Coffee Market Report November 02 2016

The National Coffee Institute of Costa Rica have reported that the countries coffee exports for the month of October were 12,329 bags or 60.93% higher than the same month last year, at a total of 32,563 bags.  

The National Coffee Institute of Honduras have reported that the countries coffee exports for the month of October were 64,354 bags or 326.11% higher than the same month last year, at a total of 84,088 bags. 

These exports from Costa Rica and Honduras though would have been mostly related to carryover stocks from the past crop and therefore, provide no indication of the prospects for the new crop that is just starting to be harvested within the lower growing areas of these countries.   Albeit that the early forecasts are for a larger new crop being due and particularly so for Honduras, the leading producer within the Mexico and Central American producer bloc. 

The Brazil Coffee Export Association in Brazil has announced their preliminary coffee export figure for the month of October, to report that coffee exports for the month were 331,709 bags or 10.03% lower than the same month last year, at a total of 2,974,790 bags. 

This dip in Brazil coffee exports is however, in terms of the impact upon the supply of Brazil arabica coffees to the consumer markets, not a significant decline.  If one is to note that the main reason for the dip is mostly related to the 246,660 bags dip in the exports of conilon robusta coffees during October, as a result of the dismal new conilon robusta crop this year.   Further noting that conilon robusta coffee exports out of Brazil are mostly advantageous exports at times of being price competitive to international robusta coffee prices, whereas the Brazil arabica coffee exports are related to dedicated demand for the particular cup characteristics of Brazil arabica coffees.  

Today is a public holiday in Brazil, where they celebrate Dia de Finados or All Souls Day, which shall remove Brazil price fixation selling pressure from activity within the New York market for the day.   Albeit that most of the influence within this market at present is related to the fund and speculative sectors of the market, but one might guess that pre-holiday price fixation activity out of Brazil might have contributed to yesterday’s late in the day decline for the New York market. 

It is early days as of yet in the month of November, but with forward commitment export contracts in hand, the traders are forecasting that coffee exports of mostly robusta coffees for the month shall be a more modest 1.67 million to 1.83 million bags.   This more modest forecast albeit that one can quantify existing November shipment contracts, might also be influenced by the trade looking to the delay in the start of the new crop harvest and likewise, the delayed flood of new crop robusta coffee stocks. 

However, there are still good levels of carryover robusta coffee stocks from the past harvest and while the South of Vietnam continues to receive regular rains, there are now frequent dry spells within the main Central Highlands coffee districts in Vietnam.  This has assisted to trigger reasonably widespread harvesting and one would expect that there shall be rising volumes of new crop robusta coffees coming to the export mills and warehouses, by the second half of the month.   In this respect and with fill in spot export business activity continuing, one might foresee that the November coffee exports out of Vietnam might prove to be higher than are initially being forecasted.  

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 67.21 usc/Lb., while this equates to a 40.73% price discount for the London robusta coffee market.  This arbitrage is perhaps becoming a less attractive factor for the 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 decrease by 2,350 bags yesterday; to register these stocks at 1,272,628 bags.  There were meanwhile a larger in number 3,070 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 25,180 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 4,167 bags or 0.18% over the week of trade leading up to Monday 31st. October, to see these stocks registered at 2,280,167 bags, on the day. 

The commodity markets encountered soft U.S. economic data yesterday, but countered by a much-improved manufactures purchases index from China.  The markets though had a mixed day and despite a softening for the U.S. dollar, the overall macro commodity index tended softer for the day.   The Copper, Orange Juice, Gold and Silver markets had a day of buoyancy, while the Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, 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 0.02% lower; to see this Index registered at 422.36.   The day starts with the U.S. dollar steady and trading at 1.224 to Sterling and 1.107 to the Euro, while North Sea Oil is near to steady and is selling at 45.45 per barrel. 

The London market started the day yesterday on a near to steady note and with both markets losing a little more weight, into the early afternoon trade.   The New York market did however soon recover and move back up into positive territory, while the London market took a sideways track south of par.   As the afternoon progressed though, the New York market started to come under pressure and to fall back below par and with sell stops coming into play, to take a steady slide into deeper negative territory and followed by further losses for the London market.    The London market ended the day on a softer note and with 78.8% of the earlier losses of the day intact, while the New York market ended the day on a soft note and with 91.1% of the earlier losses of the day intact.   This close tends to paint something of a negative technical picture for the markets, but there can be expected to be some caution in terms of the disbelief in a sharp downside potential for the markets and one might expect to see a hesitant near to steady start for early trade today, against the prices set yesterday, as follows: 

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

NOV     2206 – 23                                               DEC   161.45 – 2.70

JAN      2158 – 26                                              MAR   165.00 – 2.55

MAR     2156 – 27                                              MAY   167.15 – 2.55

MAY     2162 – 27                                                JUL   168.95 – 2.50

JUL      2165 – 28                                                SEP   170.65 – 2.45

SEP      2171 – 28                                               DEC   173.00 – 2.30

NOV     2178 – 27                                               MAR   174.85 – 2.20

JAN      2188 – 26                                               MAY   175.90 – 2.15

MAR     2204 – 25                                                JUL   176.85 – 2.15

MAY     2222 – 24                                                SEP   177.70 – 2.20