Coffee Prices today - dry weather threat to the next Vietnam coffee crop is once again coming : The weather conditions in Brazil continue to be mixed with excessive rains falling within the main arabica coffee regions of the country, while the main conilon robusta regions of the country within Espirito Santo remain within a situation of partial drought. It is however common with Espirito Santo for farmers to use supplementary irrigation to support their crops, but with reservoirs running dry, it is resulting in farmers struggling to counter the lack of rain for their close to maturity new crop and further confirming the forecasts for a modest new conilon robusta crop.
Meanwhile with the Brazil Real having firmed against the U.S. dollar it is contributing to internal market price resistance, which has resulted in lacklustre trade for forward coffee sales out of Brazil for the present. But one can speculate that with many if not most of the Brazilian farmers and coffee cooperatives already well covered with forward sales commitments for their new crop, that it is to be expected that selling aggression would be on the wane. This decline in the volume of new crop arabica coffee forward selling and the related price fixation hedge selling into the New York market, is however assisting for the market to show a degree of buoyancy.
The Uganda Coffee Development Authority are voicing confidence in their industry which has since it has since it became a free market industry been steadily growing in volume, with their latest forecasts for coffee exports for this year forecasted to increase by 15% to approximately 3.8 million bags. Thus maintaining Uganda’s prominence within Africa as the continents leading coffee exporter, despite the country being second in terms of production to Ethiopia, where the domestic coffee market absorbs a high percentage of the country’s coffee production.
The seasonal talk of dry weather threat to the next Vietnam coffee crop is once again coming to the fore, with forecasts that due to the El Nino phenomenon that the new rain season will be delayed and that with the dry winter season water resources declining, the restricted supplementary coffee farm irrigation might be negative for the prospects of the next Vietnam crop. It is however early days and with the country a month ahead for the next summer rain season; these reports are largely ignored for the present, as is evident from the lacklustre nature of the related London robusta coffee market.
One might speculate however that fundamentally and despite the prospects for a much larger new Brazil arabica coffee crop due to impact during the second half of this year, that the prospects for an El Nino inspired smaller new Mitaca crop in Colombia and lower coffee production in Indonesia this year shall in time start to impact upon market sentiment. In this respect to contribute in time to a degree of market buoyancy and with the prospects for the coffee markets to start to catch up with the value of physical sales price, to thus move into a modestly higher trading range during the second half of the year.
The May on May contracts arbitrage between the London and New York markets broadened yesterday, to register this at 54.62 usc/Lb., while this equates to a 46.35% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, with the good discount most likely due to remain in place for the foreseeable future, in line with steady robusta shipments out of Vietnam.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 7,560 bags yesterday; to register these stocks at 1,526,101 bags. There was meanwhile a smaller in volume 6,880 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 6,880 bags.
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