Coffee Market Report February 03 2017

The General Statistics Office in Vietnam and with the month of January over, are forecasting that the countries coffee exports of mostly robusta coffees for the month shall be approximately 20.70% lower than that of the same month last year.  The lower export numbers would have been affected by the Tet New Year celebrations which fell in January this year instead of the more traditional first half of February, and will no doubt have had an influence on the final figures for January exports which are still to be finalised and reported.  The estimate at this stage is for exports to have reached around 2.33 million bags in this first month of the calendar year.   The initial forecast from general trade within Vietnam for the month of February meanwhile, is for a stable estimate of mainly robusta exports to be between 1.83 and 2.33 million bags over this coming short month.
The weather in Brazil has meanwhile, taken a turn for the better and there are reports of good rain dispersion through the southern arabica coffee growing areas, as well as the north eastern regions, where concerns have been raised about the year on year lack of sufficient seasonal rainfall that has resulted in parched and low ground moisture levels in the regions where the earlier to develop and ripen conilon robusta coffee crop is grown.
The tighter overall supply of the conilon robusta coffees to traditional export markets and more specifically to the immense demand of the internal coffee roaster consumer industry in Brazil, is causing some concern surrounding the prospects of market disruption as the matter of available stocks and price viability combine ahead of the new crop to come.  This new crop is estimated to be another dry weather induced smaller conilon robusta crop and is due to begin harvest in about two and half months’ time.  The internal tighter supply has brought fresh discussions to the fore to suggest that the local coffee processing industry should be allowed to import alternative origin robusta coffees to assist with the apparent shortfalls in local supply.  This is a view that was supported in an interview yesterday with the Ministry of Agriculture, albeit a move that is fiercely opposed by the coffee producer associations. There are future meetings set to take place, scheduled for Tuesday next week and to include representation from all sectors of the coffee industry within Brazil in an effort to reach a consensus around this complex and intensively sensitive subject.
The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 48.66 usc/Lb., while this equates to 32.77% price discount for the London robusta coffee market.  This relatively narrow arbitrage is now becoming less of 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 increase by 3,002 bags yesterday; to register these stocks at 1,298,550 bags.  The certified stocks reported a relatively steep decrease of 9,377 bags to the number of bags pending grading for this exchange; to register these pending grading stocks at 47,461 bags.
The commodity markets were mixed yesterday, the U.S. Dollar lost ground against other major currencies while market sentiment oscillated between buoyant overall economic data and concerns over the future implications of the new U.S. administrations apparent protectionist policies, should these be implemented.  It was a softer day for the oil markets, Sugar, Cocoa, Coffee, Copper, Orange Juice, Wheat, Corn, Silver and a positive day for Cotton, Soybean, Gold, Platinum and Palladium. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.3363% lower, to see this Index registered at 431.27.  The day starts with the U.S. Dollar trading at 1.251 to Sterling and steady at 1.075 to the Euro, while North Sea Oil is steady in early trade and is selling at $ 55.81 per barrel.
 
The coffee markets started the day yesterday on a mildly positive stance, although London slipped into mildly negative territory and held steady in a narrowly negative range heading into the afternoon.  The latter day news regarding current discussions underway in Brazil which may longer term consider altering legislation to permit coffee imports, in combination with the latest weather reports that the weather in Brazil is conducive to both the conilon robusta and the arabica crop that is in cherry phase ahead of the new harvest to start mid this year, took some of long position wind out of the sails of the speculative sector in these markets, as did additional producer selling pressure that had been lacking from Vietnam over the past holiday week, make an appearance.  This activity lead to the markets setting a lower track as the day progressed into the late afternoon. The lower track set for the latter half of the day was met and countered along the way with sufficient underlying buyer support to meet the gradual slide in market value.  This underlying buyer support withdrew as the session drew toward the close however and the last hour in both markets saw sellers weigh in again, to end the day on the lows of the day, in both New York and London, to set the close yesterday after a respectable volume day, on a softer note, as follows:
LONDON ROBUSTA US$/MT                          NEW YORK ARABICA USc/Lb.
MAR     2185 – 58                                              MAR   145.95 – 4.20
MAY     2201 – 56                                              MAY   148.50 – 4.05
JUL      2211 – 53                                              JUL     150.80 – 4.05
SEP      2216 – 52                                              SEP    153.10 – 4.00
NOV     2218 – 51                                              DEC    156.25 – 3.95
JAN      2217 – 51                                              MAR   159.15 – 3.95
MAR     2216 – 51                                              MAY   160.85 – 3.95
MAY     2218 – 51                                              JUL    162.35 – 4.00
JUL      2228 – 51                                              SEP    163.80 – 4.00
SEP      2238 – 51                                              DEC   165.95 – 4.00