Coffee prices have consolidated the sharp losses experienced in early May and have started to recover, encouraged by a soaring oil market and lingering dollar weakness. There has not been any market-moving fundamental news over the last two weeks as market players are awaiting the announcement by the Brazilian Agriculture Ministry of details of the recently declared 2008/09 Pepro subsidy program. The ICO composite indicator price ended 4.63 cents higher on May 15 than two weeks before, at 127.86 cents/lb. Colombian Mild Arabicas closed 5.20 cents stronger at 144.52 cents/lb, while Other Mild Arabicas increased from 138.07 cents/lb to 143.75. Brazilian Natural Arabicas finished 4.60 cents higher at 130.60 cents, while Robustas settled 3.82 cents up at 109.68 cents.
In Brazil, the National Commodities Supply Corporation (Conab) has raised its estimate for the country's 2008/09 coffee crop to 45.5 mmn 60-kg bags, up from an earlier estimate of 41.3-44.2 mmn and significantly higher than the 33.7 mmn harvested in 2007/08. Of the total, Brazil would harvest 34.7 mln bags of arabica and 10.8 mmn of robusta coffee, Conab said. Despite its upward revision, Conab's estimate is still significantly below private analysts' and trade houses' recent forecasts, estimating the crop at between 50 mln and 55 mln bags. Though Conab does one of the most extensive surveys to determine the crop size, its figures are dismissed by other analysts as too low, given that the level of shipments Brazil has actually been able to maintain over the past several months is higher than what was expected based on the last known stock data and Conab's production figures. Substantiating this claim, Brazil exported 2.02 mln 60-kg bags of green coffee in April 2008, up by 7% from 1.89 mln shipped the same month a year ago. Further more, the March total was revised upwards to 2.04 mmn bags from 2.02 mln forecast last month. Total exports in April (including solubles) reached 2.30 mln bags, 7.5% more than the 2.14 mln shipped in April 2007.
Coffee producing nations in Central America saw a significant rise in exports in April, the seventh month of the 2007/08 season. Costa Rica saw the biggest leap in exports last month, of 25% to 241,866 60-kg bags, compared with 193,406 bags in April 2007. Total coffee shipments since the start of the 2007/08 season, which commenced in October last year, are now up by 9.6% to 977,430 bags, from 891,710 bags in the same period last season. Honduran coffee shipments in April were 473,099 bags, up by 16% from 409,503 bags in 2007. Total export for the 2007/08 season now stand at 2.093 mln bags, a 23% rise from 1.634 Inln bags from the first seven months of last season. Guatemala's coffee exports in April were up by 5.5% to 528,845 bags, compared with 528,845 bags in April last year last year. Local growers group Anacafe has revised down its coffee export estimate for 2007/ 08 to 3.68 mln 60-kg bags from 3.75 mln previously, citing strong winds at the beginning of the year. El Salvador exported 214,696 60kg bags of coffee in April 2008, up by 55% from 138,655 shipped the same month in 2007. That brought total exports in the first seven months of 2007/08 (October/September) to 789,634 bags, up by 19.4% from the same period last season. The only country in the region with lower shipments on the year was Mexico, whose April exports were 300,804 60-kg bags, down by 5.7% from 318,848 bags shipped the same month in 2007. Total exports in the first seven months of 2007/08 are 1.411 mmn bags, down by 9.2% from 1.553 mln exported the same period last season.
The International Coffee Organisation (ICO) has forecast world coffee production at around 127 mmn 60-kg bags in 2008/09, up from an earlier estimate of 123126 min, saying the upward revision partly reflected a higher estimate of the Brazilian crop. According to the ICO, the world's 2007/ 08 coffee crop stood at 118.1 mmn bags.
Kenya's weekly coffee auction in Nairobi has been forced to close its doors from May 28 for a month due to lower-than expected supplies and poor quality beans as the effects of erratic crop production hit the market. The Nairobi Coffee Exchange (NCE) traditionally holds main crop auctions from December to July, but the management claim a break was inevitable. Officials at the NCE said supplies for sale had plummeted by 36% in recent weeks - down to 16,000 bags per week on average from the usual 25,000 bags. The auction is expected to re-open in July when the new crop starts trickling in once again. Early estimates suggested Kenya was on course for an improved crop of around 933,000 60-kg bags this year, up from around 812,000 in 2007, according to figures from the country's Coffee Research Foundation.
The latest Commitments of Traders Report showed that the non-commercial net long position in the ICE "C" coffee contract fell to 23,081 lots
as of May 6 from 26,061 on April 29, while small speculators (nonreportables) increased their net long position to 3,415 contracts from 3,037. The commercial net short
position decreased to 26,496 lots as of May 6 from 29,098 a week earlier. In : general market assessment, a leading US investment bank presented a mixed scenario for commodities in the coming months. This was despite what the bank called "unprecedented" inflows of up to $40 bin in commodity indexes and $16 bin into retail commodity investments this year. It added that the months ahead represent a transition phase for commodities, citing bearish factors like the stronger dollar and a worsening US economy. Apart from this broad perspective, investment funds appear to have lost their taste for coffee after helping fuel a run-up to a 12-1/2-year peak in London earlier this year, and prices look unlikely to rally significantly from recent lows. The prospect of bumper crops in top producers Brazil and Vietnam later this year has helped dampen enthusiasm among investors, while funds have also become more selective in their commodity investments after major reversals in several markets.'prices for London robusta coffee on the benchmark second month climbed to $2,815 a tonne in early March, buoyed by aggressive buying by investment funds, but then fell back sharply to $2,119 on May 6, a drop of 25%. Arabica coffee in New York has followed a similar pattern with the second month rising to $1.7190/lb in late February, the highest level in ten years, before sliding around 25% with prices dipping below $ I .30 in early May. A recovery in global equities during the last few weeks has also encouraged funds to return to those markets. However, coffee prices are not expected to plummet as there is still ample demand for coffee globally and that is going to provide a floor.
