Coffee Market Report May 04 2017

With the month of April past, the Indonesia government trade data from Sumatra which is the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month were 111,827 bags or 140.19% higher than the same month in the previous year, at a total of 191,597 bags.   This contributes to the cumulative Sumatran robusta coffee exports for the first seven months of the present October 2016 to September 2017 coffee year to being 202,109 bags or 11.04% higher than the same period in the previous coffee year, at a total of 2,032,593 bags. 

It has to be noted though that while robusta coffee exports for the present 2016/ 2017 coffee year from Sumatra are so far only modestly increasing over the volumes exported during the previous 2015/2016 coffee year, that this latter 2015 to 2016 coffee year registered 50.49% lower exports than the previous 2014/ 2015 coffee year and that the 2015/2016 coffee year was in reality a dismal coffee year for the island.  However, with the new crop now starting and forecasted to be a larger new crop, one can expect that the islands monthly export volumes shall continue to improve and that by October, one shall see a much-improved performance for the present 2016/2017 coffee year.   But unlikely to match the 5.3 million bags exported during the 2015/2015 coffee year.   

It is perhaps worth a comment that with the Brazil conilon crop already being actively harvested and with the new Brazil arabica coffee crop cherries maturing and soon to start being harvested, that there has been little in the way of market supportive noise coming to the fore on the prospects for this new crop.   The perspective from many of the earlier reports would indicate that the new conilon robusta crop shall be better than the previous year’s dismal crop but unlikely to exceed domestic market demand and to limit any potential for conilon robusta exports until next year, while the new arabica coffee crop while smaller than last year’s bumper crop, is likely to be not quite as modest as some have predicted and shall be sufficient to fuel domestic and consumer market demand through to next year. 

The question is now what shall be the prospects for the follow on 2018 Brazil crop and while many forecast that presuming that weather conditions for the next twelve months in Brazil are normal, that this shall be a large new crop and with good prospects for both the conilon robusta and arabica coffee farmers.    However, Brazil has to still transit the frost threat winter season an albeit with the prevailing global weather conditions frost over the main coffee districts is an unlikely scenario, it is nevertheless a threat, while there are presently no longer term threatening indications for problems for the follow-on summer rain season.   Making one think that if frost does not become an issue and the summer rains come on time by October this year, that large new 2018 Brazil crop forecasts might have a longer term negative impact upon the market for the coming year.   

The July to July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 45.19 usc/Lb., while this equates to 32.88% 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 960 bags yesterday; to register these stocks at 1,411,938 bags.  There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 14,185 bags. 

The commodity markets were mixed in trade yesterday, but with many markets tending softer and influencing a softer track for the overall macro commodity index for the day.   The Oil, Natural Gas, Coffee, Corn and Soybean markets had a day of buoyancy, while the Sugar, Cocoa, Cotton, Copper, Orange Juice, Wheat, 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 0.40% lower, to see this Index registered at 408.49.  The day starts with the U.S. Dollar showing some degree of buoyancy and trading at 1.288 to Sterling and at 1.089 to the Euro, while North Sea Oil is steady and is selling at $ 49.20 per barrel. 

The London and New York market started the day yesterday on a positive note, but while the London market held on to its gains the New York market soon slipped back to trade around par and with the markets entering the afternoon trade on a positive note and the New York market only hesitantly steady.   As the afternoon progressed and with little in the way of producer selling activity the London market continued to take a positive track, while the New York market slipped back into negative territory.   The London market maintained its positive stance through to the close, with the New York market attracted support at the lows and bounced back into positive territory for late in the day trade.   

The London market ended the day on a very positive note and with 88.6% of the earlier gains of the day intact, while the New York market ended the day on a positive note and with 80% of the gains of the day intact.   This close and with the ability of the New York market to shrug off the earlier in the day negative pressures is perhaps somewhat constructive for confidence and one might expect to see a steady start due for early trade today against the prices set yesterday, as follows: 

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

MAY     2009 + 47                                             MAY   135.00 + 1.00

JUL      2034 + 39                                              JUL    137.45 + 1.20

SEP      2049 + 40                                             SEP    139.70 + 1.15

NOV     2058 + 41                                              DEC   143.20 + 1.15

JAN      2063 + 44                                             MAR   146.65 + 1.15

MAR     2061 + 44                                             MAY   148.90 + 1.20

MAY     2061 + 41                                              JUL    151.00 + 1.25

JUL      2071 + 41                                              SEP    152.90 + 1.20

SEP      2079 + 41                                              DEC   155.30 + 1.25

NOV     2086 + 41                                              MAR   157.60 + 1.25