Coffee Market Report 11th January to 15th January 2016

COFFEE MARKET NEWS Week Ending: 15^th Jan 2016

Global 2015/16 coffee production forecasted to reach 143.4 million bags. Global 2015/16 coffee production is forecast to rise to 143.4 million 60-kg bags, up 1.4 percent from 2014/15, the International Coffee Organization (ICO) said in its first estimate for the crop year on Thursday. The ICO revised down its 2014/15 estimate to 141.4 million bags.

NYC:

Arabica futures remain low and are predicted to stay low. Recent rains in the main Arabica growing regions of Brazil have reinforced the downward trend in prices.

LIFFE:

While Robusta futures increased on Wednesday, they again closed the week lower than it started. Robusta coffee prices have been falling since late 2014 due to abundant supplies around the world and higher than expected exports of Arabica from Brazil, stoked by a weakening real currency.

Currency:

GBP/USD & GBP/EUR:

In the UK on Friday, the morning’s release of data covering the construction industry was very disappointing, with UK construction output for the month of November at -0.5% m/m and -1.1% y/y, representing the largest annual drop since 2013. The weak construction data weighed heavily on Sterling seeing it lose further ground against both the US $ and the €.

Origins:

Brazil:

Consumption of coffee in Brazil, the world’s 2^nd largest consumer, after the United States, is expected to edge up in the current November-October year to a record 21 million 60-kg bags, the local coffee industry association Abic said on Thursday. Abic reported consumption in the 2014/15 year that ended in October rose by 0.9 percent to 20.5 million bags from the previous year, despite the economic crisis that is hitting local consumers with high inflation and job losses.

On Thursday, up to a dozen containers carrying chemicals caught fire at a terminal at the  port of Santos, causing substantial delays on ships’ movements. A spokeswoman for Localfrio, which exports general cargo as well as chemicals used for refrigeration, said emergency measures were in place and the terminal had been evacuated.

Indonesia:

Large production increase targeted. Indonesia’s coffee bean production is targeted to increase 9 percent to 600,000 tonnes in 2016, up from 550,000 tonnes last year, the country’s coffee exporters association said, amid a growing market for the drink domestically and overseas. However, productivity is holding this origin back from producing more. Despite advances in agricultural technology, Indonesia’s coffee production is still significantly lower in terms of productivity compared to Brazil and Vietnam. Coffee farmers in Indonesia, the world’s third largest grower of Robusta, produce around 700 kilograms of coffee per hectare of plantation, while Brazilian coffee growers harvest 3 tonnes and Vietnamese farmers get 2.3 tonnes. This productivity gap needs to be properly addressed before Indonesia can really fulfil its potential.

Vietnam:

Vietnamese shipments of Robusta coffee are set to pick up in January, reversing last year’s stockpiling, with a softening dong boosting returns in local currency.

Vietnam has just completed the harvesting of a smaller crop but also has stocks left over from the previous season when farmers held back supplies, hoping for a price rise which never materialised.

In other news…

Starbucks bets on China: Starbucks said it expects China to eventually overtake the U.S. as the coffee chain’s largest market. Starbucks currently has 2,000 stores in China, making it the company’s second largest market after the U.S. They said they’re on track to open 500 stores in China this year. It expects to have a total of 3,400 stores in China by 2019. “Over time, it’s conceivable that China could become our largest market,” said Starbucks CEO Howard Schultz, in a statement.

Flat whites at Greggs? The baker, Greggs, is to add flat whites and mochas to its coffee range. Greggs said that breakfast was its fastest growing part of the day, with sales of coffee on the rise.

There are now 1,698 Greggs trading in the UK at the moment-we’re wondering what will be their next coffee play will be!