Posts Tagged ‘Colombia’

The terminal or commodity coffee market has been crazy these last months

Reaching near historical highs above $3/ Lb a few months back we now appear to be in a doldrums… ranging around 220 > 240 c / lb awaiting fresh fundamental € zone economic news, before funds and specs decide where and how to make their money next

The sad reality for us mere mortals, is that the bankers that wreaked havoc and left us on the edge of an abyss in late 2007,  have long since moved under ground…frigthened by uncertain returns in equities, they have instead focussed on the commodity markets… driving prices wildly higher…with the knock on effect that you and I pay more for basic items on the high street

So where are we now and what happens next?!

Well in a non fundamental market it is almost impossible to say…so the following comes with the usual health warning!

Key factors at this time / Pertinent to forward pricing;

1)     All accredited coffees remain in very short supply

2)     And demand remains high for these coffees – especially in Northern Europe

3)     Additionally- there is no significant benefit to the growers to adhere to the strict  guidelines and rules and regulations associated with accreditation – therefore restricting supply

4)     Growers have made good returns in the last 18 months

5)     Those that have accredited beans therefore do not need to sell urgently and hence differentials remain firm

6)     Unless there is a bumper crop in Brazil this year ( 60m bags+) which now looks uncertain, supply and demand problems could continue into late next year

7)      There have additionally been fundamental issues associated with La Niña

8)      Heavy rains in Central American have created significant havoc and damage – limiting the flow of beans to market / port. This has particulalry affected Peru / Honduras and kept C2 differentials stubbornly in the low  +20’s

9)      Similarly, heavy rains in Colombia have affected their crop, which is now forecast at c 8 m bags- below the original estimate and near recent  lows for historical Colombian harvests

10)   Meantime, continued € zone uncertainty means funds and specs continue to intervene in the market, with yesterday’s 10 cent trading range a clear indication of their continued activity and influence in the market place

The result of this is that;

1)     Monkey see prices continuing firm above the current base of 220 c / Lb for the time being  to the end of 2011 and possibly into Q1 2012

2)     Monster believes thereafter, as the Brazil crop forecasts become confirmed, that the market could ease

3)     Guru advises however, it may well be that the market has already ‘discounted’( or allowed for)  a large Brazil crop in current market prices and that therefore there my be little further easing!

4)     We see all differentials remaining firm – especially now C1 and C2 due to the harvest/ distribution problems listed above

5)     However, because Brazil differentials are ridiculously high, we now see many roasters switching out of Brazil into cheaper Central American coffees… !

This is a trade first, as Central American coffees are considered superior to Brazilian beans…the result of this will be to further firm C American prices until Brazils return to lower levels ( An RFA Brazil today could be as much as + 50 c / Lb vs a C. American coffee at + 20 c / Lb)

6)     ‘Notice day’ on the market will be in c 7  days time, at which point December comes off the trading board… therefore –  the prices for Q2 should automatically ease  by 2 > 3 cent / Lb

So the bankers that started the espresso craze in London’s posh coffee shops…are now the ones fuelling the price increases we all have to bear! Ironic…but at least you can drown your sorrows in a fabulous cup of aromo espresso…made from one of our superb ESE espresso pods…so go on treat yourself and then move to a croft on Harris….!