Coffee Market Report January 25 2017

The new arabica coffee crop harvest in India is peaking, but reports from India indicate that there is strong price resistance being shown by many farmers, which is slowing the delivery of new crop coffees to the countries exporters for present.   This is related to the view being taken by many farmers that there is reason to believe in medium term international coffee market buoyancy, which will assist to add value to their new crop coffees. 

Meanwhile the new robusta coffee crop harvest in India is only just starting and one can anticipate that following the completion of what is generally regarded to have been a smaller new Vietnam crop and with carryover stocks into this crop more modest that the year before, that the Indian robusta coffee farmers shall likewise show some degree of price resistance.  To contribute to a slow start to the overall Indian new crop coffee export season. 

With the new crop harvest in progress and while so far there have been no scare stories emanating from Honduras and Guatemala who dominate production from the fine washed arabica coffee producer group of Mexico and Central America and with both countries anticipating larger new crops, there are continued reports from the smaller producers Nicaragua and Costa Rica of the weather related damage to the potential of the earlier to be harvested new crop coffees from the lower grown regions of these countries.    This related to the unseasonal rains late last year, which resulted in some degree of ripe cherry drop.  

There are however no official quantifiable numbers on this potential damage being forwarded and while some reports indicate that this problem might contribute to as much as a 10% dip in the overall potential of these relatively small regional crops, there has so far not been much of a market reaction.   The lack of excitement in terms of the export trade of the new crop coffees from Central America early this year, being more related to the combination of internal market price resistance within some of the countries as against a complacent and lacklustre demand from the consumer markets.  The consumer market roasters able to take advantage of steady deliveries of readily available Colombian fine washed arabica coffees, to fulfil the greater portion of their short-term requirements for fine washed arabica coffees. 

The March to March contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 52.02 usc/Lb., while this equates to a 34.14% price discount for the London robusta coffee market.  This relatively narrow 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 2,105 bags yesterday; to register these stocks at 1,298,678 bags.  There was meanwhile a larger in number 16,599 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 45,356 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to increase by 48,833 bags or 2.01% during the week of trade leading up to Monday 23rd. January, to see these stocks registered at 2,478,833 bags on the day. 

The commodity markets were mixed in trade yesterday, with the energy sector of the markets posting a positive day and assisting to buoy the fortunes of the overall macro commodity index.   The Oil, Natural Gas, Cocoa, Copper and Orange Juice markets had a day of buoyancy, while the Sugar, Coffee, Cotton, Wheat, Corn, 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 0.23% higher, to see this Index registered at 432.69.   The day starts with the U.S. dollar showing some degree of buoyancy and trading at 1.251 to Sterling and 1.073 to the Euro, while North Sea Oil is steady and is selling at $ 54.25 per barrel. 

The London and New York markets started the day yesterday on a steady note, but while the New York market recovered back to par for the early afternoon trade, the London market remained under pressure to continue sideways within negative territory.   As the afternoon progressed the New York market started to add value, while the London market remained within negative territory but with profit taking selling starting to impact for the vibrant New York market it started to head south and with sell stops coming into play, to accentuate the losses and with the London market heading further south.   The New York continued on a downside track for late trade and likewise the London market, to see the markets end the day on an overall soft note.  The London market ended the day on a very soft note and with 90% of the earlier losses of the day intact, while the New York market ended the day on a soft note and with 84.7% of the earlier losses of the day intact.   This close and while it has not destroyed the positive nature of the charts is however likely to contribute to some degree of hesitant caution and perhaps a follow through softer start for early trade today against the prices set yesterday, as follows: 

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

JAN      2227 – 34   

MAR     2212 – 36                                               MAR   152.25 – 3.05

MAY     2222 – 31                                               MAY   154.80 – 3.00

JUL      2229 – 31                                                JUL    157.10 – 3.00

SEP      2232 – 32                                               SEP    159.35 – 2.95

NOV     2232 – 32                                                DEC   162.40 – 2.85

JAN      2230 – 34                                               MAR   165.30 – 2.80

MAR     2229 – 31                                               MAY   166.90 – 2.75

MAY     2231 – 31                                               JUL    168.40 – 2.80

JUL      2241 – 31                                               SEP    169.95 – 2.70