Coffee Market Report January 19 2017

The Ethiopian Coffee Tea and Development Authority are reported to have forecasted coffee exports for this year to be close to 4 million bags, which is well in excess of the many earlier private trade and industry forecasts that had been forecasting a number of closer to 3.5 million bags.    Time will tell but the report does little to impact upon market sentiment, where the prospects for surplus arabica coffee supply for this year is an already accepted factor. 

This surplus is however being countered by the accepted fundamental of the medium term tightening of robusta coffee supply and with this potential deficit supply, likely to increase buying interest in the lower quality arabica coffees.   A factor that shall reduce to perhaps even almost eliminate any chance for an overall surplus global coffee supply, which does perhaps contribute to some degree of confidence within the coffee markets for the present. 

With only just over a week to go before the start of the Tet New Year celebrations to bring in the Year of the Rooster and with profits from early sales good, there has not been significantly aggressive selling of new crop robusta coffees within the internal market in Vietnam.   While with the sophisticated nature of market news services within Vietnam and the awareness of the farmers of the potential for strong demand for their robusta coffees in the coming months, one might expect to see rising internal market price resistance to come into play post the Tet holidays. 

Slowing sales out of Vietnam would further assist to buoy confidence within the London robusta coffee market, which has already been reacting in a positive manner to the building weather threat for the forthcoming new Brazil conilon robusta coffee crop.   A crop that many are already forecasting to be another deficit crop which would create increased domestic market demand for replacement lower quality arabica coffees or if the regulations are lifted, in Brazil import demand for what is already tightening supply robusta coffees. 

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 47.37 usc/Lb., while this equates to a 31.74% 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 decrease by 1,475 bags yesterday; to register these stocks at 1,291,063 bags.  There was meanwhile a larger in number 2,640 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 36,010 bags. 

The commodity markets were mixed but generally took something of a back step yesterday and with the Oil markets taking the major knock for the day and contributing to the overall macro commodity index, taking a softer track for the day.   The Sugar, London robusta Coffee, Cotton, Corn, Soybean and Silver markets had a day of buoyancy, while the Oil, Natural Gas, Cocoa, New York arabica Coffee, Copper, Orange Juice, Wheat and Gold markets had a softer day’s trade.    The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.64% lower, to see this Index registered at 430.88.   The day starts with the U.S. dollar showing a degree of buoyancy and trading at 1.228 to Sterling and 1.064 to the Euro, while North Sea Oil is steady and is selling at $ 52.95 per barrel. 

The London and New York markets started the day yesterday on modestly softer note and with both markets taking a softer track, into the early afternoon trade.   As the afternoon progressed the New York market came under further pressure to extend the losses, while the London market continued on a sideways track modestly south of par.   The New York market did however late in the day bounce back from the lows and make something of late recovery, while the London market took a late upside track and move back into modest positive territory.  The London market ended the day on a positive note and with 58.3% of the earlier gains of the day intact, while the New York market ended the day on a softer note, but having recovered 77.8% of the earlier losses of the day.    This mixed close is likely to contribute towards cautious hesitation within the markets but perhaps, with the ability of the still technically positive New York market to largely shrug off the bout of negative pressure in yesterday’s trade it might assist to inspire a steady start for early trade today, against the prices set yesterday, as follows: 

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

JAN      2260 + 6  

MAR     2245 + 7                                                 MAR   149.20 – 0.70

MAY     2247 + 7                                                 MAY   151.55 – 0.75

JUL      2251 + 9                                                 JUL    153.90 – 0.70

SEP      2253 + 9                                                SEP     156.10 – 0.70

NOV     2251 + 7                                                 DEC    159.15 – 0.70

JAN      2251 + 7                                                 MAR   162.05 – 0.65

MAR     2250 + 7                                                 MAY   163.70 – 0.65

MAY     2252 + 7                                                 JUL    165.25 – 0.65

JUL      2262 + 7                                                 SEP    166.75 – 0.70