Coffee Market Report March 17 2017
There have been a number of reports from the internal trade in Vietnam that farm stocks from the October 2016 to January 2017 harvest are diminishing and with the next harvest of mainly robusta coffees only due to start in October, the internal market coffee supply is tightening. This not unexpected scenario in terms of the smaller crop that Vietnam brought in, is expected to continue to buoy the fortunes of the related London robusta coffee market for the coming months and until the advent of the new Indonesian crop that shall only really start to impact in volume by May.
The new Indonesian robusta coffee crop is however not expected to be accompanied by a good conilon robusta coffee crop from Brazil, where forecasts are for another deficit to perhaps as best matching internal market demand new conilon crop this year. Therefore, and with the general view that global robusta coffee supply for the present October 2016 to September 2017 coffee year shall remain in deficit, one might foresee the London market showing medium term buoyancy.
Meanwhile with the new Brazil arabica coffee crop developing and making cherry counts more accurate and despite overall good rains and weather conditions to support this crop over the past five months, there are numerous field trip reports that with biennial bearing factors contributing and following last year’s bumper Brazil arabica coffee crop, that this year’s new arabica coffee crop shall be at least 4 million bags lower than last year’s crop. Many reports even indicating a larger dip in arabica coffee production, which is likely and with no indication of surging supply later in the year from the other main arabica coffee producers, to tighten up longer term arabica coffee supply.
Presently the consumer markets would appear to have little to fear in terms of the potential for longer term tightening coffee supply, as the main stream markets in Europe, North America and Japan are holding significant coffee stocks. However, with global coffee consumption on the back of producer internal markets and the new markets in Asia steadily rising and the present indications for little chance for any significant increase in global coffee supply, one might expect to see the consumer stocks starting to decline later in the year and to see this factor play a part in providing support for sentiment within both the New York and London markets.
The May to May contracts arbitrage between the London and New York markets broadened yesterday, to register this at 42.43 usc/Lb., while this equates to 29.99% 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 increase by 6,198 bags yesterday; to register these stocks at 1,332,561 bags. There was meanwhile a larger in number 7,004 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 38,299 bags.
It was a mixed day in the commodity markets yesterday and with the post interest rate hike softening of the U.S. dollar assisting to buoy spirits within many markets, to see the overall macro commodity index maintaining a positive track for the day. The Sugar, New York arabica Coffee, Cotton, Copper, Corn, Soybean, Gold and Silver markets had a day of buoyancy and the Oil, London robusta Coffee and Wheat markets were steady for the day, while the Natural Gas, Cocoa and Orange Juice markets had a softer day’s trade. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.35% higher, to see this Index registered at 420.60. The day starts with the U.S. Dollar tending softer and trading at 1.237 to Sterling and at 1.078 to the Euro, while North Sea Oil is steady and is selling at $ 50.75 per barrel.
The London and New York markets started the day with a degree of buoyancy yesterday and with both markets and with supportive sentiment coming from the positive nature of overall macro commodity index, adding weight in early afternoon trade. The markets did however as the afternoon progressed and with commodities in general running out of steam start to come under pressure, to see the London and New York market drifting back to set only a modest positive close for the day. The London market ended the day on a modestly positive to perhaps only steady close and with only 13.6% of the earlier gains of the day intact, while the New York market ended the day on a positive note, but with only 18.3% of the earlier gains of the day intact. This close and with both markets having seemingly struggled to maintain upside direction for the day does little to inspire, but one might expect with the close being on the positive side of par that is shall assist to see the markets taking a hesitant steady start for early trade today against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
MAR 2160 – 1 MAR 139.75 + 0.55
MAY 2183 + 3 MAY 141.45 + 0.55
JUL 2202 + 4 JUL 143.75 + 0.55
SEP 2212 + 3 SEP 145.00 + 0.50
NOV 2216 + 3 DEC 149.30 + 0.50
JAN 2209 – 1 MAR 152.50 + 0.40
MAR 2208 – 3 MAY 154.55 + 0.35
MAY 2209 – 3 JUL 156.35 + 0.25
JUL 2211 – 3 SEP 157.95 + 0.25
SEP 2219 – 3 DEC 160.05 + 0.15