Great people watching and arguing about coffee production, but forgot to look at the wind generation inventory is moving slowly through the hands of consumers. Inventory "inside her" is swell considerably. The disadvantage of the new season 2014/15'm halfway there.

Figure 1: Evolution futures closing price floor in London January 8-2014 (synthetic author)

Price of buyers and sellers who have not met

Due to the closing price of robusta coffee futures floor Ice Liffe London in three days this weekend trading firm up domestic prices inched 23-8 Saturday morning to 39.5 million / ton, an increase of 500,000 VND / ton over a week ago. The local market time "pre-harvest" pretty quiet. This season will end on 30-9.

Futures prices closed weekend 22-8 pegged at $ 1,997 / ton, up $ 35 / t from the previous week but still lost almost a hundred dollars per ton compared to the closing price on the first month (see chart 1).

Futures prices has yet to make call "push" to stimulate local volumes remain in the market. The current expectations of the customers also have over 40 million / ton. But whenever futures prices, buyers are often exploited to stretch the export price on the basis of the difference (the differential) between the water delivery at the port of export (FOB) and the listed price of the futures floor .

The export price of robusta grade 2 (5%) were black pools offered at minus 20-30 dollars / ton lower futures prices, while buyers pay only minus 50-60 dollars / ton. Isolated from 30-40 dollars / ton so buyer and seller have yet to meet. A business reported that FOB prices for Robusta Brazil is being offered for sale minus $ 45 / t below the listed price, but also discrete volume buyers.

What factors should disturb the market?

Many people do not know how to explain the real goods trade coffee in the world is quiet at the end of the season 2013/14. If you are sure the new crop yield lower world, which are the two major water supply Brazilian arabica and robusta exports Vietnam, the market was bustling today, scrambling to buy higher prices and help. Probably not due to the larger world production, or what?

In fact, the market is too focused on production problems forgetting that inventories in consuming countries are increasingly ominous bulge out a way in terms of the said market.

Coffee inventories in North America by the Association of American Coffee County (Green Coffee Association - GCA) announces rising highest level since 2005 last with 6.05 million bags (60 kg x bag). The inventory of Europe's coffee is also stocked with about 11 million bags. In Japan, coffee inventories rose to a record high of 3.05 million bags. Thus, the three centers consume the world's big coffee holds over 20 million bags, not including the purchase of goods in the hands scattered in the bonded warehouses in the country of manufacture.

Figure 2: Inventory increases substandard London robusta (source: Newedge) (Click on image to view larger size)

And if the standard coffee futures floor auction can confirm nor less. By the end of the day 18-8, standardized inventory of floor robusta Liffe London Ice at 1.4 million bags, exceeding 8.8% over the past 12 months (see chart 2). Standard inventory of New York Ice floor to reach 2.42 million bags 22-8. One thing worth mentioning is that most of the standard amount of coffee in the hands of financial speculators.

It will not be wrong to say that the amount of inventory that, before the eyes of consumers still have plenty of coffee to use. They have sufficient rights to see the rules and wait until the new crop palpable how the new act.

The market has not recognized the world coffee shortage

The heart of the controversy over the coffee market in recent years made ​​soft from Brazil questions crop or harvest for crop year 2015/16? The world has no shortage of coffee, especially Arabica coffee, coffee is decided by the quality of coffee consumption places?

Some reports estimate that Brazil's coffee exports will reach 33-34 million bags for the period from January to June 6-2015 7-2014, an increase compared to the previous, only 32 million bags. In addition, inventories of standard arabica, coffee Brazilian origin are insignificant.

However, two factors are not enough to convince the professional business. Many people swap Brazilian coral harvests and lack of goods, but rather the market or the futures price on the floor of the New York arabica Ice can not do that. For several months now, arabica standard inventory at 2.4 million bags hung back up, but never Floor New York futures suffer "price squeeze" as robusta floor in London.

"Price squeeze" on the floor of the futures market occurs when every local shortages, particularly for the most recent term of delivery, contract prices for immediate delivery (spot month) than the next month.

This means that either the market does not lack customers, or financial speculators are afraid to push up world prices "squeezed", a surprising amount of inventory that previously uncontrolled (invisible stocks) will be launched strong market prices collapsed, causing losses for shippers arabica current standards.

In contrast, the continuous price squeeze phenomenon occurs on the floor of the London robusta, where speculators are taking inventory standard Robusta Vietnam to "price".

Rather, qualified inventory but larger arabica, financial speculation still can not master volume by external constraints, the complete opposite of robusta, speculation several times easily controlled through existing the "price squeeze".

Saigon Economic Times