ICE Coffee Futures Rally
Arabica coffee futures recovered Tuesday helped by the London market action. The most
active contract for March delivery settled 415 points higher at 110.25 cents a
pound. A strong move of the London Robusta market encouraged the
arbitrage related buying, after the Arabica premium traded at the narrowest
level of the last five years. The coffee market was also helped by other
commodity markets that advanced today supported by a weak US dollar. The
US dollar weakened as investors expect no change of the monetary policy in the
short term. The CRB index gained 175 points, posting highs not seen since
October 30. In related news, the real in Brazil was stronger as traders
anticipate the central bank will continue to intervene to support the
currency. Technically, the March chart shows support and resistance in
the near term at 105.50 and 112.00 respectively. A recent increment of
the open interest reflecting new short players could induce some short covering
today. The OI increased 3,496 lots since December 5.
London: A more controlled opening for Robusta today with the activity revolving
around structure. The market is continually referring to ongoing issues of low stocks and no grading.
Options will be a main focus over the coming days with the January positions
expiring next Wednesday 18th December. We are currently carrying almost 12,000
Calls live at the moment with the market moving above the biggest strike of
1800 during the morning which alone holds 5,589 lots open which provided
another push to momentum. The pattern of trading repeated a familiar sequence
with the board pausing before taking another leg higher encouraged by the
backwardation of the market. The quality of selling became more diluted as the
price action worked higher. Turnover maintained a good pace into the session
with the market constantly searching for the next target on the upside. The
January premium traded to a new high with the outright market finding its level
above 1800. Prices continued its impressive rally into the afternoon with only
a small reduction in the January exposure after the healthy upside move
yesterday encouraging the rally. The pattern of trading indicated that we were
experiencing a transition of shorts into longs driving the move as turnover
broke 30,000 lots and the price action positioned around the highs into the
close. Options added a lot of liquidity as strikes were rolled and traders
organized positions for the January expiry against the aggressive rally in
CoffeeNetwork (New York) – Coffee production in Colombia
exceeded 10.7 million bags over the past 12 months, largely as a result the
successful renewal program that seeks to increase productivity and plant health
of the coffee plantations, according to the Colombian Coffee Federation. This
rise in coffee production is in line with the increase in total exports. During
the last twelve months, exports grew 31% and stood at 9.5 million bags.
To date, 34% of Colombia's coffee exports were sold in
higher value segments, while 165,000 coffee growers are linked to some
sustainability certification such as 4C, UTZ, Rainforest Alliance, Fair Trade
(Flo) or CAFE Practices. About 70% of all coffee purchases the National Coffee
Fund (FONC) correspond to specialty coffees.
Production recorded between January and November grew 36%,
mostly due to the renovation program which has not only allowed to have younger
trees resistant to diseases like rust fungus and climate effects, but has also
been instrumental in raising productivity per hectare.
The average productivity of coffee plantations has
increased, going from 11.1 bags of green coffee per productive hectare in 2012,
to an expected 14.5 bags per hectare this year, an increase of 32%.
As a result, so far this year, the recorded harvest reached
9.8 million bags, up 43% from 6.8 million bags in the same period last year.
In November 2013, the recorded production reached 1,113,000 bags, up 45%
from 770,000 bags obtained in the eleventh month of 2012.
On the other hand, exports, like coffee production in
Colombia, also saw a significant increase between January and November. Exports
grew 36% and stood at 8.7 million bags compared to 6.4 million bags placed in
international markets between January and November 2012. Coffee exports
in November 2013 grew 44% totaling 1.1 million bags compared to 736,000 bags
exported in November 2012.
By Marvin G. Perez
Nov. 27 (Bloomberg) -- Colombia’s National Federation of
Coffee Growers comments in e-mailed statement.
* Sees 2013 output around 11m bags, from 7.75m bags last yr
* Yields rose 35% on average this yr, as a program to replace
aging trees with new disease-resistant-varieties lifted
* Since 2008, farmers increased the density per hectare by
8.3% to 5,026 trees/ha from 4,642
* NOTE: Colombia is the world’s biggest grower of arabica
beans after Brazil
* NOTE: A bag weighs 60 kgs, or 132 lbs
By Marvin G. Perez
Nov. 26 (Bloomberg) -- Output may drop 7.7% to 3.68m bags
next year from 3.986m bags in 2013, Lorenzo Castillo, the
manager of the National Coffee Board, said in a telephone
interview from Lima.
* Favorable rains aided flowering, prompting the group to
increase its forecast from a preliminary 3.07m bags
projected in September, which meant a drop of 13% YoY
* Output has declined from the record 5.52m bags in 2011,
partly because leaf rust, a fungal disease, damaged crops
* Export income seen ~$640m in 2013 vs $1.03b last yr, $1.6b
* ~40,000 hectares infested with leaf rust with most-severe
cases in Chanchamayo, San Martin and Amazonas regions, where
aging tree population exacerbates vulnerability to fungus
* Low prices prompt some growers to replace coffee trees with
pineapple and citrus crops, while coffee producers struggle
to secure financing, Castillo said yday
* Top buyers of Peru’s beans are Germany. U.S., Belgium,
Canada and South Korea
* NOTE: Arabica coffee has plunged 52% to $1.0855/lb since the
end of 2011 on ICE Futures U.S. in New York
* NOTE: Brazil is the top grower in South America, followed by
Colombia and Peru
* NOTE: A bag weighs 60 kgs, or 132 lbs
Good Morning!! Coffee prices are finding moderate early support this morning as the
market has successfully breached the 110.00 level and consolidated near the
middle of this week's range. The fundamentals of this market do not seem to support
a significant move higher unless there are some relevant developments with the
support programs from either Vietnam or Brazil. Open interest fell to the lowest
since October 17th, which tells us that the recent rallies have been mostly
helped by short covering. Positive fundamental news out of London Robusta
futures are also helping the move as they have been rallying since late last
week, and are now at the highest levels since October 25th. Coffee Exports from
Nicaragua in October were down 78.4% from last year, the nation is one of the
hardest hit in the region from the Roya Fungus outbreak. Momentum studies are
trending higher from the mid range levels which should support a move higher if
resistance levels are taken out, the next objective is around the 112.50 level
of initial resistance, with support near the 105.00 area.
13, 2013 4:41 pm
©Bloomberg Coffee drinkers have cause to celebrate the return of Colombia, the leading producer of high quality arabica beans, to the market, but for growers the timing is unfortunate. After a virulent strain of coffee fungus ravaged the country’s coffee farms five years ago, output has recovered after an extensive four-year restoration programme where 40 per cent of coffee trees were replanted. However, the Latin American country’s harvest, which is expected to rise almost a third this year to 10m 60kg bags, has come at a time when the world is awash with arabica – the higher quality bean used in espressos and cappuccinos – and prices are plummeting.
Having fallen to a third of its 34-year peak of $3.089 a pound in 2011, ICE March arabica is trading at $1.0655 a pound, having fallen to a five-year low of $1.0415 earlier this month. “$1 coffee. How low can it go?” asked Kona Haque, analyst at Macquarie in London, adding that she struggles to see any supporting factors for the price.
While the price fall is good news for coffee drinkers, it has been devastating for growers. The cost of production in many countries is now higher than the price, and many are relying on government subsidies to keep on farming.
Average production costs have risen for growers, with Central America and Colombia
seeing costs at about $1.40-$1.50 a pound – a level the market breached in
February this year. Last month, arabica coffee prices fell below $1.20 a pound,
the production costs for Brazil, the world’s largest and most efficient coffee
Although for many commodities, the cost of production tends to provide a price floor,
coffee growers tend to be slower in responding to weaker prices. Unlike annual
crops such as grains and oilseeds, where farmers can adjust the sowing of seeds
to cut production in the face of a supply glut, lower prices do not lead to
coffee farmers felling the perennial trees.
After two years of excess output, the market faces the prospect of another year of
the same. The arabica market was oversupplied by 800,000 bags in 2011-12 and
7.4m bags in 2012-13, according to Swiss coffee trader Volcafe. Brazil is
expected to have another bumper crop, while Colombia is likely to continue to
see strong output. Barring adverse weather hitting both countries, analysts
estimate a surplus of about 2m-3m bags in 2013-14.
The current low prices will eventually feed through to production numbers as
farmers refrain from investing and maintaining their trees, say coffee
“The natural reaction to low prices – decreased use of inputs, insufficient
husbandry, diversification and abandonment – will be intensified,” said Carlos
Brando, director of P&A International, the marketing and consulting arm of
Brazilian coffee machinery maker Pinhalense.
“A fundamental turnaround for the coffee market will be ahead of the Brazilian
2015-16 crop for which the flowering of the trees starts in October 2014,” said
One ray of hope for farmers is a move away among coffee roasters and blenders from
robusta, the lower quality bean, into arabica. After arabica coffee hit its
highs two years ago, many roasters started to use more robusta in their blends
or introduced cheaper coffee products using a higher proportion of the cheaper
This year’s sharp decline in arabica prices has seen some roasters switch back to
the higher quality bean, especially in Brazil, the second largest coffee
consumer, as well as other parts of the world, according to traders.
Anecdotally, some traders are noticing an increase in arabica imports in the
Mediterranean countries, while others say Japan and the US are also purchasing
more arabica beans.
However, the impact of bean switching is expected to take time to filter through. Until
then, farmers will need to weather the losses.
Luis Fernando Samper of the Colombian Coffee Growers Federation says the country’s
farmers have managed to cut some costs thanks to rising production yields after
the renovation programme. There is also a push to increase margins by producing
high end specialty coffee beans.
In the short term, the vast majority of the federation’s coffee growers are facing
a difficult situation. “The pain is particularly felt by many of the small
growers, who depend on the coffee income. We need the government to give us a
hand during this price cycle,” said Mr Samper.
ICE Coffee Futures Dip On Technical
Arabica futures struck lower today after three days of mostly
constructive performance. The most active contract for December delivery
settled 160 points lower at 115.65 cents a pound with a lowest price of 114.80,
15 points shy of where the contract opened this week. The short-lived short
covering raised the market above the 20-day moving average until a precipitous
fall of considerable volume brought prices back to the familiar range of the
lower Bollinger band. Fundamental news is sparse, with few developments at
origin to influence market movements. Both the Brazilian Real and Colombian
Peso saw slight devaluation today, though nothing sizable compared to recent
weeks. Today’s performance keeps coffee futures range-bound with an upper
resistance of 121.05 and support at 114.00 basis December.
Until we start to get some physical flow London continues to search
for something which may not be there. Opening selling which took London lower
was more associated with liquidation of short term longs than origin. A slight
build noted from 1710 in November could be linked to selected origins. Much of
the conversation revolved around the movement of the larger Index associated
long out of the November position ahead of month end on Monday. The
November slipped back into a small discount to make up a fair percentage of the
turnover in that position. Traders prepare for pressure as bids appeared at
larger discounts. Volume was better in weakness as the morning developed which
proved a point. Management of overnight longs appear to have generated the main
pressure into the session. With the open position down 255 lots in such poor
overall turnover yesterday once again we can only describe the lift as another
reaction in a Bear market. Arbitrage values narrowed fairly aggressively which
attracted a round of covering operations which in turn generated selling into
Robusta as the board elected stops below 1680 breaking the market lower.
Composition of the marker reflected a similar pattern over the last few weeks.
Prices work hard to generate an upside reaction which is based on short
covering and is quick to resume the downside path. The market will need to
generate something special to change the pattern for the
22 Aug 2013 11:42 EDT DJ Peru's Government Struggles To Calm Angry Coffee
Growers By Robert Kozak
LIMA, Peru--Peru's government is struggling to calm angry coffee growers who are demanding more aid to combat the roya disease, a plant-eating fungus that has affected crops in various Latin American nations.
Government officials have forecast that the roya disease will lead to a decline of at least 25% in Peru's coffee output this year.
On Wednesday thousands of coffee growers protested on the main central highway leading into the Andes mountains from Lima, blocking traffic until police launched tear gas and took other measures to open the highway.
President Ollanta Humala called on the coffee growers to abstain from acts of violence, and reiterated that the government is offering aid.
"Even if they are privately-owned crops, the state is helping. Acts of violence aren't going to resolve the problem, as the roya will continue to advance whether there are acts of violence or not," Mr. Humala told reporters.
The government has been blaming climate change for the spread of the roya.
On Thursday Agriculture Minister Milton Von Hesse said that there had been a problem of communications and that the government was channeling aid. The President of the National Federation of Coffee Growers, Isaac Porras, told RPP radio Thursday that the government's aid package of 100 million soles
($36 million) fell well short of what was needed, and came too late.
"The plants are already dead. This 100 million soles is a failure," he said.
Peru's National Coffee Chamber, representing some producers, said earlier this week that the roya has ruined some 55,000 hectares of coffee plants, representing an estimated loss totalling $330 million.
The government has declared a state of emergency in a number of coffee-growing regions, including Cusco, Junin and San Martin.
Earlier this year, the National Coffee Chamber said it expects Peru will produce 6.0 million quintals, or 46-kilo bags, of coffee this year. It originally projected output of 7.5 million quintals.
Peru is one of the world's top 10 producers of coffee.
Write to Robert Kozak at email@example.com
August 7, 2013, 11:24 a.m. ET
Brazil Launches Measures to Boost Coffee Prices
Government Will Buy Up Supply as Bumper Crop Is Expected
By JEFFREY LEWIS
SÃO PAULO—Brazilian President Dilma Rousseff said Wednesday that the government will launch two programs to buy as many six million bags of coffee to help prop up growers' incomes, the Agência Estado news agency
The government will offer growers options contracts to sell as many as three million 60-kilogram (132-pound) bags of coffee at 346 reais ($150.55) per bag, Estado cited the president as saying. The contracts will have a delivery date in March 2014.
Ms. Rousseff also said the government will buy as many as another three million bags at 307 reais per bag, though she didn't give any more details, according to the news agency.
An agriculture ministry spokeswoman couldn't immediately confirm the report.
Arabica prices have tumbled 18% this year on expectations for a record off-year coffee harvest. Brazil's two-year coffee production cycle is characterized by alternating years of higher and lower productivity—with 2013 being a down year. But dry, temperate weather in Brazil's main growing regions is expected to help
this year's harvest come close to last year's record.
Arabica-coffee futures rose Wednesday immediately after the report, with the contract for September delivery on the ICE Futures U.S. exchange up in late-morning trade 2.2% at $1.2075 a pound.
Brazil, the world's biggest coffee grower and exporter, has used option contracts in the past to augment growers' income.
Arabica coffee futures dropped Wednesday on commercial and speculative selling. The
most active contract for September delivery fell 170 points to close at 118.60 cents a pound. A weak real induced producers selling early on the session. However after the coffee market close, the Brazilian currency
recovered sharply following the FED statement stating an outlook for the US economy less positive. Coffee prices were also pressured as the technical picture deteriorated. The breaking of the key level of 120 for the
September contract attracted speculative participants that now anticipate further losses. During the month, Arabica prices declined 140 points. Concerns about the cold weather in Brazil propelled the prices
against the 132.50 resistance level, helping producers especially from Brazil to hedge futures sales. Exhaustion amid long players added weight to the liquidation that followed. In coffee related news, Mexico
2013-14 total output may drop as 10 %, according with Gabriela Barrera, from the AMECAFE.
Activity was better during the early stages as prices probed lower searching for more stops. Structure uncovered good support at level money absorbing the continued rolling from the Index associated longs which have been so well published in London this year. The question of spec net exposure continues to be debated but
it is unlikely to be above 5,000 short which as a result is considered not to be influential to price action. This still leaves some decent gross numbers to be sorted as the attention switches to September which takes over the spot position today.
Technical considerations have taken on a different configuration this week as prices have broken down but for the moment the action has not attracted fresh positions. Origin has been left behind with the recent move lower but still has good volumes that need to be sorted out over the next month.
Levels worked lower encouraged by the weakness in New York with the structure finding its level as hedge shorts came to the market and widened the premium. Underlying bids became a significant influence to the direction of the premium.
Good volume traded out into the settlement with towards 1,900 lots of Sept/ Nov coming together into the closing sequence as the premium held once again. The outright market ended towards unchanged on the day maintaining the negative slant which has developed the last few days.
Commentary by: Int'l FC Stone