02. 12. 2012

COFFEE MARKET NEWS 8th - 12th February 2010

Futures Markets:

Arabica : coffee futures recovered Monday on speculative short covering. Activity was dominated by short-term specs covering shorts after the market held recent lows. Good-sized spreads boosted the volume. By the end of the week the market was helped by a weakening US dollar. During the week, Arabica prices climbed 3.95 cents or 3 %. The move was mainly caused by speculators closing out their short positions hence raising prices but for how long?

Robusta : During the week, Robusta prices gained $2 per metric ton. In the physical market in Asia, the approaching Tet Holiday (Chinese New Year on 14th February) slowed activity. Prices were affected by devaluation of 3% of the Vietnamese Dong. The Vietnamese government would seem to have more work ahead which may include further devaluations and sharply higher interest rates. Economists forecast that the government will let the Dong devalue a further 5.9 % this year.

Currency : The Pound remains relatively weak against the dollar as fears over National Debt remain, The likely continuation of low interest rates makes the Pound unfavourable for fund managers. The spectre of a rise in VAT to 20% after the general election and its implications on retail strength also cast a shadow.

Monday

Tuesday

Wednesday

Thursday

Friday

NY May-10 c/lb

130.65 (+1.40)

132.25

133.80

132.90

134.30

Lon May-10 $/t

1330 (0)

1331

1325

1331

1329

£/$

1.5607

1.5703

1.5592

1.5691

1.5678

Physical Markets:

The upward trend in coffee prices recorded in December 2009 continued during the first fortnight of 2010, with the monthly average of the ICO composite indicator price in January rising to 126.85 US cents per lb compared to 124.96 US cents per lb in December 2009. The increase was particularly marked in the case of Colombian Milds, widening their differentials against 2nd position on the New York futures market. Supplies of Arabicas from South and Central America are facing both climatic and structural difficulties, particularly with the recurrence of coffee berry borer in Colombia. Prospects for a return of Colombian production to its normal level following a poor performance in 2008/09 are once more uncertain and the production in January was very low.

Brazil : Coffee producers in Brazil's main Robusta-growing state, Espirito Santo, said two months of hot, dry weather has scorched some of the developing crop and will slash production there by between 10 & 20%. Espirito Santo is the No. 2 coffee growing state in the world's top coffee producer, but produces mostly Robusta variety beans.

Colombia : Dry weather conditions are already taking a toll on Colombian coffee production with output ruined in some parts of Huila province, the country's 4th largest producer. Coffee production was ruined as the El Nino weather pattern sent temperatures soaring.

Mexico : coffee exports rose to 259,351 bags in January, up 12.5% against the previous year earlier, according to statistics released by the agriculture ministry and the national coffee organization.

Honduras : According to the Honduran Coffee Institute, (Ihcafe) coffee production from the 2009-10 harvest so far this season was up 25%, to 859,998 bags.

Costa Rica : the gourmet crop will be smaller than expected because of low rainfall.

El Salvador : Coffee exports from El Salvador went up 17% in January, according to preliminary monthly data released recently by the Salvadoran Coffee Council. Cumulative exports since the beginning of the 2009-10 crop cycle showed a 5% decrease. Harvesting operations started more than one month behind schedule. Due to continuing weather damage, El Salvador's coffee production in the 2009/10 coffee year is expected to fall 3.2% to 1,364,444 bags.

Kenya : Climate change has affected Kenyan coffee production through unpredictable rainfall patterns and excessive droughts, making crop management and disease control a nightmare. Intermittent rainfall in the 2007/08 crop year, for example, caused a terrible bout of the Coffee Berry Disease that cut Kenyan output 23% to 42,000 tonnes as farmers were caught out by rains and did not protect their crop in time.

Ethiopia : African coffee producers are expected to enjoy higher prices this year thanks to falling output in Colombia, the world's third biggest exporter, the chief executive of the Ethiopia Commodity Exchange (ECX) said. "The outlook for Arabica prices seems to be they will continue upwards because of the shortfall of production in Colombia. We think this is a very good opportunity for African fine coffees." (As quoted by Reuters.)

Rwanda : Rwanda sees its 2010 coffee crop rising 63% to 26,000 tonnes, boosted by the biennial harvest cycle and new trees starting to bear fruit. The fertile central African country also expects earnings from coffee to jump by between 58 and 71% to around $60-$65 million from $38 million in 2009, according to the Rwanda Coffee Development Authority.

Uganda : Uganda Coffee Development Authority officials have revised their export forecast for the October 2009 to September 2010 season down to 3.1 million bags from 3.4 million previously. They have now factored into the forecast the impact of drought which is reported to be severe in a number of coffee growing areas, and also prices which are relatively lower and discourage production.

Indonesia, Thailand and Laos : Vietnam's devaluation will help make Vietnam's key exports- including coffee-cheaper than those of many other Asian countries, potentially hitting exports from other countries such as Indonesia, Thailand and Laos.

Vietnam : Vietnamese coffee exporters have done little loading in the run-up to the week long holiday as low prices discouraged farmers from selling and exporters were short of funds after banks tightened lending,. Trade in Vietnam has been unusually slow before markets close to mark Tet, the Lunar New Year festival, between Feb. 13 and 18. Farmers normally sell beans for cash in the run-up to Tet. Trading will resume on Feb. 22.

Consuming nations : Russian consumption of coffee this year will remain around the 2009 level, but consumption of tea may rise by 2-3% as the economy recovers from recession. According to local commentators the coffee market is stagnating although it shows an increase in money terms.

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