Coffee Market Report December 22 2016

The Vietnam Coffee and Cocoa Association have reported that while they await the final coffee export figures for the month of December, that they estimate that these shall contribute to the countries coffee exports of mostly robusta coffees shall be close to 30 million bags.   However, with these exports that are aside from a growing domestic coffee consumption that many now see to be close to 3 million bags per annum had been supported by good carryover stocks into the last year end 2015 crop, which have since been partially liquidated. 

Thus, with the prospects for a smaller new crop this year the Vietnam Coffee and Cocoa Association forecast that coffee exports in the coming year might be as low as below 22 million bags, but one might suggest that this is perhaps an overly conservative and somewhat market manipulative in nature forecast, as most of the presently being harvested new crop forecasts would indicate a potential for coffee exports of close to 26 million bags for the coming year.    This number while not so frightening under usual global supply conditions in terms of robusta coffees is though for the short to medium term at least a concern for the consumer markets, as there shall be nothing in the way of conilon robusta coffee supply to the consumer markets until at least May next year, while there is at the same time the prospects for tight robusta coffee supply from Indonesia for the same period. 

Vietnam aside there is really nothing in the way of news coming to the coffee markets at present, with the new crop harvests in Mexico, Central America and Colombia seemingly on track for increased fine washed arabica coffee supply, while global weather reports do not forward any threat to the main coffee producer blocs for the present.   Thus, there is little in the way of new fundamental news to provide for market direction for yearend trade, with the prospects for deficit robusta coffee supply for the coming year being countered by the prospects for surplus arabica coffee supply.    

The March to March contracts arbitrage between the London and New York markets broadened yesterday, to register this at 48.71 usc/Lb., while this equates to a 33.70% price discount for the London robusta coffee market.  This narrowing arbitrage is now becoming less of 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 3,635 bags yesterday; to register these stocks at 1,257,767 bags.  There was meanwhile a smaller in number 910 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 31,965 bags. 

The commodity markets had another mixed and relatively lacklustre trading day yesterday, with the pending holiday season tending to slow activity, but with the overall macro commodity index managing to take a modestly positive track for the day.  The Natural Gas, Cocoa, New York arabica Coffee, Cotton and Corn markets had a day of buoyancy and the Wheat and Soybean markets were relatively steady for the day, while the Oil, Sugar, London robusta Coffee, Copper, Orange Juice, Gold and Silver markets tended softer for the day.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.18% higher; to see this Index registered at 418.61.   The day starts with the U.S. dollar steady and trading at 1.235 to Sterling and 1.043 to the Euro, while North Sea Oil is near to steady and is selling at $ 53.40 per barrel. 

The markets started the day yesterday with the London and New York markets taking a near to steady stance, but coming under pressure in thin and lacklustre trade and taking a modestly softer track, into the afternoon trade.   The London market maintained its softer stance for the day, but as the afternoon progressed the New York market managed to bounce back from its lows of the day and to head back into positive territory for later in the day’s trade.   The London market ended the day on a soft note and with 66.7% of the earlier losses of the day intact, while the New York market ended the day on a modestly positive note and with 73.7% of the earlier gains of the day intact.   This close albeit that the London market with producer price fixation selling playing its part had a softer day, might with the ability of the New York market to shrug off the earlier negative pressure, assist to buoy confidence.   Thus one might expect to see something of a steady start for early trade today, against the prices set yesterday, as follows: 

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

JAN      2119 – 22

MAR     2113 – 10                                               MAR   144.55 + 0.70

MAY     2120 – 10                                               MAY   146.75 + 0.65

JUL      2124 – 10                                               JUL     149.05 + 0.70

SEP      2127 – 12                                              SEP     150.95 + 0.75

NOV     2129 – 14                                               DEC    153.85 + 0.70

JAN      2129 – 16                                               MAR   156.55 + 0.65

MAR     2132 – 18                                               MAY   158.20 + 0.65

MAY     2140 – 19                                               JUL    159.80 + 0.65

JUL      2154 – 20                                               SEP    161.45 + 0.65