee exports were 97% lower than the same month last year. 

Furthermore, one might comment that in terms of consumer market demand for Brazil coffees it is the countries somewhat unique natural process arabica coffees which account for approximately 90% of the countries arabica coffee production, that are the Brazil coffees that have a dedicated demand.   Whereas the countries conilon robusta coffee exports are mostly related to opportunist interest from consumer market buyers, as and when they might provide for competitive prices to the more usual Asian and African robusta coffees that the consumer markets import. 

Thus, indicating that the overall dip in Brazil coffee supply for the month of October, has not really impacted upon the important supply of Brazil coffees to the consumer markets, but is rather only a reflection upon the fact that there remains medium to longer term reason to be concerned over longer term consumer market robusta coffee supply.  Especially so, if the forecasts for an approximate dip in the size of the new Vietnam robusta coffee crop that is presently in harvest, proves to be true.  

The Vietnam robusta coffees meanwhile and with the new crop harvest having been delayed by two to three weeks by the unseasonal rains in the second half of October and into early this month, are now coming just in time to fuel a continued and much needed good volume export performance during the coming month.   Albeit that exporters in terms of their forward contract export commitments, still carry fair volumes of past crop robusta coffee stocks to supplement the early deliveries of new crop robusta coffees from the internal market.  But with the slow start for the new crop in Vietnam, there is seemingly some short-term tightness in supply for new robusta coffee export business for the prompt December shipment month.  

The March to March contracts arbitrage between the London and New York markets broadened yesterday, to register this at 76.78 usc/Lb., while this equates to a 44.18% price discount for the London robusta coffee market.  This arbitrage is once again becoming an attractive factor for the 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 2,000 bags yesterday; to register these stocks at 1,271,740 bags.  There was meanwhile a larger in volume 7,463 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 16,818 bags. 

The commodity markets along with the equity markets had a mixed day yesterday, following the initial negative knee jerk reaction to the election results within the U.S.A.  But it would seem that the conciliatory champions speech from Donald Trump was the turning factor, that placated many of the initial fears and brought order back into all sectors of the markets.  Contributing to a recovery for the overall macro commodity index, as the day progressed.   The Oil, Natural Gas, Sugar, Coffee, Copper and Silver markets had a day of buoyancy, while the Cocoa, Cotton, Orange Juice, Wheat, Corn, Soybean and Gold markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.08% lower; to see this Index registered at 420.31.   The day starts with the U.S. dollar that had recovered from yesterday’s early morning negative pressure once again steady and trading at 1.242 to Sterling and 1.094 to the Euro, while North Sea Oil is steady and is selling at 44.45 per barrel. 

The London and New York markets started the day yesterday on a follow through soft note and in line with the overall post-election negative sentiment that prevailed globally, with the markets maintaining this negative stance into the afternoon trade.   However, as the afternoon progressed the London market started on a recovery track and with confidence building the market triggered buy stops and took a relative sharp move back up into significant positive territory, while the New York market followed suit into positive territory and started on a steady upside track for the rest of the day’s trade.   The London market ended the day on a positive note and with 81.3% of the earlier gains of the day intact and having added $ 116.00 per Metric Ton to the earlier in the day’s lows, while the New York market ended the day on a likewise positive note and with 80% of the earlier in the day’s gains intact and having added 6.85 usc/Lb. to the earlier in the day’s lows.    This significant recovery for the markets might be seen to be a factor to build confidence, but with the technical picture of the markets somewhat uncertain, the dollar having recovered its earlier in the week muscle and the Brazil Real having softened and threatening increased price fixation selling later in the day, one might expect to see little better than a cautious hesitant start for early trade today, against the prices set yesterday, as follows: 

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

NOV     2190 + 48                                               DEC   170.10 + 2.60

JAN      2133 + 48                                              MAR   173.80 + 2.60

MAR     2139 + 43                                              MAY   176.10 + 2.65

MAY     2147 + 40                                                JUL   178.05 + 2.65

JUL      2156 + 42                                                SEP   179.85 + 2.65

SEP      2163 + 42                                               DEC   182.05 + 2.55

NOV     2172 + 46                                               MAR   183.90 + 2.50

JAN      2180 + 46                                               MAY   184.90 + 2.50

MAR     2195 + 46                                                JUL   185.75 + 2.45

MAY     2211 + 46                                                SEP   186.55 + 2.45