Coffee Market Report October 14 2016

The Vietnam customs authorities have reported that while the coffee exports of mostly robusta coffees for the month of September were 15.5% lower than the previous month, they were nevertheless higher than had been expected by the local traders, at a total of 2,150,000 bags.   This number they say has contributed to the countries coffee exports for the just completed October 2015 to September 2016 coffee year to have been a record performance, at a total of 29 million bags.  

This remarkable export performance would no doubt have been with the support of the liquidation of the record coffee stocks that were carried over into the start of he just completed coffee year, but one might guess that there still would have been in excess of 4 million bags of carryover stocks into the new October 2016 to September 2017 coffee year.   But with all of these stocks already committed to support exporters forward sale commitments for October and November, while the country awaits the rain delayed start to the new crop harvest.   

The provisional coffee exports figures from the Coffee Board of India have indicated that for the period from the 1st. January to the 10th. October this year, that green coffee exports for the period were 527,700 bags or 15.8% higher than in the same period last year, at a total of 3,866,300 bags.  

The same report from the Coffee Board of India notes that the country’s exports of value added soluble coffees for the same period were 4,596 metric tons or 19.45% lower than the same period last year, at a total of 19,039 metric tons.   This dip in exports of soluble coffee is however not really any indicator of domestic coffee supply, as much of these exports is related to the use of imports of cheap coffees for processing and value adding and re-export. 

The main coffee districts in Brazil following some good rains in the previous week, have had a mostly dry time for this week, but with forecasts for good rains to return for the end of the coming week and thereon, into early November.   But the somewhat erratic start to the October to March rain season for South East Brazil remains a concern for many, until such time as there is confirmation that it shall prove to be a normal rain season and one that would be supportive for a good 2017 crop.   In the meantime, the somewhat hesitant start to the Brazil rain season, remains a supportive factor of coffee market sentiment.  

The U.S. government National Weather Service’s Climate Prediction Centre have reported that there still is a 55% chance for a La Nina phenomenon to soon start to develop within the Pacific Ocean, which would bring with it increased rains for the Pacific Rim countries and to a lesser degree, to South East Brazil.   But one might presume by the relatively low margin of probability that it is unlikely that there shall be a severe La Nina and that for the present, there is only a very modest chance for any significant damage to the 2017 Colombian and Indonesian coffee crops.   

The March to March contracts arbitrage between the London and New York markets broadened yesterday, to register this at 62.35 usc/Lb., while this equates to a 39.93% price discount for the London robusta coffee market.  This arbitrage is perhaps becoming a less 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 registered were seen to increase by 4,275 bags yesterday; to register these stocks at 1,263,829 bags.  There were meanwhile a smaller in number 2,191 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 28,111 bags. 

The sentiment within the commodity markets were under some degree of pressure from the news of declining export volumes out of China but nevertheless, the overall macro commodity index tended to remain close to steady for the day.   The Oil, Natural Gas, Cocoa, New York arabica Coffee, Cotton, Wheat, Corn, Soybean and Gold markets had positive day’s trade and the London robusta Coffee market was steady, while the Sugar, Copper, Orange Juice and Silver markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.41% higher; to see this Index registered at 417.61.   The day starts with the U.S. dollar steady and trading at 1.219 to Sterling and 1.103 to the Euro, while North Sea Oil is steady in early trade and trading at 49.90 per barrel. 

The London and New York markets started the day yesterday on a hesitantly steady note yesterday, but with the New York market briefly dipping back to below par into the early afternoon trade.   The New York market soon recovered, while the London market started on an upside track and towards two year highs, but it was an erratic day for the New York market that kept hitting a nearby ceiling and taking a hesitant sideways track for the rest of the day, while the London market attracted selling pressure to take a steady downside track through to the close.   The London market nevertheless ended the day on a steady note at around par, while the New York market ended the day on a modestly positive note and with 37.5% of the earlier gains of the day intact.  This close while not one that might inspire confidence does however contribute to a positive technical picture and one might expect to see an near to steady start for early trade today against the prices set yesterday, as follows: 

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

NOV     2037 – 1                                                 DEC   152.70 + 0.60

JAN      2070 unch                                             MAR   156.15 + 0.60

MAR     2068 – 6                                                MAY   158.25 + 0.60

MAY     2067 – 5                                                 JUL   160.15 + 0.65

JUL      2066 – 10                                               SEP   161.75 + 0.60

SEP      2064 – 15                                              DEC   163.90 + 0.50

NOV     2072 – 15                                              MAR   165.80 + 0.40

JAN      2082 – 15                                              MAY   166.85 + 0.30

MAR     2089 – 15                                               JUL   167.80 + 0.25

MAY     2092 – 15                                               SEP   168.70 + 0.15