El Nino Strikes Again.
05 Oct 2015
The latest Commitment of Traders report from the New York arabica coffee market has seen the Non Commercial Speculative sector of this market decrease their net short sold position within the market by 12.86% during the week of trade leading up to Tuesday 29th. September; to register a net short sold position of 29,040 Lots. This net short sold position which is the equivalent of 8,232,711 bags has most likely been further decreased, following the period of mixed but overall more positive trade which has since followed.
While awaiting the final green coffee export figure from Honduras, the National Coffee Institute of Honduras have predicted that these exports shall contribute to the country’s exports for the October 2014 to September 2015 coffee year to being approximately 5.06 million bags, while they forecast that with the new crop now heading towards maturity that exports shall rise by 9% for this new October 2015 to September 2016 coffee year. In this respect the National Coffee Institute are forecasting exports for this new coffee year, to be approximately 5.52 million bags.
This rather positive forecast from Honduras and in terms of the new crop potential, is despite the recent evidence the negative dry weather effects of the prevailing El Nino phenomenon within the Pacific Ocean, which has brought with it drier weather for Central America. The drier conditions that have come with the El Nino having already had an impact upon crop in the lower altitude regions of Honduras and their neighbours in Central America, with evidence of lower production levels for many basic food crops.
In the meantime there are reports out of Indonesia of El Nino related drier weather conditions and with fears for partial drought for the last quarter of this year being voiced, with the Association of Coffee Exporters in Indonesia already talking about the possibility of a significantly lower new coffee crop for the coming year. In this respect on official from the association has voiced that should the dry weather continue, it could reduce the next year’s crop by as much as 35% and result in coffee production hitting a twenty six year low at around 7.5 million bags.
There have so far not been similar fears voiced by coffee officials in Colombia and Peru, who are most usually along with Indonesia very much in the front line of the negative effects of the El Nino phenomenon, but one might expect that with the El Nino now reality that there might soon be such reports coming to the fore. Thus there is the potential in the coming weeks for these weather related reports to start to impact upon speculative sentiment within the coffee markets, which might contribute to some degree of the presently relatively soft markets for the last quarter of this year.
The coffee districts in Vietnam are presently in receipt of rain conditions which shall need to come to a close for the start to the new harvest being triggered, so for the present there is no pressure upon the farmers and internal traders to start to make space to receive new crop coffees. Thus with the reference prices of the London robusta coffee market remaining relatively soft, the internal market price resistance for sales of past crop coffee stocks continues to inflate asking export price differentials and to slow the pace of Vietnam coffee sales and exports.
