22nd. January, 2013

The latest Commitment of Traders report from the London robusta coffee market has seen the Non Commercial Speculative sector of this market increase its net long position within this market by 264,167 bags or 20.79% in the week of trade leading up to Tuesday 15th. January, to register a net long of 9,208 Lots or 1,534,667 bags, on the day. This rising net long within the London market which is no doubt benefiting from the general fund move into increasing exposure within the commodity markets, is also influenced by the perspective for tighter robusta coffee supply later in the year.

The Coffee Board in Tanzania have reported that the countries June 2012 to May 2013 coffee year’s crop which they had forecasted to total 916,667 bags, has already surpassed this forecasted improved crop level. In this respect they are now predicting that this present crop has the potential to close off at a respectable level of 1,016,667 bags, which in terms of much improved volume following their previous year’s dismal crop, to counter in terms of income some of the negative effects of the significantly lower prices for this present crop.

This confirmation of a crop in excess of 1 million bags also assists the country to set its place as the African continents fourth largest producer, but well behind and in order of size of crop Ethiopia, Uganda and the Ivory Coast. The country meanwhile has a host of state and private industry programs in play, to encourage both improved farm husbandry on the part of their large small scale farming community and to introduce new farmers and districts to the industry, but they are unlikely to raise production above the Ivory Coast for the foreseeable future and look to retain their forth position within African production, for some time to come.

The National Federation of Colombia Coffee Growers who have been sponsoring a farm rejuvenation program for their approximately 563,000 farmers over the past decade, are confident that by 2016 the country shall see 90% of the country’s 930,000 hectares of coffee farms sporting new coffee trees. This program is mostly related to providing support for farmers to replace aged low yielding coffee trees with new disease resistant and high yielding trees, they foresee shall see this leading fine washed arabica coffee country target annual crops that shall well exceed 16 million bags per annum.

Meanwhile following the past three years of dismal weather affected crops that have suffered from the negative influences of an El Nino and followed by a La Nina in the Pacific Ocean that had seen coffee production dip below 8 million bags per annum, the federation is talking in terms of an excess of 10 million bags of production for the present October 2012 to September 2013 coffee year. This production with many earlier rejuvenated coffee farms already seeing their trees coming to full yield maturity and with unforeseen weather issues aside, is likely to steadily increase in the coming years and in terms of the areas under coffee and with even an average yield of 1,000 Kgs. per hectare indicating a crop of 15.5 million bags, the 16 million bags target would seem to be very much a realistic target.

Trade in arabica coffees was stalled yesterday, with the New York market closed for the Martin Luther Day holiday, but there was nevertheless steady trade for robusta coffees, which is being further inspired by the now relative short window of opportunity to take on new crop supply from Vietnam, ahead of the seven to ten day break in Vietnam for the Tet New Year holiday. This holiday that effectively shall start on the 8 th. February now only allows for twelve full trading days of trade, prior to the holiday and one might expect to see some degree of vibrancy for robusta coffee trade in the interim. Followed perhaps by some degree of buoyancy for the London robusta coffee market during mid-February, as lacking active producer price fixation hedge selling over this market during the Tet holidays, it shall benefit from good underlying buying support.

The Certified washed arabica coffee stocks held against the New York market decreased by 1,005 bags yesterday, to register these stocks at 2,605,581 bags. There was meanwhile a sharper 8,230 bags decrease in the number of bags pending grading for the exchange, which were registered at 51,575 bags.

The commodity markets were mostly closed yesterday, with the public holiday in the U.S.A. and likewise, there was not much in the way of striking economic news forthcoming. Albeit for the short term at least and with the exuberance that surrounds the start of the new presidential term for Barak Obama and the present evidence of prospects for reasonable growth this year for the U.S.A. economy, there is some degree of support for the markets. Therefore with the markets closed there was no change for the Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets which remained at its Friday close, which saw this Index registered at 566.74, for the day. The day starts with a steady U.S. Dollar trading at 1.586 to Sterling and 1.334 to the Euro, while Brent Crude is showing some early buoyancy and is selling at US$ 112.95 per barrel.

The New York market was closed but the London markets opened the day yesterday on a hesitantly softer note, which remained very much the track for the day’s trade. The day ended with the London market setting a modestly softer close, but having recovered 40% of its earlier losses of the day and thus setting little in the way of indication for early trade today, for the markets. There is however in terms of the news late on Friday of the significant reduction of the managed money funds and the non-commercial speculative short positions within the New York market, a possibility that this shall result in some negative speculative pressure coming to this market today and with this in mind, one might think to see a steady to softer start being due for the markets for early trade today against Friday’s close in New York and yesterdays close in London, as follows:

LONDON ROBUSTA US$/MT21/01 NEW YORK ARABICA USc/Lb.18/01

JAN 2020 – 6

MAR 1970 – 6 MAR 156.30 + 0.80

MAY 1985 – 3 MAY 159.10 + 0.80

JUL 1996 – 1 JUL 161.85 + 0.75

SEP 2005 unch SEP 164.45 + 0.75

NOV 2009 unch DEC 168.00 + 0.50

JAN 2015 unch MAR 171.45 + 0.35

MAR 2026 unch MAY 173.60 + 0.30

MAY 2000 unch JUL 175.80 + 0.50

JUL 2000 unch SEP 177.85 + 0.50