Coffee Market Report February 08 2017

Following on from the discussions that have been held in with coffee industry and producer organisations in Brazil, their Agriculture ministry has agreed to audit the robusta coffee stock numbers being held within Brazil, prior to any further decisions being made regarding the possibility of importation of alternative robusta coffees, to fuel domestic local roaster and soluble value added sector of the local coffee industry.  This decision is thus far well received by producer organisations who have told government officials that they hold around 4 million bags of robusta beans in stock and vehemently oppose any imports in this regard. 
Brazil’s producer representatives have further committed to present a report to the Ministry by Friday, to indicate that there are sufficient robusta stocks to maintain roaster industry needs.  These discussions have developed as a result of the smaller drought affected robusta conillon crop of last year and ahead of the new and forecast to be another smaller dry weather conillon robusta crop that is due to begin harvest around three months’ time. 
Subsequent to the Tet New Year celebrations in Vietnam and the traditional flurry of cash robusta coffee sales as producers gather finance ahead of the celebrations, the internal market has subsequently slowed as the gap between price expectation and market interest internally, has widened.  The latest developments in London meanwhile and the mainly speculatively driven lower futures market is likely to contribute toward additional resistance and limited producer interest to participate as sellers, thus likely that this largest robusta producer will remain measured in the short to medium term, and perhaps until the next Indonesian robusta harvest due to start next month and build into April may present a degree of price competition and perhaps to inspire more vigorous selling activity within Vietnam.
The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 46.53 usc/Lb., while this equates to 32.08% 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 decrease by 2,525 bags yesterday; to register these stocks at 1,308,345 bags.  The certified stocks reported an increase of 3,525 bags to the number of bags pending grading for this exchange; to register these pending grading stocks at 36,182 bags.
The commodity markets had a mixed day yesterday, as the approaching French elections and weaker economic data released by Germany lead to a slide in confidence in the Euro, while the U.S. Dollar posted a recovery on the day. It was a softer day for Oil, Sugar, Coffee, Cocoa, Cotton, Copper and a firmer day for Orange Juice, Wheat, Soybean, Corn, Gold, Silver, Platinum and Palladium markets. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.13% higher, to see this Index registered at 429.28.  The day starts with the U.S. Dollar trading at 1.251 to Sterling and steady at 1.067 to the Euro, while North Sea Oil is steady in early trade and is selling at $ 53.46 per barrel.
 
The coffee markets started the day yesterday on a mildly softer note but with some early in the session recovery noted in New York.  The early to midsession in both markets were however choppy and played out in a narrow range around the opening levels.  Good volumes were noted in both markets with first notice day spread activity taking hold and as the day progressed New York registered a lower track by midsession, London managed to post a recovery by the latter half of the day.  The news of good rains in Brazil and a general lack of fundamental news to guide the speculative sector in this markets, would appear to have prevailed on the day, with a softer trend contribution by the firming U. S. Dollar on the day.  The late afternoon session found limited underlying buying support as the trading day wound to a close, to see both markets register a softer close on the day, near to the day’s lows in London and on the day’s close in New York, to set the close yesterday in a respectable volume day for both markets, on a softer note in both markets, as follows: 
 
LONDON ROBUSTA US$/MT                          NEW YORK ARABICA USc/Lb.
MAR     2147 – 11                                             MAR   142.60 – 1.60
MAY     2172 –  9                                              MAY   145.05 – 1.50
JUL      2183 –  9                                              JUL    147.45 – 1.40
SEP      2189 –  8                                              SEP    149.75 – 1.45
NOV     2192 –  7                                               DEC   153.05 – 1.40
JAN      2191 –  7                                              MAR   156.05 – 1.40
MAR     2190 –  7                                              MAY   157.80 – 1.45
MAY     2192 –  7                                              JUL    159.35 – 1.40
JUL      2202 –  7                                              SEP    160.85 – 1.35
SEP      2212 –  7                                              DEC   163.00 – 1.25