Coffee Market Report February 09 2017

As the current July 2016 to June 2017 Brazil arabica coffee crop flows to the markets, there is a general consensus related to the lower output of conillon robusta production, a factor that has brought about the recent internal discussions within Brazil where the coffee industry petition for the Agricultural Ministry to permit a percentage of alternative robusta coffees to be imported. This has however been counteracted in recent meetings by a commitment from the producer organisations to provide substance to their claims that the robusta stocks being held within Brazil are sufficient to fuel the industry ahead of the next crop to come. 
The latest poll conducted by Reuters for the coming Brazil crop has reflected the overall median estimate that the coming July 2017 to June 2018 coffee crop may reach 50 million bags, with the polls estimates ranging in views from anywhere between 48 to 52 million bags.  This coming crop is in cherry development phase and largely the weather is reported to be conducive at this juncture, however the estimates for this coming crop and on the back of the larger biennial bearing arabica but smaller robusta 2016/2017 harvest, the output potential of this coming crop continues to be closely monitored and with the coffee harvest still some months ahead, these estimates are many and varied.   Brazil’s largest coffee cooperative Cooxupe that is a cooperative related to arabica coffees, has reiterated their forecast that earlier adverse weather conditions during the new crop development has in combination with the stress of the past higher biennial bearing crop of 2016, led to a projection that production for this coming July 2017 to June 2018 coffee harvest may be lower than previously anticipated.  Their forecast for this next harvest is for arabica coffee production to be between 35 and 38 million bags and a total Brazil crop to reach 43 and 47 million bags for the coming year.
The May to May contracts arbitrage between the London and New York markets widened yesterday, to register this at 48.41 usc/Lb., while this equates to 33.32% 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 4,962 bags yesterday; to register these stocks at 1,313,307 bags.  The certified stocks reported an increase of 5,873 bags to the number of bags pending grading for this exchange; to register these pending grading stocks at 30,309 bags.
It was a generally buoyant day for the commodity markets yesterday, as the oil markets took a positive turn as higher US inventory data released to the markets were not as large as earlier indications.  The U.S. Dollar lost some ground over the day, encouraging interest for US Dollar denominated commodities in other major currencies.  It was an overall positive finish in the day for oil, Sugar, Cotton, Copper, Orange Juice, Corn, and a stronger close in Soybean markets, Gold, Silver, Platinum and Palladium were higher as did arabica coffee finish in mildly positive territory.  The Cocoa, robusta Coffee and Wheat markets were softer on the day.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.373% higher, to see this Index registered at 430.89.  The day starts with the U.S. Dollar trading at 1.251 to Sterling and steady at 1.068 to the Euro, while North Sea Oil is steady in early trade and is selling at $ 54.36 per barrel.
 
The London robusta market opened on a softer track yesterday and in a continuation of the previous days’ speculative fund long liquidation and New York had a mildly positive start to the day.  This however met with a continuation of speculative spread activity and the morning session in New York faltered and both markets followed a weaker trend by midsession.  The latter day overall improved sentiment within the commodity sector registered a degree of influence in these markets to see New York in particular recover the earlier day losses and with renewed buying support, push back into positive territory where a short time spent at the top of the days’ levels met with renewed selling to cap the gains and this market finished just above unchanged on the day.  The London robusta market having already lost most of the ground earlier in the day, spent the last few hours trading within a narrow range with a degree of consolidation to register the close in this market just above the days low.  I was another respectable volume day in both markets to finish the day, on a softer note in London and hardly changed in New York, as follows: 
 
LONDON ROBUSTA US$/MT                          NEW YORK ARABICA USc/Lb.
MAR     2106 – 41                                             MAR   142.90 + 0.30
MAY     2136 – 36                                              MAY   145.30 + 0.25
JUL      2146 – 37                                              JUL    147.60 + 0.15
SEP      2153 – 36                                              SEP    149.85 + 0.10
NOV     2157 – 35                                               DEC   153.05 Unch
JAN      2159 – 32                                              MAR   156.05 Unch
MAR     2164 – 26                                              MAY   157.80 Unch 
MAY     2164 – 28                                              JUL    159.40 + 0.05
JUL      2166 – 36                                              SEP    160.90 + 0.05
SEP      2176 – 36                                              DEC   163.05 + 0.05