Weekly Market Report 5 to 9 August 2013

Coffee Prices, Futures and Currency close levels:

Futures Markets:

Arabica:  A 4.1% rise in open interest, spread trading and spec participation last week kept the market on its toes. Sentiments are bullish, looking at the lower 130s as the new resistance.  The sudden drop to 115.3 was short lived, and only another dip below 120 would draw the focus back down to that level.  Overall, prices recovered 4.65 cents (3.9%) partly due to the stronger Brazilian real bolstering commercial selling.

Robusta:  A decline in exchange stocks and the slowdown of Vietnamese shipments are thought to be the key factors in the rise of prices in London this week, where levels reached a two-week high. November robusta gained $41 (2.1%), settling at $1,949.  Stocks have fallen by at least 28% in the last 4 weeks due to Vietnam holding out for better prices and Sumatra’s unfavourable weather conditions.

Currency: Sterling made positive gains last week with GDP/USD rising to a high of $1.5558, up 2.5 cts from the start of the week, while GBP/EUR also rose 1 ct.  In the UK, there are signs of economic recovery, with trade deficit narrowing to £8.1 billion, the lowest since July 2012.  This can mainly be attributed to increasing export volumes.

Physical Markets:

Brazil: The much-anticipated farmers’ aid program was finally announced on Wednesday.  Farmers will be offered options contracts at BRL 346 ($150.55) per bag to the volume of 3 million bags.   Arabica prices in Brazil have fallen 18% this year.  One positive outcome of the low prices is the increased purchasing of arabica for domestic consumption.  Over the past decade, only robusta has been used by local roasters due to the comparatively high prices of arabica. 

Colombia: in between the mitaca (fly crop) and the main harvest, coffee output is low.  Currency is not in the buyers’ favour, with the peso below 1780 to the dollar.

Ethiopia: ECX washed coffee trading is on the decline, although the new crop for washed coffees from the areas of lower altitude will start in early September.   Export figures for Jul12/Jun13 were sizeable at 20,000 tonnes while current favourable weather conditions bode well for the new crop.

Papua New Guinea: Local elections have slowed down the coffee industry with limited arrivals this week.  Export business is currently only seen with the higher quality arabicas.

Kenya: Fly crop coffee is still on sale and well- bid and differentials are steady.  Asking levels for AB FAQ have upped considerably.

Peru: Little spot coffee is available suggesting that producers held onto their coffee while NY ‘C’ was below 120.  Ongoing demand in Europe and rising market levels should boost flow.