Coffee Market Report January 20 2017

The Colombian Coffee Federation in an interview yesterday, are forecasting a twenty-year high coffee production of 14.5 million bags for this year, based on the prevailing favourable weather conditions and improved farm husbandry and inputs.  They do make the point though that there is more to be done in terms of yields and they are encouraging farmers to follow the lead of Brazil and Vietnam, to move towards increased usage of fertilizers and to increase yields per hectare. 

The Federation are also upbeat over the recent peace agreement that has been concluded with the Marxist rebels in the country that has opened up more land suitable for coffee growing and intend to encourage farmers in many of these districts were the conditions are suitable for coffee, to start planting coffee.   This they say along with improved inputs within the traditional coffee districts of Colombia, might see the countries annual crop and weather conditions permitting, to increase to close to 20 million bags per annum over the next few years. 

Brazil weather reports confirm that most of the country’s main arabica coffee districts have been in receipt of good rains for this month so far, but it has remained hot and dry over the leading conilon robusta districts in the state of Espiritu Santo.   However, the forecasts to point to the possibility of rains coming to Espiritu Santo next week but following a month of hot and dry conditions and with the new crop conilon robusta coffee cherries maturing and despite many farms utilising supplementary irrigation, it is perhaps all too late to support a crop that would be much better than last year’s dismal conilon crop.  

With now only a week to go ahead of the close down in Vietnam for the week-long Tet New Year holidays that shall bring in the Year of the Rooster, the farmers in Vietnam with the support of the buoyant reference prices of London market, are reported to be in receipt of price levels for their robusta coffee that are the best since 2011.   This shall make for good celebrations over the Tet holidays but with good profits in hand from the present sales of their new crop coffees and with good volumes already sold to the internal trade and the exporters, some encouragement to continue to show some degree of price resistance for new sales.   

Thus, the news so far and perhaps with the exception of the conilon farming community in Brazil, it remains happy days for coffee farmers in Brazil, Vietnam and Colombia who presently contribute to between 60% to 65% of global coffee supply, depending on the year by year crop variances for the former two.  This year’s factor and following a smaller Vietnam crop and a marginally lower Brazil crop, to be closer to the 60% factor but still a dominant share, which with their contributions to all of the quality sectors of the consumer market requirements, keeps consumer buying well focused on these coffees that dominate the majority of consumer market blends.   

The March to March contracts arbitrage between the London and New York markets broadened yesterday, to register this at 48.19 usc/Lb., while this equates to a 31.97% 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 2,104 bags yesterday; to register these stocks at 1,288,959 bags.  There was meanwhile a larger in number 4,860 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 31,150 bags. 

The commodity markets were mixed but generally remained soft in nature in trade yesterday, to see the overall macro commodity index taking a softer trade for the day.  The Oil, Natural Gas, Coffee, Cotton and Corn markets had a day of buoyancy, while the Sugar, Cocoa, Copper, Orange Juice, Wheat, 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 0.43% lower, to see this Index registered at 429.03.   The day starts with the U.S. dollar tending a little softer and trading at 1.235 to Sterling and 1.068 to the Euro, while North Sea Oil is steady and is selling at $ 53.30 per barrel. 

The London and New York markets started the day yesterday with modest buoyancy, but while the London market maintained its positive track into the early afternoon trade, the New York market slipped back to bounce around either side of par on a near to steady sideways track.   There was however late in the day support coming to both markets and with the London market maintaining its gains, while the New York market took a positive track into the close.   The London market ended the day on a positive note and with 76.2% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 68.9% of the earlier gains of the day intact.   This close and with the markets tending to firm later in the day and contributing to a positive picture for the charts is likely to inspire a follow through steady start for early trade today against the prices set yesterday, as follows: 

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

JAN      2271 + 11  

MAR     2261 + 16                                               MAR   150.75 + 1.55

MAY     2261 + 14                                               MAY   153.15 + 1.60

JUL      2264 + 13                                               JUL    155.45 + 1.55

SEP      2266 + 13                                              SEP     157.65 + 1.55

NOV     2266 + 15                                               DEC    160.70 + 1.55

JAN      2263 + 12                                               MAR   163.55 + 1.50

MAR     2259 + 9                                                 MAY   165.15 + 1.45

MAY     2261 + 9                                                 JUL    166.70 + 1.45

JUL      2271 + 9                                                 SEP    168.20 + 1.45