Coffee Market Report April 26 2017

The coffee terminal market remained under pressure yesterday, with the London market in particular and coming off many months of speculative and fund net long holdings, suffering from steady position liquidation.  But with some thoughts that the London robusta coffee market and against still relatively tight global robusta coffee supply, might soon be seen to be somewhat oversold and due for some degree of stability and perhaps even, a modest positive correction.  

Reports from Vietnam estimate that the domestic coffee consumption is close to 2.9 million bags of coffee per annum and steadily increasing, while the exports of value added roast and ground and soluble coffee from the country are seen to be close to 2.5 million bags per annum.   With Vietnam coffee industries actively targeting the regional consumer markets and with and including one of Vietnams leading coffee roasting companies now targeting both on line and retail outlet sales of roast and ground and soluble coffee sales, within the Chinese market.  

Meanwhile the General Administration of Customs in China have reported that the countries import of coffee for the first three months of this year totalled a relatively modest 6,682 metric tons, while the country’s exports of coffee for the same period was a more substantial 9,968 metric tons.   These are relatively modest numbers, in terms of the global industry perspective that the growing coffee shop culture within the country and the growth of soluble coffee consumption, is due to fuel an active coffee market within this high population country. 

Nevertheless, and despite some question over the official coffee trade figures from China, there is no doubt that the regional Asian coffee market remains on a strong upside track and with this growing interest in coffee from the consumers in general, shall encourage increased regional production.  Suggesting that in time that the growing interest in coffee consumption within Asia shall assist to encourage the Asian coffee producers and with presently an approximate 32% share of global coffee production, shall steadily increase this share in the coming years.  

The July to July contracts arbitrage between the London and New York markets broadened yesterday, to register this at 45.49 usc/Lb., while this equates to 34.36% price discount for the London robusta coffee market.  This still relatively low arbitrage remains not such 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 995 bags yesterday; to register these stocks at 1,410,688 bags.  There was meanwhile a larger in number 4,860 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 17,217 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 7,000 bags or 0.25% in the week of trade leading up to Monday 24th. April, to see these stock registered at 2,815,833 bags, on the day. 

The commodity markets while mixed in trade yesterday but with the U.S. dollar losing some muscle through the day, there was buoyancy within many markets and the macro overall commodity index had a modestly positive day.  The Oil, Cocoa, New York arabica Coffee, Cotton, Copper, Orange Juice, Wheat and Corn markets had a day of buoyancy, while the Natural Gas, Sugar, London robusta Coffee, 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 0.54% higher, to see this Index registered at 409.38.  The day starts with the U.S. Dollar near to steady and trading at 1.284 to Sterling and at 1.094 to the Euro, while North Sea Oil is steady and is selling at $ 49.70 per barrel. 

The London market started the day yesterday on a steady note but soon dropping off to take a softer track south, while the New York market opened the day with modest buoyancy and with both markets retaining this stance through to the early afternoon trade.   As the afternoon progressed the London market lost some more weight before bouncing back to limit its losses, while the New York market trading erratically either side of par and perhaps assisted by the positive nature of the macro commodity index, took on a modestly positive stance for late in the day trade.   

The London market ended the day on a soft note but having recovered 69.2% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 50% of the earlier gains of the day intact.   This close and with the New York market having somewhat stabilised and with the London market having come back off seven and half month lows might well assist to contribute to some degree of confidence, to set the markets for a steady start for early trade today, against the prices set yesterday, as follows: 

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

MAY     1884 – 22                                              MAY   129.90 + 0.40

JUL      1916 – 20                                              JUL    132.40 + 0.50

SEP      1931 – 22                                             SEP    134.80 + 0.55

NOV     1938 – 22                                              DEC   138.35 + 0.50

JAN      1940 – 22                                             MAR   141.75 + 0.45

MAR     1940 – 23                                             MAY   143.95 + 0.45

MAY     1943 – 21                                              JUL    146.00 + 0.45

JUL      1950 – 21                                              SEP    148.00 + 0.45

SEP      1958 – 21                                              DEC   150.35 + 0.45

NOV     1965 – 21                                              MAR   152.65 + 0.50