Coffee Market Report October 05 2016

The National Coffee Institute in Honduras have reported that the country’s coffee exports for the month of September were 129,492 bags or 309.48% higher than the same month last year, at a total of 171,334 bags.   This they say has contributed to the countries cumulative coffee exports for the October 2015 to September 2016 coffee year to have been marginally 5,056 bags or 0.1% higher than the previous coffee year, at a total of 5,153,000 bags. 

However, we note that if one is to take the month by month coffee export reports from Honduras over the past twelve months, the country’s cumulative coffee exports for the October 2015 to September 2016 coffee year would have been 186,344 bags or 3.62% higher than the previous coffee year, at a total of 5,334,288 bags.  This number is nevertheless still significantly lower than the forecasted exports of 5.52 million bags for the just completed coffee year, but is perhaps more an indication of the increasing volumes of cross border smuggled coffees into mainly Guatemala but also including Mexico, El Salvador and Nicaragua, than being any indication of a smaller than expected past crop. 

In the meantime, with the new crop cherries already approaching maturity in the lower districts in Honduras and the new crop due to pick up in volume by December this year, the early forecasts are that the country is due an approximately 9% larger new crop, which shall exceed 6.1 million bags.   This to fuel even with the volumes of smuggled coffees expected to continue, exports that might well exceed 5.5 million bags for the new October 2016 to September 2017 coffee year. 

The summer rain season in Vietnam has yet to tail off and the expectations are that the start of the new crop might be delayed by a couple of weeks, to see the country’s exporters reliant on carryover past crop stocks to support steady robusta coffee exports through this month and into the month of November.  But in the meantime the forecasts from the coffee traders in Ho Chi Minh City are indicating that coffee exports of mostly robusta coffees for the month of October shall be lower than the volume exported in September, at between 1.17 million and 1.67 million bags. 

The big question is that with negligible robusta coffee supply from this year’s relatively small Brazil conilon robusta crop and lower volumes of robusta coffees from Indonesia this year, what shall be the size of the new Vietnam robusta crop.  Presently the forecasts are that this new crop might be as much as 8% lower than the past crop and that with stocks having been partially liquidated over the past twelve months of high volume exports and carryover stocks at more modest levels into the new crop, it is pointing towards continued price resistance and price buoyancy for Vietnam robusta coffees for the foreseeable future. 

The November to December contracts arbitrage between the London and New York markets broadened yesterday, to register this at 58.64 usc/Lb., while this equates to a 39.77% 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 300 bags yesterday; to register these stocks at 1,258,458 bags.  There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 11,855 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 9,333 bags or 0.4% during the week of trade leading up to Monday 3rd. October, to register these stocks at 2,304,667 bags, on the day. 

The commodity markets had a mixed day yesterday, but with the renewed speculation for the possibility of a U.S. Dollar interest rate hike before the end of this year and the firmer U.S. dollar in play, selected markets came under some degree of pressure.   The overall macro commodity index did nevertheless retain a degree of buoyancy and to take a positive track, for the day.   The Oil, Sugar, Cocoa, Cotton, Orange Juice, Wheat and Corn markets had a day of buoyancy and the Natural Gas and New York arabica coffee markets were close too steady, while the London robusta Coffee, Copper, 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 0.20% lower; to see this Index registered at 417.91.   The day starts with the U.S. dollar steady in early trade and trading at 1.273 to Sterling and 1.121 to the Euro, while North Sea Oil is steady in early trade and trading at 49.35 per barrel. 

The London market started the day yesterday on a modestly softer note, while the New York market took a steady start to the day’s trade.   The London market tended to lose some more weight into the early afternoon trade and to then take a softer erratic sideways track for the rest of the day, while the New York market showed a greater degree of volatility and traded either side of par, with gains of as much as 1.10 usc/Lb. and losses of as much as 0.80 usc/Lb. through the day and to end the day on a near to steady note.   The London market ended the day on a soft note and with 76% of the earlier losses of the day intact, while the New York market ended the day on a near to steady note.   This mixed close is accompanied by a somewhat negative picture for the charts 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. 

NOV     1958 – 19                                               DEC   147.45 – 0.10

JAN      1986 – 18                                              MAR   150.80 – 0.10

MAR     1996 – 18                                              MAY   152.75 – 0.05

MAY     2003 – 18                                               JUL   154.50 – 0.05

JUL      2010 – 18                                               SEP   156.05 – 0.10

SEP      2017 – 18                                              DEC   158.15 – 0.10

NOV     2025 – 18                                              MAR   159.85 – 0.15

JAN      2035 – 18                                              MAY   160.90 – 0.15

MAR     2042 – 18                                               JUL   161.90 – 0.15

MAY     2045 – 18                                               SEP   162.85 – 0.15