Coffee Market Report May 10 2017

The much-debated issue of the Brazil governments authorisation and the stalling of such authorisation of imports of robusta coffee to supplement the tight supply of conilon robusta coffees over the past year is still a matter of debate, with the news from the Brazil Department of Trade and industry that so far it had authorised the import of only 5,893 bags.   However, there has so far not been a bag of coffee imported, while the relatively minimal numbers that are involved with this matter, are unlikely to have any impact upon sentiment within the London market. 

One might speculate that with the new conilon robusta coffee crop in Brazil now in full swing and good volumes of new crop conilon coffees available to the domestic roasters and roasters of value add export soluble coffees, that there is little inspiration to wish to continue to lobby for authority to import robusta coffees.   Especially so that if one is to proceed with such imports, the risk of phytosanitary control rejections on arrival in Brazil, is very high and potentially not worth the investment and effort. 

The Vietnam Department of customs have announced that the countries coffee exports for the month of April were 852,384 bags or 27.5% lower than the same month last year, at a total of 2,246,983 bags.   A number that is likewise 19,8% lower than the previous month and contributes to the countries cumulative coffee exports for the first four months of the present coffee year to being 11% lower than the same period in the previous coffee year, at a total of 9,802,017 bags. 

These lower numbers are not unexpected, following the smaller new Vietnam crop that came in over October 2016 and January 2017, which has generally been reported by the usually reliable trade and industry players to have been something between 24 million and 25 million bags.   This crop of course needing to also fuel a domestic market demand of close to 3 million bags, which shall reduce the availability of coffees for export.  

But based on the April export numbers and the exports for the first four months of this year and taking into account that there were carryover stocks to cover approximately 60% of the export demand for the last quarter of last year, it indicates that there shall be steady export volumes of robusta coffees from Vietnam through to the potentially larger new crop in October.  Albeit that these Vietnam robusta coffee export volumes shall most certainly not match the volumes for the same period last year, which shall fuel increased demand from the consumer markets from the other robusta producers for the next six months. 

Brazil with a better but not significantly substantial new conilon robusta coffee crop this year is unlikely to contribute, but there is improved supply from Indonesia and Uganda.   Albeit that these producers are not expected to completely eliminate the prevailing overall deficit in global robusta coffee supply, which is expected to continue for the next six months.   This factor one would think, shall assist to maintain the prevailing buoyancy for the related London coffee market, for the short to medium term. 

The July to July contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 43.52 usc/Lb., while this equates to 32.2% 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 985 bags yesterday; to register these stocks at 1,414,101 bags.    There were meanwhile a larger in number 2,225 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 34,420 bags. 

The commodity markets encountered some renewed muscle for the U.S. dollar yesterday and while mixed in trade, the overall macro commodity index took a softer track for the day.   The Natural Gas, Sugar, Cocoa, Cotton, Copper, Orange Juice, Corn and Soybean markets had a day of buoyancy, while the Oil, Coffee, 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 0.42% lower, to see this Index registered at 403.88.  The day starts with the U.S. Dollar near to steady and trading at 1.296 to Sterling and at 1.089 to the Euro, while North Sea Oil is steady and is selling at $ 47.15 per barrel. 

The London and New York markets started the day yesterday on a hesitantly steady note, but with the both markets slipping back into modest negative territory in early afternoon trade.   As the afternoon progressed the London market moved briefly moved back into positive territory and the New York market back towards par, but this was short lived and the London market slipped back below par, while the New York market lost relatively more weight and moved into negative territory and with the markets maintaining as softer sideways stance through to the close.  

The London market ended the day on a negative note but having recovered 63.2% of the earlier losses of the day by the close, while the New York market ended the day on a negative note and with 83.3% of the earlier losses of the day intact.  This reversal of the fortunes for the markets does not paint a very clear picture and does little to buoy confidence and one might expect 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. 

MAY     1991 – 11                                              MAY   132.80 – 1.75

JUL      2020 – 7                                                JUL    135.15 – 1.75

SEP      2039 – 6                                               SEP    137.50 – 1.70

NOV     2048 – 6                                                DEC   140.85 – 1.80

JAN      2052 – 6                                               MAR   144.25 – 1.85

MAR     2053 – 6                                               MAY   146.45 – 1.90

MAY     2056 – 4                                                JUL    148.45 – 1.95

JUL      2069 – 1                                                SEP    150.35 – 1.95

SEP      2077 – 1                                                DEC   152.75 – 1.95

NOV     2084 – 1                                                MAR   155.05 – 1.90