Coffee Market Report June 16 2017

The Green Coffee Association of the U.S.A. have announced that the countries port warehouse stocks increased by 224,169 bags or 3.25% during the month of May, to register these stocks at 7,114,523 bags at the end of the month.   This is noted to be the highest figure recorded for these stocks, since 1993 and when the New York market was trading in an economically unsustainable for producer’s price range of between 55 usc/Lb. and 70 usc/Lb.   

These stocks do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of 560,000 bags per week, would conservatively have been at least 1.1 million bags. If one is to consider the additional unreported stocks the end month stocks, this would equate to approximately 14.7 weeks of roasting activity, which may be considered to be more than a safe reserve and in fact, an economically excessive stock level. 

These stocks in North America and likewise similar in terms of stocks as a ratio of roasting demand being held within Europe and perhaps even more so in Japan, would indicate that overall mainstream consumer market stocks are perhaps as much as six million bags in excess to a safe requirement.   This factor continuing to impact negatively upon sentiment within the volatile New York market, where the managed money funds and the speculative sectors of the market have significant overall short sold positions. 

This is of course very much and arabica coffee scenario, as with robusta coffee exports potentially due to steadily decline out of a well sold Vietnam and despite fill in supply coming from Indonesia, Uganda, India and West Africa, the robusta coffee supply is foreseen to become relatively tight and producer friendly, in terms of price. 

There is of course still the in excess of 2.7 million bags of certified robusta coffee stocks being held against the London market that provides for some degree of insurance for the consumer market roasters and one would think that these might decline further, in the coming months.   Albeit that the conilon robusta coffees within these stocks, are seen to be in terms of cup quality, not very attractive to the European roasters.  

While one might suspect that there shall be with the narrowing arbitrage between the London robusta coffee market and the New York arabica coffee market, some increased interest on the part of some of the more flexible roasters in taking advantage of discounted aged arabica coffees within the substantial consumer market stocks, to substitute for relatively expensive robusta coffees.   Suggesting that in the coming months, there might be reason to believe in a degree of market support coming the fore, against declining overall consumer market stock levels.  

Meanwhile in Brazil where many leading arabica coffee districts have been experiencing unseasonal and harvest interrupting rains, the new crop harvest continues.   With the analyst Safras & Mercado estimating that so far 31% of the new crop has been harvested.  In this respect 54% of the new conilon robusta crop and 24% of the new arabica coffee crop. 

Concerns have already been voiced over the relatively low percentages of bolder bean screen 17 plus beans from the coffees coming in from the rain effected farms in South Minas, but one must note that with only a relatively small percentage so far harvested.  Speculating that one might expect larger bean size percentages to be due from the later maturing coffee cherries, which would by nature assist to improve the overall bean size within these cherries.  

The September to September contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 32.57 usc/Lb., while this equates to 25.44% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 1,706 bags yesterday; to register these stocks at 1,514,329 bags.  There was meanwhile a similar in number 1,683 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 22,176 bags. 

The commodity markets had a mixed day yesterday and tending softer for many markets, to see the overall macro commodity index taking a softer track for the day.  The Natural Gas, Coffee, Orange Juice, Wheat, and Corn markets had a day of buoyancy, while the Oil, Sugar, Cocoa, Cotton, Copper, 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 0.4% lower, to see this Index registered at 398.13.  The day starts with the U.S. Dollar tending softer and trading at 1.277 to Sterling and at 1.117 to the Euro, while North Sea Oil is showing a degree of buoyancy in early trade and is selling at $ 46.05 per barrel. 

The London market and New York markets started the day yesterday trading around par and soon picking up support, to see the markets taking a positive track into the early afternoon trade.   As the afternoon progressed the markets started to attract more support and to add more value and this started the fundamentally supported London market upon a strong upside track and mirrored for a while by the New York market, but with the New York market faltering in late trade and shedding most of its more modest gains of the day.  

The London market ended the day on a very positive note and with 90.7% of the earlier gains of the day intact, while the New York market ended the day on a modestly positive note and with only 14.3% of the earlier gains of the day intact.  This close does though assist to improve the technical picture for the markets and inspires a degree of confidence, with both markets opening he day today on a follow through positive note, against the prices set yesterday, as follows: 

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

JUL    2090 + 52                                            JUL     125.80 + 0.25 

SEP    2105 + 49                                            SEP    128.05 + 0.30

NOV   2080 + 43                                            DEC    131.45 + 0.30

JAN    2044 + 33                                            MAR   134.90 + 0.25

MAR   2018 + 26                                            MAY   137.15 + 0.20

MAY   2016 + 26                                            JUL    139.35 + 0.15

JUL    2031 + 26                                            SEP    141.45 + 0.15

SEP    2041 + 23                                            DEC   144.00 + 0.10

NOV   2050 + 20                                            MAR   146.55 + 0.10

JAN    2057 + 20                                            MAY   147.65 + 0.05