Coffee Market Report March 10 2017

The Brazil Coffee Exporters Association Cecafé has reported that the countries green coffee exports for the month of February were 390,000 bags or 14.89% lower than the same month last year, at a total of 2,600,000 bags.   This dip in exports was partially related to the over 80% dip in the exports of conilon robusta coffees for the month, but is being seen to have been more related to the tightening price resistance within the internal market by arabica coffee farmers for their declining past crop stocks.   

One might comment that strengthening price resistance within the internal market in Brazil might suggest that farmers believe in the earlier forecasts for a smaller new arabica coffee crop to be due to start being harvested in four months’ time, but there might also be some degree of speculation over the once again declining value of the Brazil real that is retarding sales of arabica coffee stocks.   The Real has dipped back to trade at present at 3.19 to the dollar and is along with most emerging market currencies coming under pressure and it is likely with now only relatively modest past crop stocks at hand, that farmers are looking towards the prospects of a weaker Real to assist to value add the sales of these stocks.  

Meanwhile in terms of the forthcoming new Brazil conilon robusta coffee crop that is due to start being harvested ahead of the new arabica coffee harvest, there are comments coming to the fore that the good February rains have been beneficial for the conilon farmers in the state of Espirito Santo the leading robusta coffee state and that this might add some volume to what has so far been forecasted to be another dismal crop for this year.   There are in this respect no clear figures being forecasted, but there are reports that talk the new conilon robusta coffee crop might be as much as 20% higher than last year’s crop, which would be assisted by what is foreseen to be good new crop from the state of Rondônia.  

One would comment that even if these latest forecasts for an improved conilon robusta coffee crop prove to be true it is only an improvement over what had been a dismal deficit crop last year and that it would really only assist to fuel the domestic coffee industry, that has been with the inability to import supplementary robusta coffee, blending in low grade arabica coffees to supplement their robusta coffee requirements.  This has been inflating the prices of Brazil soluble coffees and is a likely contributor to the fact that the exports of value added soluble coffees for the month of February were the equivalent of 65,000 bags or 20.77% lower than the same month last year at the equivalent of 248,000 bags, calculated in terms of their green coffee equivalent.  

The U.S. governments National Weather Service’s Climate Prediction Centre has reported that post the La Niña that the conditions within the Pacific Ocean are presently neutral, but the see a strong chance for a new El Niño phenomenon to start developing in the coming months.    This would if it were to occur start to lessen the rain for the Pacific rim coffee producers such as Colombia, Peru and Indonesia but unless it were to be a severe El Niño, it would be unlikely to be significantly threatening for these producers and one would think that it is too vague a possibility, to be market supportive.  

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 41.48 usc/Lb., while this equates to 29.53% 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 decrease by 92 bags yesterday; to register these stocks at 1,338,874 bags.  There were meanwhile a smaller in number 29 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 27,695 bags. 

The Certified Robusta coffee stocks held against the London market were seen to decline by 11,000 bags or 0.4% over the week of trade leading up to Monday 6th. March, to see these stocks registered at 2,735,167 bags, on the day. 

The commodity markets remained under pressure yesterday, to see the overall macro commodity index taking a softer track for the day.  The Natural Gas, Cotton and Orange Juice markets nevertheless had a day of buoyancy, while the Oil, Sugar, Cocoa, Coffee, Copper, Wheat, Corn, Soybean, Gold and Silver markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.86% lower, to see this Index registered at 416.63.  The day starts with the U.S. Dollar steady and trading at 1.215 to Sterling and at 1.059 to the Euro, while North Sea Oil is steady and is selling at $ 51.25 per barrel. 

The London market started the day on par yesterday, while the New York market had a marginally lower start to the day before joining the London market to see both markets on par for early afternoon trade.   It was however a complicated day for the markets and not assisted by the negative influences of the softer macro commodity index and with both markets taking brief jumps over par but mostly remaining below par and ending with a marginally softer close for the London market, while the New York market started to trigger late in the day sell stops and take a more dramatic dip in value.   The London market ended the day on a softer note and with 53.8% of the earlier losses of the day intact, while the New York market ended the day on a soft note and with 81.2% of the earlier losses of the day intact.    This close does little to inspire and is likely to influence little better than a near to steady start for early trade today against the prices set yesterday, as follows: 

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

MAR     2157 – 6                                                MAR   138.75 – 1.30

MAY     2182 – 7                                                MAY    140.45 – 1.30

JUL      2197 – 8                                                 JUL    142.80 – 1.25

SEP      2206 – 9                                                SEP    145.05 – 1.25

NOV     2207 – 9                                                 DEC   148.30 – 1.25

JAN      2206 – 9                                                MAR   151.55 – 1.25

MAR     2207 – 10                                              MAY   153.60 – 1.15

MAY     2208 – 11                                               JUL    155.30 – 1.10

JUL      2209 – 11                                               SEP    156.90 – 1.05

SEP      2217 – 11                                               DEC   159.05 – 1.10