Coffee Market Report March 24 2017

The Brazilian statistical body CEPEA have estimated that with the new arabica coffee crop harvest still a couple of months to the fore, that the countries farmers and coffee cooperatives still have in hand arabica coffee stocks that are the equivalent of 20% of the past crop harvest.    This being somewhat better than the 15% factor at the same time last year, but is of course based on the fact that Brazil had a much improved new arabica coffee crop in 2016. 

One must however keep in mind that a good percentage of these stocks shall be sold by the start of the new harvest and with forecasts for a biennially bearing new arabica coffee crop this year that might be as much as 3 million to some even talking 5 million bags lower than the last crop, that the farmers and cooperatives would have no fear to have some carry over arabica coffee stocks in hand to supplement a smaller new arabica coffee crop.  

In terms of the new conilon robusta coffee harvest in Brazil there are reports that harvesting is already starting within the northern coffee province of Rondonia, but with the main conilon robusta districts in the north of the Espirito Santo only due to start in three to four weeks’ time.    These new crop conilon robusta coffees coming to the fore perhaps just in time, so as to fuel the internal market industry demand for these coffees. 

Meanwhile in yesterday’s auction of aged government retention coffee stocks that offered 137,000 bags and mostly directed towards the country’s domestic industries, 133,300 bags or 97.3% of the coffees on offer were sold.   These coffees having sold at an average price of the equivalent of 106.65 usc/Lb., being seen to be a good price for such aged coffees and all indications that there is now very little in the say of such state stock now remaining.  

Internal market trade in robusta coffees in Vietnam is being reported to be slowing and with some degree of internal market price resistance in play, while albeit early in the day for the new robusta coffee crop in Indonesia, there are reports that early new crop coffees are already starting to come to the market.    Presumably encouraged by the still relatively firm reference prices of the London market, against which the farmers and internal traders can value these deliveries. 

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 42.39 usc/Lb., while this equates to 30.17% 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 4,533 bags yesterday; to register these stocks at 1,345,841 bags.  There was meanwhile a larger in number 7,878 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 40,369 bags. 

The commodity markets were mixed and generally flat yesterday and with the overall macro commodity index taking a steady track, for the day.  The Natural Gas, Sugar, Cocoa, Copper and Wheat markets had a day of buoyancy and the Oil, London robusta Coffee and Cotton markets were steady for the day, while the New York arabica Coffee, Orange Juice, 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 0.04% higher, to see this Index registered at 421.75.  The day starts with the U.S. Dollar steady and trading at 1.248 to Sterling and at 1.077 to the Euro, while North Sea Oil is steady and is selling at $ 50.25 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, but with the London market soon coming under some pressure and both markets taking a softer track for early afternoon trade.    As the afternoon progressed both markets seemingly bottomed off and headed back up and briefly through par for later trade, but with the London market sliding back to par for the close, while the New York market once again slid back into negative territory.    The London market ended the day on a steady note and having recovered 94.1% of the earlier losses of the day, while the New York market ended the day on a soft note and with 55.8% of the earlier losses of the day intact.   This close does little to inspire and one might expect to see 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     2139 – 1

MAY     2163 – 1                                                 MAY   140.50 – 1.20

JUL      2184 – 1                                                  JUL    142.90 – 1.15

SEP      2195 unch                                             SEP    145.25 – 1.10

NOV     2199 unch                                              DEC   148.55 – 1.15

JAN      2192 unch                                             MAR   151.80 – 1.10

MAR     2192 unch                                             MAY   153.85 – 1.10

MAY     2195 unch                                              JUL    155.60 – 1.15

JUL      2197 unch                                              SEP    157.25 – 1.15

SEP      2205 – 4                                                  DEC   159.35 – 1.10

NOV     2200 unch                                              MAR   161.45 – 1.10