Coffee Market Report December 01 2016

With the month of November past, the Indonesia government trade data from Sumatra which is the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month were 59,997 bags or 19.27% higher than the same month last year, at a total of 371,407 bags.   However, following the modest export volumes of the previous month, the cumulative exports for the first two months of this new October 2016 to September 2017 coffee year are 221,704 bags or 22.99% lower than the same period in the previous coffee year, at a total of 742,569 bags. 

This dip in the cumulative exports for the first two months of the present coffee year follows a dismal performance for the previous October 2015 to September 2016 coffee year, where Sumatra recorded exports for the year to have been 2,678,617 bags or 50.49% lower than the same period in the previous 2014/2015 coffee year, at a total of only 2,626,936 bags.   Thus, one might think that albeit that one can expect Sumatra to continue to post relatively modest robusta coffee export volumes through to at least May next year that with the advent of a much improved new 2017 crop shall assist to contribute rising export volumes from thereon and more than likely an overall improved export performance for this new 2016/2017 coffee year. 

With the evidence of forward contract commitments in hand and with the new crop harvest now peaking, the trade in Vietnam are forecasting that the coffee exports of mostly robusta coffees for this month of December shall most likely be something in the region of 2.5 million bags.   This forecast is close to the 2.53 million bags exported during December last year and it is likely that Vietnam is going to record a very impressive coffee export performance for this calendar year, which shall get close to 30 million bags. 

However, with the reference prices of the London robusta coffee market now softening in line with the overall softer nature of the coffee markets, one might expect that once the initial flurry of new crop sales is completed, that there shall be increasing price resistance within the internal market in Vietnam.   This would slow to a degree the volumes of price fixation activity within this market and be by nature limit the decline in value within the market, which is likely to result in the narrowing of the arbitrage between the London and New York markets. 

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 58.97 usc/Lb., while this equates to a 39.16% price discount for the London robusta coffee market.  This arbitrage remains an 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 increase by 1,229 bags yesterday; to register these stocks at 1,257,383 bags.  There was meanwhile a larger in number 2,583 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 18,527 bags. 

The commodity markets mixed but encountered the rather dramatic rally for the Oil prices that came with the somewhat surprising OPEC agreement, to limit exports and with further support for the markets coming with the improved manufacturing data from China.   These factors assisting the overall macro commodity index to take a positive track, for the day.   The Oil, Natural Gas, Sugar, Cotton, Copper, Orange Juice and Corn markets had a day of buoyancy, while the Cocoa, Coffee, Wheat, Soybean, 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 0.94% higher; to see this Index registered at 419.78.   The day starts with the U.S. dollar near to steady and trading at 1.253 to Sterling and 1.061 to the Euro, while North Sea Oil is showing a degree of buoyancy and is selling at 50.25 per barrel. 

The London market and New York markets started the day yesterday to the negative side of par, but with the London market soon recovering and taking a positive track into early afternoon trade and with the New York market recovering to bounce around par.   As the afternoon progressed the New York market started to come under pressure and to slide back into negative territory and to take a downside track for the rest of the day, while the London market continued to resist the selling pressure but finally succumbed to take a modestly negative track for later in the day’s trade.    The London market ended the day on a soft note and with 87% of the earlier losses of the day intact, while the New York market ended the day on a very soft note and with 94.2% of the earlier losses of the day intact.    This close and with the corresponding negative technical picture of the markets does little to inspire and one might expect to see only 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. 

JAN      2026 – 20                                               DEC   147.50 – 2.40

MAR     2020 – 15                                              MAR   150.60 – 2.45

MAY     2027 – 15                                              MAY   152.90 – 2.45

JUL      2033 – 14                                                JUL   155.05 – 2.35

SEP      2037 – 14                                               SEP   156.95 – 2.35

NOV     2041 – 15                                               DEC   159.75 – 2.35

JAN      2044 – 18                                               MAR   162.25 – 2.30

MAR     2053 – 18                                               MAY   163.65 – 2.25

MAY     2069 – 18                                                JUL   164.75 – 2.25

JUL      2069 – 18                                                SEP   165.65 – 2.25