Coffee Market Report January 12 2017

The Brazil Exporters Association CECAFÉ have reported that Brazil exports of green coffee for the month of December were 180,000 bags or 6.14% lower than the same month in the previous year, at a total of 2.75 million bags.   This dip was however weighted by the dismal conilon robusta coffee crop last year, which saw the conilon robusta coffees exported during the month of December being 98,000 bags or 89.9% lower than the same month in the previous month, at a total of only 11,000 bags out of the total December 2016 green coffee exports. 

The same report indicated that the Brazil green coffee exports for 2016 were 3.29 million bags or 9.84% lower than the green coffee exports in 2015, at a total of 30.15 million bags.   This dip in green coffee exports for 2016 were though heavily weighted towards the 3.63 million bags decline in conilon robusta coffee exports for the year, which was related to the dismal 2016 conilon crop that struggles to even fulfil domestic market demand for these robusta coffees.

 Therefore, in terms of the Brazil arabica coffee exports that fulfil a dedicated consumer market demand for these unique in quality mostly natural arabica process arabica coffees and with the 2016 exports 340,000 bags higher than the previous year at 29.56 million bags, there are presently no concerns over short to medium term consumer market supply, for these coffees. 

There are however and albeit early day’s to be forecasting the new 2017 Brazil arabica coffee crop some concerns developing, with some of the local trade already talking in terms of another dismal conilon robusta coffee crop due this year and a biennially bearing 12% lower arabica coffee crop.  Contrary to this though, there are many who refer to the positive nature of the rains over the arabica coffee districts for the past three months and in this respect, question the possibly market manipulative in nature, forecasts for a significantly smaller new Brazil arabica coffee crop. 

The traditionally conservative International Coffee Organisation by nature of their commitment to work with the often conservative individual origin production figures, have forecasted that global coffee supply for the present October 2016 to September 2017 coffee year shall be 151.6 million bags.  This they say with their estimated global consumption for this coffee year of 155.1 million bags, result in a 3.5 million bags deficit supply.  These ICO figures do however differ from the many respected international coffee trade and industry forecasts, that foresee global coffee supply exceed 155 million bags for this coffee year and perhaps, a marginal surplus supply for the coffee year. 

But there is no doubt that the ICO figures and along with some concerns over the prospects for unquestionable deficit robusta coffee supply for the present coffee year with the added longer term concerns over the prospects for the new 2017 Brazil crop, shall assist to limit the downside potential for the coffee terminal markets.   While with the news yesterday that the leading North American coffee roasting company J. M. Smucker has announced that they shall increase by 6% the wholesale prices of their mainstream Folgers and Dunkin’ Donuts brands, it indicates respected industry belief in the potential for longer term coffee price buoyancy, which would assist to inspire some degree of positive market confidence. 

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 48.39 usc/Lb., while this equates to a 32.48% 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 7,921 bags yesterday; to register these stocks at 1,273,486 bags.  There was meanwhile a smaller in number 2,986 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 49,623 bags. 

The commodity markets were mixed in trade yesterday but with some assistance from the positive nature of the Oil and Coffee markets and a weaker U.S. dollar, the overall macro commodity index took a steady track for the day.  The Oil, Sugar, Coffee, Cotton, Orange Juice, Gold and Silver markets had a day of buoyancy, while the Natural Gas, Cocoa, Copper, Wheat, Corn and Soybean markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.04% lower; to see this Index registered at 427.89.   The day starts with the U.S. dollar steady and trading at 1.222 to Sterling and 1.061 to the Euro, while North Sea Oil is steady and is selling at $ 53.75 per barrel. 

The London and New York markets started the day yesterday with early buoyancy and maintained a positive track into the early afternoon trade, when both markets started to attract support and with buy stops being triggered, to accentuate their gains.   The New York market did however soon come under pressure to shed some of the gains and to take a more modest positive sideways track through to the close, while the London market with fundamental reality to the positive nature of the market took a relatively steady positive sideways track for the day.  The London market ended the day on a very positive note and with 83.6% of the earlier gains of the day intact, while the New York market ended the day on positive note and with 40.6% of the earlier gains of the day intact.  This close and with the charts painting a positive picture is likely to buoy confidence and one might expect to see a steady start due for early trade today against the prices set yesterday, as follows: 

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

JAN      2228 + 56 

MAR     2218 + 56                                               MAR   149.00 + 1.30

MAY     2222 + 54                                               MAY   151.40 + 1.35

JUL      2229 + 54                                               JUL     153.65 + 1.35

SEP      2234 + 54                                              SEP     155.85 + 1.40

NOV     2236 + 53                                               DEC    158.90 + 1.40

JAN      2236 + 48                                               MAR   161.80 + 1.45

MAR     2235 + 49                                               MAY   163.50 + 1.45

MAY     2237 + 49                                               JUL    165.05 + 1.40

JUL      2247 + 49                                               SEP    166.65 + 1.45