Coffee Market Report October 06 2016

The Coffee Federation in Colombia have reported that the country’s coffee production for the month of September was 24,000 bags or 2.27% lower than the same month in the previous year, at a total of 1,034,000 bags.  This performance does however follow many months of improved production and has contributed to the countries cumulative production for the just completed October 2015 to September 2016 coffee year to being 676,000 bags or 5.07% higher than the same period in the previous coffee year, at a total of 14,009,000 bags. 

In terms of exports, the Coffee Federation in Colombia have reported that the country’s coffee exports for the month of September were 53,000 bags or 4.85% lower than the same month in the previous year, at a total of 1,040,000 bags.  This improved performance contributes to the countries cumulative exports for the just completed October 2015 to September 2016 coffee year to being 5,000 bags or 0.04% higher than the same period in the previous coffee year, at a total of 12,291,000 bags. 

These figures with Colombian coffee production tailing off over the past couple of months, does confirm the expectations that the overly dry conditions that came with the El Nino phenomenon within the Pacific Ocean for the last quarter of last year and the first quarter of this year, has impacted negatively within many coffee districts in Colombia and the output from the countries Mitaca coffee crop.   However, the El Nino has not been followed by the expectations for a significant La Nina phenomenon and the accompanying excessive rains, which would indicate that the prospects for the new main crop that is now starting are fairly good and likewise, for next year’s mid-year new Mitaca crop. 

Thus there are already early forecasts with the new Main crop cherries now coming into maturity that Colombian coffee production of mostly fine washed arabica coffee shall perhaps rise to in excess of 14.5 million bags and by nature, to fuel exports for the new October 2016 to September 2017 coffee year of in excess of 12.5 million bags.  These coffees to be joined within the mainstream quality conscious consumer markets by the probability of a close to 6% increase in production of fine washed arabica coffees from the Mexican and Central American producer bloc and a 10% increase in the Peru production of fine washed arabica coffees, to indicate no reason for concern over medium to longer term fine washed arabica coffee supply. 

While awaiting the final Vietnam Customs figures for coffee exports for the month of September and the just completed October 2015 to September 2016 coffee year, the Vietnam Coffee and Cocoa Association have been quoted as saying that they expect these exports to be approximately 26.67 million bags.  These exports in terms of approximately 1 million bags having been made up from arabica coffees and would indicate that Vietnam fuelled the consumer markets with approximately 25.7 million bags of robusta coffee over the just completed coffee year, which is a volume that if the forecasts for a smaller crop due to soon be harvested, that might not be matched within the new October 2016 to September 2017 coffee year and would underpin the forecasts for a tighter overall robusta coffee supply through to the impact of the new Brazil conilon robusta crop and the new Indonesian robusta coffee crop, in June next year.  

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 59.61 usc/Lb., while this equates to a 39.33% 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 5,841 bags yesterday; to register these stocks at 1,252,617 bags.  There was meanwhile a smaller in number change to the number of bags pending grading for this exchange; to register these pending grading stocks at 16,855 bags. 

The commodity markets had a mixed day yesterday, but with the majority of the markets tending to take a positive track and likewise, supporting a positive stance for the overall macro commodity index for the day.   The Oil, Natural Gas, Sugar, Cocoa, Coffee, Wheat and Corn markets had a day of buoyancy and the Copper market was steady, while the Cotton, Orange Juice, 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 0.17% higher; to see this Index registered at 418.60.   The day starts with the U.S. dollar steady in early trade and trading at 1.271 to Sterling and 1.120 to the Euro, while North Sea Oil is tending softer in early trade and trading at 49.30 per barrel. 

The London market started the day yesterday on a relatively steady note, while the New York market started the day with modest buoyancy to see both markets continue to take a positive track into the early afternoon trade and with the New York market adding more value, while the London market started to take on value in a more modest manner.   The New York market did however hit something of a ceiling as the afternoon progressed and to attract selling pressure to shed much of its gains through to the close, while the London market took a sideways track and holding on to its mid-afternoon gains.   The London market ended the day on a positive note and with 94.7% of the earlier gains of the day intact, while the New York market ended the day on a hesitantly positive note and with only 20.3% of the earlier gains of the day intact.   This somewhat mixed close and with the New York market having faltered late in the day is unlikely to inspire overall confidence, which might encourage a softer start for early trade today against the prices set yesterday, as follows: 

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

NOV     1994 + 36                                               DEC   148.20 + 0.75

JAN      2020 + 34                                              MAR   151.55 + 0.75

MAR     2027 + 31                                              MAY   153.50 + 0.75

MAY     2030 + 27                                               JUL   155.25 + 0.75

JUL      2037 + 27                                               SEP   156.85 + 0.80

SEP      2044 + 27                                              DEC   158.90 + 0.75

NOV     2052 + 27                                              MAR   160.60 + 0.75

JAN      2062 + 27                                              MAY   161.65 + 0.75

MAR     2069 + 27                                               JUL   162.65 + 0.75

MAY     2072 + 27                                               SEP   163.60 + 0.75