Coffee Market Report Week Ending 28th Aug 2015

COFFEE MARKET NEWS Week Ending: 28^th Aug 2015

Like a bear in a ‘China’ shop

The collapse in the Chinese stock market this week sent shockwaves around the world, affecting commodities, stocks and currencies. Although many recovered towards the end of the week, its impact may be longer lasting than we would like!

NYC:

The NYC explored negative prints and was looking very vulnerable before steady buying helped to defy sentiment and bid the market back into positive territory, where it remained for the closing bell at 124.05.

LIFFE:

London worked to a familiar pattern with the sorting of September dominating the flow as the discount operates to carry and origin address outstanding positions ahead of the delivery period starting today.

Working exposure in September is just 1,937 lots, much smaller than the market expected.

Currency:

Solid growth figures on the US economy amid brief respite over concerns on the Chinese economy have helped support the dollar, growing stronger and stronger against GBP all week. Meanwhile, GBP/EUR traded in a tight range and was more stable.

Origins

Colombia: There are calls for Colombia to relax its export rules. These strict rules have been part of the reason that Colombia has garnered fame for its high quality washed Arabica. However, some producers are putting forward the proposition that these rules need to be relaxed in order to open up news markets. Carlos Ignacio Rojas, the head of the private coffee exporters association, thinks the lifting of the coffee export restrictions will allow producers to tap into more diverse markets and increase profits. Rojas asserts that this does not necessarily mean a deterioration in quality. In addition to the high quality washed Arabicas, natural coffees and premium Robustas can cater to a wider variety of tastes and increase exports.

Papua New Guinea (PNG): There are warnings that PNG could face its worst drought in 20 years ‘This drought has the potential to be worse than 1997 and 1998’ Prime Minister Peter O’Neill warned last week. An intensifying El Nino is raising fears that production of the country’s critical agricultural commodities may suffer badly. A state of emergency has already been declared in Enga and Southern highlands provinces-the highland provinces are key coffee producing regions. Although PNG only accounts for 1% of global coffee supplies (World Bank Estimate), coffee is one of the few commodities that it exports and damage to its coffee industry could be very detrimental to its economy.

Timor-Leste: The New Zealand government is investing 14.5 million NZ dollars (9.43 million U.S. dollars) to help develop Timor-Leste’s coffee and cocoa industry, Foreign Minister Murray McCully said on Wednesday. Coffee is Timor-Leste’s largest export after oil and gas but its low productivity and lack of investment hampers its development. Almost 20% of Timorese households rely solely on coffee for their income, but tree productivity is less than 20% of the global average. New Zealand’s investment is spread over 5 years and the project is expected to double the income of 19,000 participating farmers.

India: Total exports are up 1% year-on-year according the Coffee Board. India exports over 70% of its output and while Arabica exports slumped 33%, Robusta exports went up 22%. More investment is going into Robusta production and the improvements in its quality is increasing demand for it which is offsetting the slump in Arabica exports.