Weekly Market Report 19th to 23rd August 2013

Coffee Prices, Futures and Currency close levels:

Futures Markets:

Arabica:  Another quiet week for New York with trading stuck beneath 118 and 109 looking like the new target once again.  The short spread (Sep/Dec) widened at ICE and coffee lost USD 6.88 per bag, making new lows.

Robusta:  London is languishing: Friday saw Liffe fall to the 1721 low last felt in June.  Robusta stocks in London were down 502 lots last week, bringing the total position to 7,875, the lowest since the market was converted to a 10 tonne contract in 2009.

Currency:  A 26-month high for the composite PMI (Purchasing Managers Index) in the Eurozone has lifted the spirits of those who perceive it to herald the recovery of the region.  Meanwhile China is ever-strong, hitting a 4-month high fuelled by domestic demand.  The US dollar continues to make gains against sterling and the Euro in anticipation of a slow withdrawal of the QE stimulus programme later in the year.

Physical Markets:

Peru:  Total coffee exports will amount to as little as USD 650 million this year due to coffee leaf rust.  The disease, which has caused widespread devastation across Central America has been less documented in its southern neighbour.  In 2012 total coffee exports totalled USD 1.02 billion, accounting to 25% or total agricultural exports.  Government investments aimed at increasing the production and export volume will continue into 2015.

Dominica: This little-known coffee origin has grand plans to increase its coffee production with the construction of a new processing plant supported by the Venezuelan Coffee Corporation. With the support of the nation’s Prime Mininster Rossevelt Skerrit, 25 acres of coffee have already been established, with a further 10,000 seedlings being cultivated for distribution.  The  plant itself will be able to process up to 2,000 tonnes a year.

India: Despite a series of emergency measures, the Rupee hit the 65 mark on Friday and the currency continues to fall against the dollar.  The steady decline has been attributed to the widening current account deficit, high inflation and the swift withdrawal of foreign capital.  Currently 10% of arabica and 20% of robusta remains unsold as farmers are unwilling to sell at lower prices.

Ethiopia:  Annual figures released by the Ministry of Agriculture report 53,595 MT exported to the country’s number 1 fan, Germany, followed by Saudi Arabia, with a total purchase of 27,499 MT.  Much of this coffee has been sold but not exported, as middlemen are stuck somewhere between a rock and a hard place having bought high and not wanting to sell low.