Arabica rallies from 7-yr low on technical buying; cocoa sinks

Reuters 07/11/13

NEW YORK/LONDON: Coffee futures jumped almost 4 percent in a turbulent session on Thursday on technical buying and bargain hunting after prices plunged to seven-year lows on concern about bumper crops in top producer Brazil.

Cocoa sank, nearly reversing Tuesday's gains, as an options expiration led to speculative selling, while sugar edged down. Relentless selling pushed arabica prices to $1.0095 per lb, their weakest since October 2006, and near the psychologically key $1 mark.

That sparked a flurry of technical buying that put the front month on track for its strongest one-day performance in two months.

"You're seeing a lot of bears take back, not because of any news but because they went for a buck and it got close. That was enough," said Jack Scoville, vice president for Price Futures Group in Chicago. December arabica coffee futures on ICE rallied almost 4 percent to $1.052 per lb and settled up 2.4 percent at $1.0395 per lb. December options will expire at the end of Friday's session.

Arabica has been falling for more than two years with large crops in Brazil and a rebound in Colombian production driving prices down from a peak of more than $3 per lb in May 2011 to a low on Thursday of barely more than $1.

It has not dropped below $1 since September 2006. Late Wednesday, data showed Colombia, the world's largest producer of washed arabica, will grow its biggest crop in seven years, increasing output by 43 percent.

An options expiration and a storm headed towards top grower Vietnam lent some support to robusta prices, which recovered from 3-1/2-year lows earlier in the session. Vietnamese farmers have harvested on average 20 percent of the new 2013/2014 coffee crop in the Central Highlands, traders said, indicating ample bean supply.

Liffe January robusta coffee settled up $6, or 0.4 percent, at $1,460 a tonne, after hitting a session low of $1,431.

COCOA FALLS

Cocoa plunged in its largest daily fall since Aug. 21 as investors continued to book profits, shrugging off the potential impact from a massive typhoon headed towards the Philippines, a major producer.

ICE March cocoa settled down $50, or 1.9 percent, at $2,693 a tonne, as the Ivory Coast harvest accelerates.

Traders eyed $2,630 as the next support level. "It's long liquidation and profit taking after Tuesday's rally," said Boyd Cruel, analyst at Vision Financial Markets in Chicago.

March cocoa on Liffe settled down 23 pounds, or 0.1 percent, at 1,712 pounds a tonne. ICE March raw sugar futures settled down 0.6 cent, or 0.3 percent, at 18.04 cents a lb, after hitting a six-week low of 17.93 earlier in the session.

Sugar has been in a steady decline since hitting a two-year high on Oct. 17 after a fire ravaged a major sugar terminal in top grower Brazil.

Concerns about nearby tightness have waned due to ready alternative supplies from India and Thailand.

India announced on Thursday it will carry forward stocks of 8.8 million tonnes into the new crop year.

US data showed speculators increased their net long position by 636 contracts to 156,584 in the week ended Oct. 29, which traders said was surprisingly high.

December white sugar on Liffe was off $4.9, or 1.03 percent, at $475.10 a tonne.

Bullish Reversal Day Forming On ICE Coffee Chart - Technical Analysis

Kira Brecht

  ICE December coffee futures hit a new contract low early  Thursday, but then

reversed higher. As long as the market closes higher, ideally in the upper

third of the daily range, a bullish key reversal day will be confirmed on the

daily chart.

  ICE December coffee recently traded up 220 points at $1.0370 a pound.

  The ICE coffee market has been in a long-term bear trend. Since mid October,

the pace of the selling has accelerated and a steep downtrend is seen on the

daily chart. From Oct. 15, ICE Dec coffee slid from $1.1765 to Thursday's new

contract low at $1.0095.

  Daily momentum indicators, such as the 9-day relative strength index,

stumbled to extremely oversold conditions, with an 8% reading hit on Nov. 6.

Any reading under 30% is considered oversold. The extreme oversold condition

leaves the market vulnerable to a snap-back corrective rally move at any time.

  While the technical trend across all timeframes remains solidly bearish,

Thursday's bullish reversal suggests the ICE Dec coffee market may have found a

short-term low and it is set up for a corrective rally move. Watch support at

$1.0095, the new contract low. That remains the key floor on the downside.

  On the upside, initial resistance lies at Thursday's high at $1.0520, ahead

of $1.0620 and then $1.0780, which are minor swing highs from the hourly chart.

  Shifting out to a longer-term timeframe, the ICE monthly continuation chart

shows an important low at $1.0170, the December 2008 low, which was an

important bottom on that chart. The Dec coffee contract slightly exceeded that

long-term support zone on Thursday's sell-off.

  Bottom line? The bears could take a pause here near term. The market is

extremely oversold and has touched a long-term support zone from the monthly

continuation chart. All trends remain bearish, but the bullish reversal

formation suggests a corrective move or at least a stabilization and sideways

consolidation trade could emerge short term.

Arabica Futures Bounce From More-Than-7-Year Low

NEW YORK  -  Arabica-coffee futures edged higher Thursday morning as some

traders took profits from bets that prices would continue to fall after the

market settled at a more-than-seven-year low last session.

  Arabica futures have been under pressure recently as growers in Central

America and Colombia bring in their harvests, following back-to-back bumper

harvests from No. 1 producer Brazil.

  Arabica coffee for December delivery on the ICE Futures U.S. exchange was

recently 0.6% higher at $1.0210 a pound, up from a fresh more-than-seven-year

intraday low of $1.0095 a pound.

  The International Coffee Organization, a London-based trade group, expects

global arabica-coffee supplies to outpace demand by four million bags in the

season that began Oct. 1. Those supplies should continue to pressure prices in

the near-term, traders and analysts said.

Coffee Futures Tumble to More Than Seven-Year Low; Sugar Slips

DJones - Leslie Josephs

  NEW YORK  -  Arabica-coffee prices slid to the lowest level in more than seven

years as growers in Central America and Colombia bring in their harvests amid

tepid demand from roasters.

  Arabica coffee for delivery in December fell 1.9% to $1.0150 a pound, the

lowest close for the most actively traded contract since Sept. 14, 2006, on the

ICE Futures U.S. exchange.

  Prices for arabica beans, which comprise the majority of world production,

have tumbled 29% this year as a second bumper crop from top grower Brazil hit

international markets. The latest drop is fueled as the harvests from Central

America and Colombia add to already ample supplies.

  The International Coffee Organization, a London-based trade group, expects

global arabica-coffee supplies to outpace demand by four million bags in the 12

months that began Oct. 1.

  The price drop for arabica has rattled growers, who say they are producing

the coffee at a loss. The ICO estimates the cost of producing one pound of

arabica coffee beans in Colombia and Central America is $1.10 to $1.15.

  "This year will be the second year in a row that we will have operational

losses," said Juan Pablo Echeverri, who farms 200 hectares of coffee in

Manizales, Colombia. "At these prices, the effects on the state of the coffee

plantation will be disastrous."

  Also driving prices lower are expectations of another big crop from Brazil

again next year. Flowering, an indication of the size and health of next

season's crop, has begun. "The flowering in Brazil was very good," said

Christian Wolthers, president of Wolthers America, a Florida-based importer of

central American and Brazilian coffee.

  But despite the price drop, roasters aren't rushing to buy beans.

  "The incentive isn't there to buy out too much," said Tom Isaia, president of

Coffee Express Co., a roaster based in Plymouth Township, Mich. "There's risk

involved."

  If prices fall further, roasters could be stuck with more expensive stock,

Mr. Isaia said.

  "If we knew that in September of 2014 coffee would be 40 cents more a pound,

you'd see everybody stumbling all over each other to buy some," he said.

  In other markets, raw sugar for March delivery fell 0.9% to 18.10 cents a

pound, the lowest settlement since Sept. 27.

  "The main pressure seems to have been the weakening real," said Michael

Liddiard, senior vice president at New York-based Agrilion Commodity Advisers

LLC. The Brazilian currency hit an eight-week low against the U.S. dollar in

intraday trade Wednesday.

  The weaker currency in Brazil, the No. 1 sugar and coffee grower, encourages

exports of the commodities because producers receive more reais back for their

crops sold abroad in U.S. dollars.

  Orange juice for January delivery ended up 1.2% at $1.2475 a pound, the

highest settlement since Oct. 14. Cocoa for delivery in December closed 0.2%

lower at $2,730 a ton, while cotton for December delivery settled 1.5% higher

at 77.07 cents a pound.

Robusta Coffee Futures Fall on Harvest Pressure; Cocoa Steady

Neena Rai

  Robusta coffee futures dropped in early European trading Wednesday as harvest

pressure from top grower Vietnam limited gains, while cocoa futures

consolidated after rising sharply in the previous session.

  At 1100 GMT, January robusta coffee futures fell 0.6% to $1,467 a metric ton.

Last week, the market hit its lowest level of $1,453/ton--the lowest since June

10, 2010.

  Tuesday's "weak pricing action negates any bottoming ideas seen Friday. This

market look set to make new leg lower," Sterling Smith, futures specialist at

Citi, said.

  Prices have come under pressure recently as harvesting of robusta beans gets

fully underway in the world's top producer, which some analysts say will ease

concerns about supply shortages. Along with weakness in New York's arabica

coffee market, dealers say near-term prices could trend even lower from current

levels.

  Elsewhere, March Liffe cocoa futures slipped 0.1% to GBP1,736 a ton,

consolidating after gains in the previous session. Cocoa futures jumped to a

two-week high of GBP1,740 a ton Tuesday as traders fretted that wet weather in

Indonesia, the world's third-largest producer, would crimp global supplies.

  "What people are starting to realise is that this is clearly a long-term

bullish market. The fundamentals support that too," a London-based cocoa trader

said.

  The global cocoa deficit is expected to rise to 69,000-70,000 metric tons in

the 2013-14 crop year from 52,000 tons in the previous season, Jean Marc Anga,

executive director of the International Cocoa Organization, said last month.

  European and U.S. chocolate consumption over the next five years will grow at

a maximum rate of 2% a year as more dark chocolate is consumed, which tends to

contain more cocoa than milk chocolate, Mr. Anga added.

  Sugar futures for December delivery were largely steady, slipping 0.1% to

$482.80 a ton.

Robusta coffee going the arabica way, prices fall below cost of production on good crop in Vietnam

PK Krishnakumar -  6 Nov, 2013, 05.28AM IST

KOCHI -  The coffee industry is facing tough times with robusta going the arabica way, the prices of which have fallen below the cost of production. Almost 70% of Indian coffee production is the robusta variety and the plunge in the prices has hit the grower.

Expectation of higher crop in Vietnam, the largest producer of robusta coffee, is pushing prices down in the global market. Various reports say that coffee output in Vietnam, where the harvest is about to begin, will be around 27 million bags (of 60 kg each). Last season, it was in the range of 23-24 million bags.

LIFFE robusta coffee futures for January delivery settled $6 lower at $1,483 a tonne on Monday. Robusta prices have fallen 16% since September. In India, the robusta cherry prices have gone down 15-20% to Rs 54 per kg compared with last year.

"The current situation is not economically viable for the farmers. The average annual earnings of a grower having a 5-acre farm have plummeted to Rs 50,000 from Rs 1.5 lakh earlier. We will have to wait and watch how it pans out,'' said Prashant Rajesh, secretary of Wayanad Coffee Growers Association.

Arabica prices have already hit rock bottom. The New York ICE arabica futures for December delivery reached $ 1.03 per pound, showing a 13% fall in three months. A good 'off year' crop in Brazil, the largest coffee producer, this year to the tune of over 50 million bags is said to be the major reason for this decline. Market reports suggest Brazil will have a good crop in 2014 as well, indicating a bearish price trend in the market in the coming months.

The exports are sluggish. "The growers are not interested in selling and the buyers are not aggressive though the prices have fallen drastically,'' said M P Devaiah, general manager of Allanasons, a major coffee exporter. Indian coffee export is only marginally down till the end of October. The exporters feel there may not be an increase during the year and it is likely to end up close to 3,10,612 tonne achieved in 2012-13.

Since there is an oversupply, the Indian coffee stock is likely to be sold at a discount before the harvest for the next crop begins next month.

According to market sources, the instant coffee makers could take advantage of the prices as they use robusta beans.

Meanwhile, India's next coffee crop is expected to fall below 3.47 lakh tonne projected by the Coffee Board because of heavy rains during the year

CONSUMO DO TIPO ARÁBICA AUMENTA À MEDIDA QUE O PREÇO CAI

 Os consumidores de café no Brasil, América, Leste Europeu e

Oriente Médio deverão colocar mais grãos arábica em seus cafés no próximo

ano, à medida que os baixos preços atraem mais demanda pelo produto de melhor

qualidade.

    Um excedente do maior produtor desse grão, o Brasil, após duas colheitas

abundantes sucessivas, ajudou a reduzir os preços para o menor valor em quatro

anos e meio nessa semana, o que deverá impulsionar os torrefadores a aumentar o

uso do grão em suas misturas.

    Porém, os consumidores que detectarem o sabor mais doce e suave em suas

xícaras provavelmente estarão mais sugestionados do que de fato perceberão a

diferença, já que os torrefadores farão mudanças nas misturas que não

poderão ser notadas pelos consumidores.

    Uma pesquisa com 10 comerciantes e torrefadores internacionais de café

mostrou que entre 3 e 4 milhões de sacas de 60 quilos de café - de um

mercado total de mais de 140 milhões - deverão ser trocadas de robusta para

arábica em 2013/14. Os grãos arábica são normalmente encontrados em marcas

de alta qualidade e tipicamente comercializados com um preço maior do que os

grãos robusta, mais resistentes e ricos em cafeína, que são amplamente usados

em bebidas espontâneas.

    Ultimamente, a diferença de preços e menor classificação entre alguns

dos grãos arábicas e dos robustas diminuiu, surgindo uma reversão na

tendência de 2011/12, quando os torrefadores aumentaram a proporção de

robusta em seus blends para cerca de 5 milhões de sacas globalmente, devido aos

preços historicamente altos dos arábicas.

    "Claramente isso está acontecendo, embora eu não ache que será uma

mudança tão grande como vimos na redução dos arábicas em 2011/12", disse

um analista europeu. "A maior mudança é no Brasil".

    O maior produtor de café do mundo também é um dos maiores consumidores,

usando mais de 20 milhões de sacas por ano. Até 1,5 milhão de sacas do

consumo de café doméstico robusta do Brasil deverão ser trocadas por arábica

em 2013/14.

    Os torrefadores de café, que tipicamente não revelam seus blends,

aumentaram a substituição de arábicas com robustas após os futuros do

arábica no ICE aumentarem para seu maior valor em 34 anos em maio de 2011 e o

prêmio sobre o robusta ter alcançado US$ 1,90/libra. O prêmio vem desde

então caindo para menos de 40 centavos e os negociantes disseram que esse

poderá cair ainda mais.

    Há um amplo espectro de qualidades dentro das variedades arábica e

robusta, de forma que os prêmios variam entre diferentes classificações, com

os comerciantes notando que o arábica do Brasil foi comercializado com

descontos em relação a alguns robustas no mês passado. "Haverá uma

substituição, mas a quantidade dependerá da qualidade dos arábicas de baixa

classificação", disse um trader de uma torrefadora internacional.

    Além do Brasil, os comerciantes e torrefadores disseram que América,

Leste Europeu e Oriente Médio também poderão ver alguma substituição, disse

o trader, notando que os mercados emergentes de café são menos sensíveis às

mudanças no sabor.

    "Em países emergentes, as pessoas vão mais pelos preços do que por

qualquer outra coisa; elas não são tão exigentes quanto à qualidade",

disse o chefe de uma comerciante internacional de café, acrescentando que o

mercado na Europa Ocidental não é tão flexível.

    A produção de café do Brasil aumenta e cai de um ano para o outro devido

a seu ciclo bianual, à medida que os cafezais de arábica precisam de tempo

para se recuperar após render grandes quantidades de cerejas. As variações

entre os anos "on" e "off" têm diminuído, entretanto, parcialmente

devido às melhoras no manejo, replantio de arvores, com variedades de maior

rendimento e maior uso de fertilizantes e irrigação.

    A Organização Internacional de Café (OIC) ainda não publicou suas

previsões para 2013/14. Estima-se que a produção global em 2012/13 foi de

145,2 milhões de sacas, das quais dois quintos são de robusta. A OIC disse que

o consumo mundial em 2012 cresceu em 2,2%, para 142 milhões de sacas. O

crescimento futuro deverá ser focado na Ásia, região onde a maioria do café

robusta é produzida, e onde o café é mais consumido na forma solúvel.

   "Eu não acho que (a substituição) significa que a demanda por robusta

está caindo. Eu acho que a demanda na Ásia está forte o suficiente para

compensar isso. A demanda por robusta e arábica crescerão nesse ano", disse

um trader.

Indonesian Coffee Premium Seen Declining on Record Vietnam Crop

Bloomberg - Isis Almeida on 10:59 am November 5, 2013

Buyers of coffee from Indonesia, the third-largest robusta grower, are paying a smaller premium for their beans as exporters sell on concern a record crop in Vietnam will lead to lower prices, according to Volcafe Ltd.

Indonesian beans for shipment in November and December were last week trading at a premium of $160 a metric ton to the price on the NYSE Liffe exchange in London, the Winterthur, Switzerland-based unit of commodities trader ED&F Man Holdings Ltd. said in a report e-mailed on Nov. 1.

That compares with $170 a week earlier, data from the trader showed.

“The drop in Indonesian premiums to below last week’s levels suggests wary exporters want to sell before London futures fall again due to a record crop in Vietnam,” according to Volcafe.

Vietnam, the world’s leading producer of the robusta variety used in instant drinks and espresso, will harvest a record 29 million bags of coffee in the 2013-14 season that started last month, estimates Kona Haque, an analyst at Macquarie Group Ltd.

Futures in London fell 22 percent this year as traders anticipated ample Vietnamese supplies.

A bag of coffee usually weighs 60 kilograms. Indonesia is selling its 2013-14 crop that started there in April. Bean deliveries from farms were about 500 tons to 1,000 tons last week, according to the report.

That’s down from 2,000 tons a week earlier, data from the trader showed.

Local prices were last week at 16,500 rupiah ($1.45) to 17,800 rupiah a kilogram (2.2 pounds) compared with 18,000 to 19,500 rupiah in the previous seven-day period, according to Volcafe.

‘Watchful’ eyes

In Vietnam, the new crop started one-to-two weeks earlier than usual, the trader said.

Farmers are rushing their harvesting, “with watchful eyes on Liffe,” the trader said. Local prices were at 30,200 dong ($1.43) a kilogram on Nov. 1, the lowest since 2010, according to data from the Daklak Trade & Tourism Center on Bloomberg.

The export market “moves slowly, most are short-covering for nearby shipments,” Volcafe wrote.

While differentials are “historically firm,” harvest peak pressure “may oil the wheels a bit in early December,” according to the trader.

Differentials refer to a discount obtained or a premium paid for physical coffee in relation to futures prices. Vietnamese beans for shipment in November and December were last week at a premium of $60 a ton to the futures, according to the report.

That compares with $50 a ton a week earlier.

Robusta Coffee Falls as Vietnam Harvest Begins

Dow Jones  -  Neena Rai

  Robusta coffee futures fell in early European trading Tuesday as harvesting

of coffee beans gets fully underway in top producer, Vietnam.

  Dealers also said weakness in New York's arabica market was limiting any

upside.

  At 1110 GMT, January robusta coffee futures fell 0.9% to $1,470 a metric ton.

Last week, the market hit its lowest level of $1,453/ton--the lowest since June

10, 2010.

   "The coffee markets gave the initial appearance of buoyancy, however, both

markets continued to succumb to speculative and origin selling," Toby Donovan,

broker at BGC, said. "...for now perhaps the bulls will have to wait in the

shade until their day in the sun comes," added Mr. Donovan.

   March cocoa futures, meanwhile, fell 0.1% at GBP1694 a ton, as harvesting of

cocoa beans in top grower Ivory Coast and a very large net long position

limited gains, said dealers.

   The market hit a two-year high of GBP1,774 a ton on Oct. 15 as

stronger-than-expected demand for cocoa beans and concerns of a supply deficit

supported the market.

   Sucden Financial brokerage said technically the market continues to track

sideways around the GBP1700 a ton mark, but short-term gains could break above

GBP 1700 a ton.

    December sugar futures nudged 0.6% higher to $488.60 a ton.