Lower Brazil coffee ideas 'may not be so bullish'

The lower coffee harvest estimates for Brazil, which have prompted a surprise revival in arabica futures prices, may not be quite so bullish after all, a leading analyst said, saying a production uptick may have only been delayed.

New York arabica coffee futures, which many analysts expected to drop below 100 cents a pound this year, have instead proved a surprise gainer, touching a four-month high of 122.60 cents a pound last week for March delivery.

While the contract has eased back since to standard at 117.20 cents a pound in morning deals on Wednesday, down 1.7% on the day, it remains some 6% higher in 2014 so far.

The improvement reflects sharply reduced expectations for Brazil's coffee harvest, the world's biggest, this year to levels well below the 60m bags or more that some forecasters have pencilled in.

Conab, the official Brazilian crop bureau, last week pegged output at 46.53m-50.15m bags, while Swiss-based coffee trader Volcafe has estimated the harvest at 51m bags, citing tree stress, and a programme of heavy tree pruning farmers have undertaken to boost future productivity while prices are low.

'Not running out of coffee'

However, respected soft commodities analyst Judith Ganes Chase - while acknowledging that investors may have underestimated the threats to Brazilian coffee output from frost and tree stress after "back-to-back bumper crops" – cautioned against overplaying the lower production estimates.

"Other crop view are not nearly as low, and still place the crop between 53m-55m bags," she said.

"It's not a bumper crop, but sufficient to cover market needs.

"The world is certainly not running out of coffee, and will remain well supplied."

'Creates a new worry'

Furthermore, the heavy tree pruning may be sowing the seeds for weaker prices ahead, in boosting yield potential for future crops.

"It will give the trees the chance to recover, and now creates a new worry," she said.

"In two years from now, Brazil could have the potential to see output expand as the pruned trees start to produce fruit again."

The comments raise concerns that growers, having taken something of a harvest holiday this year, may face low prices when their trees return to productive use.

A drop in coffee prices below the cost of production has been a major concern for coffee producing countries such as Brazil and Colombia, for which the crop is a major earner for rural economies.

ICE Coffee Bulls Carve Out Uptrend Pattern - Technical Analysis

Kira Brecht

  After two-and-a-half years of sustained bear market action, the bulls have finally carved out a

minor bottom on the ICE March daily coffee chart. The primary bear trend has been intact since May

2011, but November's bullish monthly reversal has opened the door to basing action.

ICE March coffee recently traded up 20 points at $1.1955 a pound.

   For now, it is too early to confirm a major bottom or end to the bear market, but the near-and

medium-term trends have turned bullish in recent weeks. Since bottoming out in early November, ICE

March coffee bulls have propelled the contract above the 20-, 40-, and 100-day moving averages,

which is a bullish signal to trend following traders.

   A minor uptrend pattern is seen on the daily chart off the early November low, with a series of

higher daily highs and higher daily lows.

   Earlier this week, however, ICE March coffee hit a ceiling of resistance near the Oct. 10 spike

high at $1.2105. The contract edged above that zone intraday, but hasn't been able to close above

that area for now. A minor consolidation phase has emerged on the daily chart, in the form of a

possible bull pennant pattern.

   However, in order for the bulls to confirm the bullish potential from the possible pennant

formation, a strong upside breakout would be needed above resistance at $1.2260. If that were

achieved it would project gains above the $1.3000 zone in the days ahead.

   ICE March coffee has made significant strides in recent weeks. After months of bearish dominance,

the bulls have been able to seize control of the short-term trend. The market is now at a critical

juncture. The $1.2100/1.2200 region represents strong congestive resistance from September and

October 2013 and that zone could be tough to crack at least initially.

   If the $1.2100/1.2200 resistance holds, look for short-term sideways consolidation and possible

modest downside correction as the coffee market digests its recent gains.

   Bottom line? ICE coffee bulls have turned the near and medium term trends bullish. The

longer-term trend remains bearish. The market has rallied substantially since the November low, but

has now run into a stiff resistance ceiling, which could trip up the bulls at least short-term. If

however, a strong upside breakout is seen over the next session or two, a potential bull flag

pattern would project significant gains higher.

Café tem retração na ICE, mas março continua próximo de referencial

  Os contratos futuros de café arábica negociados na ICE Futures US encerraram esta quinta-feira com oscilações apenas relativas, com o março conseguindo, dentro de uma feição consolidativa, se manter muito perto do nível psicológico de 120,00 centavos de dólar. Ao longo do dia, a primeira posição chegou a aferir alguns ganhos, entretanto, não conseguiu superar a máxima do pregão passado. Não obtendo êxito nessa tentativa básica, o que se verificou foi o acionamento de algumas ordens de venda, quer proporcionaram algumas retrações, ainda que se mantendo os intervalos atuais. Ao final do dia, os vendedores imprimiram um ritmo mais forte, no entanto, o março conseguiu se manter dentro do patamar de 119 cents.

A questão da produção do Brasil continua em pauta entre os participantes e agora parece haver um consenso maior de que o país deverá realmente ter uma produção menos intensa que a registrada nas duas últimas temporadas, ainda que 2014 seja considerado um ano de safra alta. Apesar do otimismo momentâneo causado pelas últimas previsões de safra do Brasil, organismos importantes e respeitados, como é o caso da Organização Internacional do Café, não demonstram tanto entusiasmo. Essa entidade revelou que a recuperação dos preços do grão não deverá ser algo imediato, ressaltando que a forte onda vendedora observada ao longo do ano passado deverá ter continuidade em 2014. Para a Organização, o Brasil deverá ter uma safra apenas 3% menor que a da temporada passada e, além disso, outras origens poderão continuar a ofertar forte. Diante do quadro, a entidade entende que, no curto prazo, a tendência baixista se mantém, mas uma mudança pode ser identificada no longo prazo, principalmente por conta da queda constante dos estoques certificados e da manutenção da alta da demanda pelo grão.

No encerramento do dia em Nova Iorque, a posição março teve queda de 155 pontos, com 118,75 centavos de dólar por libra peso, com a máxima em 121,50 centavos e a mínima de 118,30 centavos, com o maio registrando baixa de 150 pontos, com 121,50 centavos por libra, com a máxima em 123,55 centavos e a mínima em 120,70 centavos. Na Euronext/Liffe, em Londres, março teve alta de 15 dólares, com 1.727 dólares por tonelada, com o maio tendo valorização de 15 dólares, para o nível de 1.691 dólares por tonelada.

De acordo com analistas internacionais, o dia na bolsa norte-americana foi técnico e o que se viu foi um processo de feição consolidativa, com o março buscando se posicionar, ao longo da maior parte do pregão, próximo do nível de 120,00 centavos. O café, na segunda metade do dia, seguiu o pessimismo de outros mercados. Pessimismo moderado, diga-se de passagem. As bolsas de valores nos Estados Unidos recuaram modestamente e o dólar apresentou ligeira baixa em relação a uma cesta de moedas internacionais. Nas commodities, queda para ouro, petróleo e vários grãos, ao passo que nos softs, apenas café e cacau ficaram no lado negativo da escala.

"Tivemos um pregão aqui em Nova Iorque que pode ser qualificado de caráter consolidativo, já que parece que o março está confortável próximo dos 120,00 centavos. Mais uma vez, o tema oferta está na pauta dos operadores. Nesta quinta, o governo brasileiro lançou sua previsão de safra e os números estão próximos daqueles trabalhados pela Volcafé, o que significa que, efetivamente, o Brasil não deverá ter um ano de safra tão consistente quanto aquela que era apregoada até há bem pouco tempo", disse um trader.

A Conab (Companhia Nacional de Abastecimento) divulgou que neste ano a produção de café do Brasil deve ficar entre 46,53 a 50,15 milhões de sacas. É o que aponta o primeiro levantamento da safra 2014. O resultado pode representar entre 5,4% de redução até 2% de crescimento, se comparado aos 49,15 milhões da safra anterior, considerados arábica e conillon. Segundo a empresa, a produção de arábica deve variar entre 35,08 e 37,53 milhões de sacas, o que corresponde a 75,1% do volume de café produzido no país. Já a produção do conillon, contabilizada entre 11,5 e 12,6 milhões de sacas, representa 24,9% do total nacional.

As exportações brasileiras no mês de janeiro, até o dia 8, totalizaram 316.363 sacas de café, queda de 27% em relação às 433.622 sacas embarcadas no mesmo período do mês anterior, de acordo com informações do Cecafé (Conselho dos Exportadores de Café do Brasil).

Os estoques certificados de café na bolsa de Nova Iorque tiveram alta de 2.010 sacas, indo para 2.703.813 sacas. Tecnicamente, o março na ICE Futures US tem resistência 121,50, 122,00, 122,50, 122,60, 123,00, 123,50, 124,00, 124,50, 125,00, 125,50, 126,00, 126,50, 127,00, 127,50, 128,00, 128,50 e 129,00 centavos de dólar, com o suporte em 118,30, 118,00, 117,55-117,50, 117,00, 116,65, 116,50, 116,00, 115,70, 115,50, 115,10-115,00, 114,95, 114,50, 114,00, 113,50, 113,00 e 112,50 centavos.

Café na bolsa de Londres tem dia de alta e mantém intervalos

  Os contratos futuros de café arábica negociados na Euronext/Liffe encerraram esta quinta-feira com altas, em uma sessão que foi novamente caracterizada pela tranquilidade e por preços gravitando próximo ao nível psicológico de 1.700 dólares. Algumas rolagens entre maio e março também foram verificadas, ainda que em volumes relativamente baixos.

De acordo com analistas internacionais, a sessão desta quinta foi marcada, na primeira parte, pela predominância dos vendedores. O março chegou a tocar no nível de 1.693 dólares. Entretanto, assim como já verificado em outras sessões, as origens estão sendo consideravelmente reticentes em suas liquidações abaixo dos 1.700 dólares. Depois de tocar a mínima, o mercado viu uma retomada compradora e as altas se consolidaram.

"Ainda existe o temor de quanto será o volume a ser liquidado pelos vietnamitas até o início do ano novo lunar. Tradicionalmente, os produtores do país liquidam nessa fase em busca de terem caixa para o período de festa. Desse modo, a expectativa é que as cotações não tenham fôlego para avançar muito, já que teriam as vendas segurando as rédeas. Entretanto, parece que há alguma consistência para que o mercado se mantenha em níveis mais firmes, ao contrário da opinião de alguns players mais catastrofistas", disse um trader.

O março teve uma movimentação ao longo do dia de 8,19 mil contratos, contra 4,60 mil do maio. O spread entre as posições março e maio ficou em 36 dólares. No encerramento do dia, o março teve alta de 15 dólares, com 1.727 dólares por tonelada, com o maio tendo valorização de 15 dólares, para o nível de 1.691 dólares por tonelada.

OIC prevê que pressão de queda dos preços continuará

  Os preços do café não devem se recuperar rapidamente. A previsão foi feita nesta quinta-feira pela Organização Internacional do Café (OIC). Em relatório anual divulgado na capital britânica, a entidade cita que a pressão vendedora vista em 2013 deve continuar nos próximos meses e só no longo prazo a tendência pode mudar. 'No curto prazo, é provável que a pressão de baixa continue no mercado de café', diz o documento divulgado há pouco, ao citar que a produção não deve recuar expressivamente no ano. 'Olhando para 2013/2014, o Brasil prevê safra de 49,15 milhões de sacas, apenas 3,3% menor que a safra 2012/2013 e outros grandes países exportadores têm perspectivas mistas', diz o relatório da entidade. Apesar do prognóstico pessimista para o curto prazo, a entidade mantém discurso otimista para o futuro. 'Estoques certificados se aproximando dos mínimos históricos e o crescimento do consumo que continua em torno de 2,4% ao ano, no entanto, fazem com que a demanda pelo café continue a ser flutuante e deve fornecer potencial de crescimento de longo prazo', diz a OIC.

Brazil coffee output may fall, defying early hopes

Brazil's coffee output, which some have forecast at a record this year, may actually fall, breaking a long-term trend, officials said, giving weight to fears which have prompted a surprise rebound in prices of arabica beans.

Conab, the Brazilian crop bureau, in its first estimate for Brazil's 2014 harvest pegged it at 46.53m-50.15m bags.

The estimate, which followed an industry survey, raises the potential for a drop from last year's harvest, which it pegs at 49.15m bags, and is a far cry from figures of 60m bags common in the market earlier in the year as Brazil's plantations enjoyed apparently ideal growing conditions.

Indeed, 2014 is an "on" year in Brazil's cycle of alternate higher and lower output years, reflecting – albeit waning – dynamics in the harvest of arabica beans, which represent the bulk of the coffee crop, and of which the country is by far the largest producer.

Not since 1999-00 has coffee output in an "off" year beaten than in the previous "on" year.

'Global supply deficit'

However, the forecast follows mounting market talk that earlier production estimates may prove too optimistic, with Somar Meteorologia this week cutting its crop forecast by 3m bags to 51m bags, citing the strongest December rains in 90 years in Brazil's coffee belt.

Volcafe on Monday also estimated Brazil's coffee output at 51m bags, citing "disappointing fixation of flowers... due to high productive stress from two large crops in a row, despite textbook weather".

A harvest at this level would be insufficient to cover demand, with Volcafe saying that, on a global level, "our 2014-15 statistical balance becomes a deficit of around 5m bags, coming after two years of statistical surplus in 2012-13 and 2013-14".

Such concerns have driven up New York arabica coffee futures by more than 9% so far in 2014.

Care must be taken in comparing bean forecasts, with some commentators, such as the US Department of Agriculture, believing that Conab routinely underestimates Brazilian coffee production.

Volcafe pegs Brazil's coffee output in 2012-13 at 57.2m bags, 8.0m bags above the Conab figure.

'Adverse weather conditions'

Conab said that the threat of lower Brazilian coffee output this year reflected indeed the prospect of a lower arabica crop, which would at best reach 37.53m bags, down more than 700,000 bags year on year, with a potential fall of 3.2m bags.

The agency blamed the fall in part on a "lower planted area", reflecting the drop in prices to levels, in many cases, below the cost of production.

Overall coffee area, including that set aside for conilon (robusta) coffee, will fall 61,000 hectares to 1.96m hectares.

The agency also highlighted efforts to iron out the two-year cycle in arabica bearing fruit, and noted the impact of "adverse weather conditions, such as frost that hit the Paraná in 2013".

In the main growing state of Minas Gerais, Conab noted the "occurrence of continuous rainfall throughout the month of December", which had hampered farmers from, for example, fertilizing crops.

However, with rains also potentially boosting growth, it was too early yet to assume crop damage.

Robusta Coffee Falls Slightly in Europe -- Market Talk

Liffe's July contract is down 0.5% at $1,640/tonne. The International Coffee

Organization says in its December report that although prices in December rose slightly compared to

November, the ICO composite indicator is still at its second‐lowest level of the year, after

2013 recorded the lowest average annual price since 2009. Coffee prices fell consistently over 2013,

with decreases recorded in nine out of the last twelve months. "This price performance has been

driven by a surplus of production over consumption, as high prices in 2011 encouraged producers to

invest in and expand their output," says the ICO. "That trend has now been reversed, as prices fall

below the cost of production and deter further investment," it adds, noting however that demand

remains buoyant.

IBGE ESTIMA SAFRA DE CAFÉ 2014 EM 49,2 MILHÕES DE SACAS

O IBGE realizou em dezembro o prognóstico para a safra

nacional de café a ser colhida em 2014, que totaliza 2.950.210 toneladas (49,2

milhões de sacas) de café em grãos beneficiados, consideradas as duas

espécies em conjunto (arábica e canephora), acréscimo de 1,1% em relação à

safra de 2013.

    Para o café arábica, que representa cerca de 75,5% da safra brasileira de

café, o percentual de decréscimo de produção em relação a 2013 é de

1,9%. O Brasil deverá produzir 2.227.347 toneladas do grão, o que equivale a

37,1 milhões de sacas de 60 kg. Em 2013 que foi um ano de baixa, o país

produziu 2.270.874 toneladas (37,8 milhões de sacas). De 1992 até 2013, a

alternância de safras foi observada, sem interrupções (para a variável

quantidade produzida). Os anos pares foram de safra cheia, e os ímpares de

safra curta. Em 2014, o revés, se confirmado, se dará através da queda de

área total ocupada com café arábica (-4,4%) e da área destinada à colheita

de 1.525.498 ha (-3,2%), em decorrência da grande crise de preços

internacionais que se agravou a partir de novembro de 2012 e persistiu até o

final de 2013.

     Para o café canephora a estimativa inicial para 2014 é de que sejam

produzidas 722.863 toneladas (12,0 milhões de sacas), 11,6% maior que a

produção do país em 2013, em uma área a ser colhida de 464.321 hectares. A

área total ocupada com esta cultura é de 472.762 hectares (-17,5%).

O Espírito Santo, maior produtor nacional de canephora, deve concentrar, em

2014, 80,0% (578.205 toneladas ou 9,6 milhões de sacas) da produção nacional,

um aumento de 18,1% em relação a 2013.

9th. January, 2014.

The Chaparrastique volcano eruption in El Salvador has predictably done little damage to the new crop that is presently in harvest, but this crop due to damage caused by Roya or Leaf Rust is nevertheless now forecasted by the countries National Coffee Council to be 456,500 bags or 35.1% lower than the past crop.   This severe dip in production is apparently not as much related to Roya damaged trees, but to the more radical reaction to the problem on the part of the commercial farming sector of the country’s coffee industry that account for approximately 70% of the coffee farms, who have taken the route of either stumping their trees or replanting coffee fields with new trees, to more easily counter the diseased fields.  

This is however a rather dramatic dip in the new crop that has been forecasted by the National Coffee Council, as to date the majority of the private industry forecasts had been looking to an approximately 300,000 bags or 23% dip in the size of the new crop for El Salvador.  Only time shall tell, but in the meantime with production of fine washed arabica coffees surging in Colombia and with an approximate 6% increase forecasted for the New Crop in Honduras, this dip in production from El Salvador which is anyhow a relatively small regional producer, is not proving to be a concern for the consumer markets.

The first week of the month of January has proven to be relatively dry for the majority of the main coffee districts in Brazil, but with good ground water retention levels that have come with normal rainfall for the preceding three months, there are no concerns being voiced for the development of the new crop.  There are however conflicting reports from within the trade and industry in terms of this new crop as following the recent forecast from Volcafe that they have downgraded this crop from their initial 60 million bags forecast to 51 million bags, there are other private trade and industry forecasts still voicing a figure of close to 60 million bags.  Thus the very important to market sentiment Brazil crop factor remains a mystery, which shall only become clear by the third quarter of this year and is in the meantime a factor that shall undoubtedly bring forth volatility for the markets.

Meanwhile with the funds stepping in to buy into the New York market, this market has moved into a new trading range, but while the late in the previous year charts were pointing to a step up for this market, it is difficult to adjudge the appetite of the funds and it shall take a week or two to see if the new trading range can hold.    Especially so as there remain large volumes of new crop coffees from Mexico, Central America and Colombia and 2013 crop Brazil arabica stocks hanging over the market, which once the market steadies might start coming to the market and with the negative pressures of price fixation hedge selling.   But one might speculate that with price or premium differential price resistance on the part of the consumer roasters resulting in hand to mouth buying from many origins, that underlying roaster price fixation buying might well come to the fore to buoy the New York market against any negative correction and that the new trading range might well have a degree of substance.  Albeit that in reality and with unforeseen negative weather conditions for Brazil aside, that there is no sign of tight arabica coffee supply foreseen for this year. 

The Certified washed Arabica coffee stocks held against the New York market were seen reported to be unchanged yesterday, to register these stocks at 2,701,803 bags.   There was meanwhile a very modest 640 bags decrease to the number of bags pending grading for the exchange; to register these pending grading stocks at 9,263 bags.

The commodity markets encountered little in the way of striking news yesterday and focus was more related towards the influences of New Year repositioning of investment on the part of the longer term Index Funds, between selected markets.   There was however something of a negative influence coming forth with speculation that with upbeat economic figures coming forth from the U.S.A. that it might inspire a rate hike and some muscle for the dollar, which make market prices relatively more expensive in terms of the other currencies.   The New York arabica Coffee, Cocoa and Soybean markets nevertheless had a day of buoyancy, while the Oil, Natural Gas, Sugar, Cotton, Copper, Orange Juice, Wheat, Corn, Gold, Silver, Platinum and Palladium markets had a softer day’s trade.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.62% lower, to see the Index registered at 507.43.  The day starts with a steady U.S. dollar trading at 1.645 to Sterling and 1.358 to the Euro, while Brent Crude is showing a degree of buoyancy in early trade and is selling at $ 107.50 per barrel.

The New York market started the day with modest buoyancy and followed by a dip into negative territory for the London market.  The New York market and with producer selling pressure side-lined continued to attract fund buying support and roaster buy stops coming into play, to build upon its gains into the afternoons trade, while the London market remained under pressure and encountered erratic trade within a lower range for the afternoon.   The London market continued to end the day with a late in the day recovery to close only modestly lower and having recovered 87% of the earlier losses of the day, while the New York market conversely ended the day on a very positive note and with 85.9% of the gains of the day intact and with the arbitrage having broadened to 43.24 usc/Lb., which equates to an attractive to the industry 35.76% price discount for the London robusta coffee market.    This close and with the London market having recovered late in the day might be seen to be somewhat positive for the markets and one might expect to see a follow through steady stance being taken for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT           NEW YORK ARABICA USc/Lb.

                                                

 JAN      1725 – 3                                                             

 MAR      1712 – 3                MAR     120.90 + 3.65

MAY      1676 – 4                MAY     123.00 + 3.65

JUL      1648 – 18               JUL     125.20 + 3.75

SEP      1644 – 23               SEP     127.05 + 3.70

NOV      1642 – 28               DEC     129.65 + 3.60

JAN      1644 – 26               MAR     132.25 + 3.55

MAR      1646 – 29               MAY     133.75 + 3.50

 MAY      1651 – 29               JUL     135.20 + 3.40

JUL      1646 – 29               SEP     136.70 + 3.30

Brazil Coffee Output to Rise 15% to Record in 2014, Ecom Affirms

Bloomberg News (BN) Date: Jan 7 2014  15:54:17

Marvin G. Perez

     Jan. 7 (Bloomberg) -- Ecom Agroindustrial Corp., one of the

world’s biggest coffee traders, affirmed that output in Brazil,

the top grower, will rise at least 15 percent to a record this

year, topping a forecast by Volcafe Ltd.

     In the season that starts April 1, the harvest will be at

least 60 million bags amid favorable weather, Jorge Esteve

Jorge, the vice president at Empresa Interagricola, a unit of

Pully, Switzerland-based Ecom, said today in a telephone

interview. Last year, Ecom estimated output approaching 52

million bags, each weighing 60 kilograms or 132 pounds. This

season marks the higher-yielding half of a biennial cycle.

     “Things are still running very smoothly for the harvest,

with good rains and sunshine” for crop development, Esteve said

from Santos, Brazil. Areas that were hurt last year by dryness

during flowering, including Bahia and Rondonia states, are

improving, he said, affirming a November estimate.

     Yesterday, Volcafe, the coffee-trading unit of ED&F Man

Holdings Ltd., said output will be 51 million bags this year,

down 11 percent from its estimate of 57.2 million in 2013. The

reduction, mostly in the arabica variety, was attributed to tree

exhaustion and hard pruning by farmers, the Winterthur,

Switzerland-based company said.

     Brazil’s government estimated output last year at 49.2

million.

     Yesterday, arabica-coffee futures in New York posted the

the largest three-day rally in 15 months, partly on the Volcafe

report. Citigroup Inc. cut its output estimate as much as 10

percent to 52.6 million bags.

     Coffee futures tumbled 23 percent last year, the third

annual decline and the longest slide since 1993, as global

harvests are set to outstrip demand for the fourth straight

season, U.S. Department of Agriculture data show.

     Money managers and other large speculators have bet on

lower prices since July 2012, U.S. government data show.

     Ecom trades about 11 million bags of coffee a year, Esteve

said.