Coffee Market Report June 23 2017

The Uganda Coffee Development Authority UCDA has reported that the countries coffee exports for the month of May were 122,509 bags or 42.84% higher than the same month last year, at a total of 408,454 bags.  This improved performance and following a much-improved performance in many of the previous months, has contributed to the countries cumulative coffee exports for the first eight months of the present October 2016 to September 2017 coffee year to being 706,124 bags or 30.95% higher than the same period in the previous coffee year, at a total of 2,987,876 bags.  

In terms of value the UCDA has reported that the coffee exports for the month of May were US$ 19,952,047.00 or 72.24% higher than the same month last year, at a total of US$ 47,571,639.00.  This having contributed to the cumulative value for the first eight months of the present October 2016 to September 2017 coffee year to be US$ 140,435,337.00 or 63.75% higher than the same period in the previous coffee year, at a total of US$ 360,720,060.00. 

These figures would start to indicate that the country is on its way to well exceed the volume of coffee exports of 3,315,567 bags that were registered for the previous October 2015 to September 2016 coffee year, during the present coffee year and possibly on track to exceed 4 million bags for the present coffee year.    While the added value for the coffees being exported out of Uganda for the coffee year so far, does much to inspire further investment on the part of the Ugandan farmers into their coffee crops. 

Albeit that the improved income is more related to the countries robusta coffee farmers, as the arabica coffee farmers are starting to suffer from the negative nature of the reference prices of the New York arabica coffee market.   Noting that the Uganda coffee production is somewhat dominated by the robusta coffee sector, which has contributed to 74.48% of the country’s coffee exports for the first eight months of the present coffee year. 

Weather conditions over the main coffee districts in Brazil have turned generally dry and a looking to remain so for the coming week, while there is no threat of frost foreseen for the short term.   This is assisting to accelerate the new crop harvest, which the respected analyst Safras & Mercado and with a new crop harvest of 51.1 million bags, estimate to be 37% complete.   Based on their assessment that already 63% of the new conilon robusta coffee crop has been harvested, while 30% of the new arabica coffee crop has been harvested.  

Meanwhile with the narrowing of the arbitrage of the reference prices of the London and New York market, the internal market prices for Brazil conilon robusta coffees are already starting to match the prices for the poorer cupping coffees out of the new arabica coffee crop.   A situation that is likewise developing globally, with lower grade arabica coffees only being able to attract price support at discounted levels to the better grades of robusta coffees.  

The September to September contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 24.42 usc/Lb., while this equates to a 20.96% price discount for the London Robusta coffee market.  

The Certified washed Arabica coffee stocks held against the New York exchange were seen to remain unchanged yesterday; to register these stocks at 1,515,258 bags.  There were meanwhile 4,467 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 33,256 bags. 

The commodity markets had a mixed day yesterday, but with the overall macro commodity index nevertheless remaining on a softer track for the day.   The Oil, Natural Gas, Orange Juice, Gold and Silver markets had a day of buoyancy, while the Sugar, Cocoa, Coffee, Cotton, Copper, Wheat, Corn and Soybean markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.76% lower, to see this Index registered at 385.75.  The day starts with the U.S. Dollar tending a little softer and trading at 1.270 to Sterling and at 1.117 to the Euro, while North Sea Oil is steady and is selling at $ 44.15 per barrel. 

The coffee markets started the day yesterday on a mixed note and with the London market trading marginally below par, while the New York market started the day on a steady note and with both markets soon starting to show some degree of buoyancy and taking a steady track and on the positive side of par into the early afternoon trade.   However, as the afternoon progressed and the Americans entered the field of play the New York market started to come under pressure and with the funds and speculative sectors of this market selling and triggering sell stops, to force the New York market deep into negative territory and followed to a lesser extent, by the fundamentally more positive London market.    Both markets did however steady in late trade and show some degree of buoyancy over the lows of the day, through to the close. 

The London market ended the day on a negative note and with 87.5% of the earlier losses of the day intact, while the New York market ended the day on a very negative note and with 84.7% of its sharp losses of the day intact.   This close and one that is related to fund and speculative actions rather than the fundamentals within the market would make one think that the New York market in particular is oversold and leaves one with the question over when shall fund and speculative exhaustion come into play, to perhaps trigger some degree of supportive profit.   Thus one might expect that the markets are due for cautious and hesitant support for early trade today against the prices set yesterday, as follows: 

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

JUL    2014 – 41                                            JUL     113.45 – 5.90 

SEP    2130 – 42                                            SEP    116.50 – 5.55

NOV   2015 – 41                                             DEC   120.05 – 5.55

JAN    1991 – 40                                            MAR   123.55 – 5.55

MAR   1978 – 38                                            MAY   125.95 – 5.55

MAY   1977 – 36                                            JUL    128.25 – 5.50

JUL    1995 – 33                                            SEP    130.50 – 5.40

SEP    2013 – 31                                            DEC   133.25 – 5.40

NOV   2022 – 31                                            MAR   136.10 – 5.35

JAN    2029 – 31                                            MAY   137.75 – 5.30