Weekly Report 1 to 5 July 2013

Coffee Prices, Futures and Currency close levels:

Futures Markets:

Arabica: A quiet week this week based on a combination of usual summer sluggishness, a slow physicals market and Thursday’s closing of the market for the 4^th July celebrations.  Technical reports suggest Tuesday’s high does not indicate a break from the current downward trend.

Robusta: The current bearish sentiment across the markets finds an exception in London.  Despite the market’s constant vacillations between the 1791 support and 1826 resistance, traders are bullish.     

Currency: In the FX markets, the dollar index rose 1.4% this week, pushing through the 84.50 level for a three year high.  The gains can be attributed to the US employment report, informing us of job gains, earnings growth and rising house values.  Meanwhile GBP/USD hit a two-month low and UK recovery ‘remains weak’.

Physical Markets:

Brazil: According to Conab (the government’s crop forecasting agency), the country will break the record this year for highest production in the second year of a biannual cycle with total harvest estimates at 48.6 million bags.  Government measures such as the planned subsidy for coffee prices and a proposal for growers to purchase coffee options will be approved by the end of August as arabica prices continue to decline for the third year running.

Colombia: Production of coffee rose 28% in June compared to the same time last year as the first year’s yield from replanted areas came to fruition.   The 913,000 bags harvested were a five year high – compared to 714,000 in 2012. 

Central America: An  international summit will be held in Bogota in October to discuss how best to combat the outbreak of coffee leaf rust disease ‘roya’  which will affect future harvests if not treated successfully (currently affecting  El Salvador 74 % of crop; Guatemala, 70 %; Costa Rica, 64 %; Nicaragua, 37 %; Honduras, 25 %).

Honduras: Coffee exports were down 14% to 477,851 bags in June as the effect of the leaf rust disease affects the crop at the end of the season.  Honduras is Central America’s largest coffee producer.

Vietnam: Robustas are currently trading at the highest premiums since 2011. A government proposal to stockpile 200-300,000 bags of the 2013/14 crop is being considered to help maintain elevated prices.  The last time the government stockpiled in 2010, prices gained up to 25%.

Sumatra: An earthquake measuring 6.1 in the Aceh region on Tuesday has left 6,500 people displaced and 4,300 houses and buildings damaged.  Our thoughts are with all those we know in the region.

Angola: Reports issued on Saturday communicated that 3,150 tonnes were produced in the Kwanza Sul region during the 2012/13 harvest.  The vice governor of the region, Mateus Alves de Brito hopes that re-launching coffee culture on a large scale will contribute to the socioeconomic development of the country.