Coffee Market Report February 15 2017

The issue of threat of a repeat of the 45 day national truckers strike that impacted negatively upon Colombia’s coffee exports over June and July last year and with this having also disrupted exports into August last year, is rising its head once again.   Apparently following the arrest of a number of leading trucker’s union leaders for alleged fraud and public disorder that was related to these strikes, the unions are reporting that the government had failed to hold up to their promises, in terms of the agreement that assisted to conclude the strikes. 

Presently the Colombian Truckers Union are in negotiation with the Colombian government authorities to force the implementation of the promises they say have not been implemented, but apparently, there is a lot of pressure on the part of union members to once again go on strike.  But in the meantime, there have been voices of concern on the part of many of Colombia’s exporters, who are doing their best to inflate port warehouse stocks of coffee, so as to reduce the negative impact of a possible strike. 

The partial failure of the short rain season during the last quarter of last year for Uganda and Kenya is becoming even more of a concern, with some long-range weather forecasters now questioning the potential of the forthcoming March to May main rain season.   Already the Kenyan government has declared a National Emergency for 23 out of 47 of its counties, due to the drought conditions and with concerns rising within the country as a whole. 

The lack of rains and with Kenya being the world’s leading tea exporter is already having some impact upon the volumes of tea coming to the Mombasa tea auctions and the prices, while there are concerns already being voiced by coffee farmers in both Uganda and Kenya.   Thus, while there have not yet been any strong voices of concern for the prospects of East African coffee supply in the coming months ahead of the main rain season, it shall be a factor to be watched in the coming months.  

The May to May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 49.43 usc/Lb., while this equates to 33.87% 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 7,028 bags yesterday; to register these stocks at 1,310,039 bags.  There were meanwhile a smaller in number 5,772 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 41,417 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 1,333 bags or 0.49% during the week of trade leading up to Monday 13th. February, to register these stocks at 2,697,500 bags, on the day. 

Despite the negative effects of some degree of renewed muscle for the U.S. dollar yesterday, following speculation for a further interest rate hike for the dollar next month, the commodity markets on the back of the buoyancy for the influential oil markets, managed to support a modestly positive track for the overall macro commodity index.   The Oil, Sugar, Orange Juice and Silver markets had a day of buoyancy and the Cotton market was steady, while the Natural Gas, Cocoa, Coffee, Copper, Wheat, Corn, Soybean and Gold markets had a softer day’s trade.   The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.11% higher, to see this Index registered at 429.62.  The day starts with the U.S. Dollar near to steady and trading at 1.247 to Sterling and at 1.058 to the Euro, while North Sea Oil is steady and is selling at $ 54.30 per barrel. 

The London market started the day yesterday on a steady note, while the New York market started with some degree of modest buoyancy and with markets maintaining this stance of London trading around par and New York in modest positive territory into the afternoons trade.    As the afternoon progressed the New York market started to falter and with both markets heading back into negative territory and to see the markets taking a further slide south, but with both markets soon bouncing off the lows and taking only a modestly soft track into the close of the day’s trade.   The London market ended the day on a soft note and with 57.9% of the earlier losses of the day intact, while the New York market ended the day on a modestly softer note and having recovered 65.7% of earlier losses of the day by the close.   This close does little to assist with the charts and the technical picture of the markets but with many potentially bullish fundamental factors to the fore in terms of the next Brazil crop, East African dry conditions, Colombian strike etc., one might think that it could assist to keep many producers off the field of play and to set the markets for a steady start for early trade today against the prices set yesterday, as follows: 

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

MAR     2096 – 11                                              MAR   143.65 – 0.60

MAY     2128 – 11                                              MAY    145.95 – 0.60

JUL      2143 – 9                                                 JUL    148.25 – 0.60

SEP      2152 – 9                                                SEP    150.45 – 0.60

NOV     2157 – 9                                                 DEC   153.55 – 0.80

JAN      2162 – 9                                                MAR   156.50 – 0.75

MAR     2164 – 9                                                MAY   158.20 – 0.75

MAY     2163 – 9                                                JUL    159.75 – 0.75

JUL      2163 – 9                                                SEP    161.25 – 0.75

SEP      2172 – 9                                                DEC   163.45 – 0.75