Coffee Market Report March 23 2017

The Uganda Coffee Development Authority UCDA have reported that the countries coffee exports for the month of February were125,942 bags or 46.31% higher than the same month last year, at a total of 397,883 bags.   This improved performance has contributed to the countries cumulative coffee exports for the first five months of the present October 2016 to September 2017 coffee year to being 422,962 bags or 29.76% higher than the same period in the previous coffee year, at a total of 1,844,178 bags. 

This improved performance in exports for the coffee year so far, is made up by an improved volume of 310,129 bags or 30.08% of robusta coffees, which totalled 1,341,230 bags and an improved volume of 112,833 bags or 28.92% of arabica coffees, which totalled 502,948 bags.  While in term of value the Ugandan coffee exports for the first five months of the present October 2016 to September 2017 coffee year are US$ 85,160,629.00 or 61.5% higher than the same period in the previous coffee year, at a total of US$ 223,631,119.00. 

This is heartening news for the Uganda coffee farmers who are mostly smallholder farmers and aside from indicating that the country is well on track for coffee exports for the present coffee year to perhaps even exceed 3.8 million bags, it definitely is an inspiration for the farmers to continue with their prevailing expansion plans in terms of new plantings and farm yield enhancing inputs. 

Making note that with the free market nature of the Ugandan coffee farming industry and the resulting ability for farmers to quickly cash in their harvested coffees and by nature of competition gain a deserved much higher share of the final export prices, it has made it that much easier for the UCDA and many private industry and aid related bodies that are involved within this industry, to inspire the countries farmers to further invest in to coffee farming. 

The Guatemalan National Coffee Association have reported that with the new crop coming to completion, that the anticipated much larger new crop shall not after all be on the cards and that due to the negative impact of adverse climatic conditions and ongoing Roya or Leaf Rust infestation on some farms, that the new crop shall only be approximately 3.32 million bags.   This is a number that is however still only marginally below the many private trade forecasts for a new crop of between 3.4 million and 3.5 million bags and therefore, is unlikely to have much impact upon market sentiment.  

A reverse auction in Brazil yesterday with the countries soluble coffee industry players bidding electronically for supply of conilon robusta coffees from the farmers, proved to be a failure and did not attract any support from the countries conilon cooperatives and farmers.   This auction that had been proposed by the Brazil Agricultural Ministry was designed to test the farmers who had protested the now stalled proposal to allow for the importation of robusta coffees, by stating that there was in fact sufficient internal market supply. 

However, while the failure of the auction and even though some of the industry prices bid exceeded the prevailing market prices for conilon robusta coffees would indicate that there might once again be inspiration to allow for the importation of supplementary robusta coffee supply, one would think that this might not be the case.   Especially so as not only are sales being concluded for conilon coffees to the soluble coffee manufacturers, but with the new conilon robusta coffee harvest only a month away and with it new supply, one would think that there would be no short-term merit in looking to external alternative supply. 

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 43.54 usc/Lb., while this equates to 30.73% 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 640 bags yesterday; to register these stocks at 1,341,308 bags.  There was meanwhile a larger in number 9,840 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 32,491 bags. 

The commodity markets were mixed but many encountered a down day yesterday, in line with the weakness of the global equity markets, to see the overall macro commodity index taking a softer track as the day progressed.   The Cocoa, Cotton, Copper and Gold markets nevertheless had a day of buoyancy and the Sugar market was steady for the day, while the Oil, Natural Gas, Coffee, Orange Juice, Wheat, Corn, Soybean and Silver markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.24% lower, to see this Index registered at 421.59.  The day starts with the U.S. Dollar steady and trading at 1.249 to Sterling and at 1.080 to the Euro, while North Sea Oil is showing a degree of buoyancy and is selling at $ 50.30 per barrel. 

The London market started the day yesterday on a near to steady note, while the New York market started the day on a marginally softer note and with the markets maintaining this stance into the early afternoon trade.  However, as the afternoon progressed and with the negative influences of the overall macro commodity index having some influence the volatile New York market encountered speculative selling and lacking any buying aggression on the part of the industry sector of the market, started to trigger sell stops and a somewhat unexpected sharp decline in value before flattening out, to take a negative sideways track to the close.   The London market followed suit in a more modest manner and even late in the day to take a brief spike back to par, before ending the day on a modestly softer note.  The London market ended the day having recovered 63.2% of the earlier losses of the day, while the New York market ended the day on a soft note and with 84.7% of the earlier losses of the day intact.  This close once again paints something of a negative technical picture for the markets but one might think that following the relatively sharp reversal of the fortunes of the New York market that there might be a degree of caution and that the markets might be due for a hesitant wait and see 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     2140 – 7

MAY     2164 – 7                                                 MAY   141.70 – 3.05

JUL      2185 – 6                                                  JUL    144.05 – 3.05

SEP      2195 – 6                                                 SEP    146.35 – 3.10

NOV     2199 – 6                                                  DEC   149.70 – 3.05

JAN      2192 – 6                                                 MAR   152.90 – 3.00

MAR     2192 – 5                                                 MAY   154.95 – 3.00

MAY     2195 – 4                                                  JUL    156.75 – 2.95

JUL      2205 – 4                                                  SEP    158.40 – 2.95

SEP      2209 – 4                                                  DEC   160.45 – 3.00