Coffee Market Report October 06 2017

The International Coffee Organisation have reported that the global coffee exports for the month of August were 8.4% lower than the same month last year, at a total of 9.87 million bags.   However, they also report that the cumulative global coffee exports for the first eleven months of the October 2016 to September 2017 coffee year were 5.8% higher than the same period in the previous 2015/2016 coffee year, at a total of 113.28 million bags. 

This report indicating an approximate 6.2 million bags increase in exports and mostly made up by a 9% increase in arabica coffee exports for the period October 2016 to August 2017 and with this well more than estimated consumption growth within the consumer countries, which would support the view that consumer arabica coffee stocks are still significant.  Especially so within North America and Europe, where the prevailing low interest rates assist for the carry of stocks.   While the evidence of the growth in consumer market arabica coffee stocks, has contributed to the prevailing bearish sentiment within the volatile New York market. 

The Vietnam customs authorities report that the country’s coffee exports for the just completed October 2016 to September 2017 coffee year, that the country exported 14.3% less coffee than the previous coffee year, at a total of 24,896,717 bags.    These exports which would have been based upon a fourth quarter 2016 crop of only approximately 24.5 million bags and with a domestic market demand of close to 3 million bags, have included approximately 4 million bags of carryover stocks. 

However, this year and following the still respectable export volumes for the past October 2016 to September 2017 coffee year, there is some degree of internal market pressure building up in terms of short term demand for new crop coffees.   Particularly so, as there are regular rain showers over the main robusta coffee districts, which is with the difficulties that this causes for the drying of harvested cherries, delaying the start of the new crop harvest upon many farms.     

Traders and exporters within Vietnam and based on contracted export commitments in hand and along with related past crop stocks, are estimating that ahead of the new crop coffees that Vietnam shall only be exporting a modest 1.3 million to 1.5 million bags of coffee during the month of October.  One would think that as medium-term weather forecasts do not foresee good spells of dry weather before the coming month, that that such a modest performance shall be repeated in the month of November and would by nature, contribute to some degree of drawdown of consumer market robusta coffee stocks.  

West Africa’s largest robusta coffee producer the Ivory Coast has meanwhile reported the country’s coffee exports for the cumulative exports for the first eight months of this year 367,683 bags or 42.3% lower than the same period last year, at a total of 507,050 bags.   This dip and relatively modest export figure does seemingly support recent reports that the country experienced an approximate 44% lower new crop over late last year and early this year, of only approximately 1 million bags. 

Weather conditions have however been fair within the Ivory Coast for most of this year and for the present, the forecasts are for an improved new crop of more than 1.4 million bags, which would assist to buoy coffee exports during 2018.  Albeit that with the tradition of smuggling coffees for export and sale by the neighbouring countries, the coffee production and export figures out of the Ivory Coast, are always seen to be somewhat conservative.    

The January 2018 to December 2017 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 37.98 usc/Lb., while this equates to 29.86% 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 12,208 bags yesterday; to register these stocks at 1,841,546 bags.  There was meanwhile a smaller in number 11,667 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 60,748 bags. 

The commodity markets were mostly on the upside yesterday, with the overall macro commodity index taking a positive track for the day.   The Oil, Sugar, Cocoa, New York arabica Coffee, Copper, Orange Juice, Wheat, Corn, Soybean and Silver markets had a day of buoyancy and the Natural Gas market was steady, while the London robusta Coffee, Cotton and Gold markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.62% higher, to see this Index registered at 410.39.  The day starts with the U.S. Dollar showing a degree of buoyancy and trading at 1.308 to Sterling and at 1.169 to the Euro, while North Sea Oil is steady and is selling at US$ 57.00 per barrel. 

The London and New York markets started the day yesterday with a degree of buoyancy and with both markets tending to stay to the positive side of par, into the early afternoon trade.   As the afternoon progressed the markets tended to come under soft pressure and to slip south of par, but while late trade brought with it buying support and triggering buy stops to buoy the New York market, the London market slipped back into negative territory and took a sideways track towards a soft close for the day. 

The London market ended the day on a soft note and with 50% of the earlier losses of the day intact, while the New York market ended the day on a positive note and with 82% of the earlier gains of the day intact.  This is a rather mixed close and while the New York market has encountered a nice corrective recovery for the day, one might expect that the rain reports from Brazil shall inspire some degree of caution and some degree of corrective buoyancy for the London market and a near to steady start for the New York market for early trade today, against the prices set yesterday, as follows: 

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

NOV    2000 – 15                                            DEC   127.20 + 2.05

JAN    1967 – 10                                            MAR   130.75 + 2.05

MAR   1955 – 9                                              MAY   133.15 + 2.05

MAY   1966 – 9                                              JUL    135.45 + 2.00 

JUL    1990 – 10                                            SEP    137.75 + 2.00

SEP    1994 – 12                                            DEC   141.15 + 2.00

NOV   1998 – 16                                            MAR   144.40 + 2.00

JAN    2000 – 23                                            MAY   146.40 + 1.95

MAR   2005 – 23                                            JUL    148.40 + 1.95

MAY   2010 – 23                                            SEP    150.35 + 2.00