A surprise bumper crop in Honduras is set to shake up the arabica coffee market as prospects of a new record high for output in the Central American country is damping enthusiasm for prices of the commodity. Coffee production in Honduras overtook Ethiopia as the third-largest arabica producer last year behind Brazil and Colombia. Export volumes in the new 2017-18 crop year, which started in October, have wrongfooted analysts and traders, who had been expecting a decline in its production following record output in the previous 12 months. “Sales from Honduras have been strong and above last year’s level,” said Carlos Mera, coffee analyst at Rabobank, the Dutch bank that lends to a wide range of agricultural businesses. Prospects of higher Honduran output this year, alongside that of other Central American producers Nicaragua and Costa Rica, as well as Vietnam, are weighing on coffee prices, which were expected to see an uplift from this week’s reweighting of commodities indices. Rabobank was originally forecasting the country’s 2017-18 output to total 6.5m 60kg bags, down from an all-time high of 7.2m, but has revised its estimate to a new record of 7.3m. Share this graphic Coffee trees tend to have an “on-year” where they produce a higher crop, followed by an “off-year” where the trees undergo a recovery process and produce less. Many analysts had expected 2017-18 to be an “off-year” but official sales and export figures since October have indicated that this year’s output could overtake the previous record. The US Department of Agriculture last month revised its Honduran output forecast from 6.5m bags to 7.4m. Together with higher-than-expected production from Uganda, 2016-17 exports from Honduras helped boost world supplies, leading to record bets against coffee. Arabica coffee closed down 8 per cent in 2017 with the commodity the third-worst performer in the asset class in terms of total returns with a loss of 16 per cent. Share this graphic The two main commodity benchmarks, the S&P GSCI and the BCom, are carrying out their annual reweighting this week. Sugar, coffee and soyabeans were expected to be among the leading beneficiaries, with coffee likely to see inflows of $350m as those invested in the indices buy the commodity to adjust their holdings to the target weight, said analysts at Citigroup. However, the arabica coffee price, which started 2018 at $1.2855 a pound, is trading at $1.2595 after rising to $1.335 last week. The current Honduran coffee production is a result of the new trees that were planted after Central American producers were hit by the devastating spread of coffee rust disease, according to Rodrigo Costa at coffee merchants Comexim. Before the outbreak of coffee leaf rust, production in Honduras grew at about 6.8 per cent a year, reaching 5.9m bags in 2011-12. Share this graphic After falling sharply over the next two crop years, a tree replanting programme and technical training for farmers have helped output, with production rising by more than 12 per cent a year since 2014-15.
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Dealing with land records may have once been the stuff of nightmares, but not any more, according to a Visakhapatnam-based firm.
Often, the common man fears being duped with fake land certificates. This is where blockchain technology could come in handy, says Zebi Data India.
“We will authenticate the credentials of users, allow them to access the records and give them a certificate. No one can tamper with the database. The buyers, too, can access relevant information on registering with their credentials,” said Babu Munagala, Founder and CEO of Zebi Data India.
This data can be verified without any human intervention, giving no scope for manipulation or copying of sensitive information by unscrupulous insiders or external hackers.
The fintech firm, which has just 23 employees, has built a solution that is being used in Amaravati, the Capital region of Andhra Pradesh. About one lakh land records with the CRDA (Capital Regional Development Authority) now have blockchain protection. “We are hosting the data of these records on the CRDA cloud at Amaravati,” Munagala said.
Andhra Pradesh has thus emerged as the country’s first public entity to use blockchain-enabled security for land records.
Munagala said Zebi Data’s maiden blockchain solution has two components. While Zebi Chain offers immutability to critical records, the central hub, Zebi Data Gateway, enables secure and instant data exchange.
Blockchain has wide application beyond the fields of banking and financial services, where it is being extensively used, Munagala said. It has applications in securing employee databases, health and salary records, pension payments and education.
Eyeing the $5-billion market for blockchain-based solutions in the country, the firm is now looking to expand its operations. After bagging the AP government order, the firm is now in talks with six players, in the public and private spaces.
“We have raised ₹10 crore in the angel round. We are looking to raise more funds to support growth plans as we expand our operations to tap the unfolding opportunities in this area,” Munagala said.
Thermal coal, the least loved major commodity, has jumped to its highest level since late 2016 as strong manufacturing activity in Asia and appetite from China drives demand. Thermal coal is burnt to generate electricity, and is a big source of income for miners such as Glencore, Whitehaven and Yancoal, which produce material for the seaborne market. While the fossil fuel is being phased out in Europe on environmental grounds, it still accounts for about 40 per cent of energy consumption in emerging markets. Its fortunes are therefore closely tied to manufacturing activity and the global economy, which most forecasters believe is enjoying the strongest period of expansion since the financial crisis. Indeed, coal-fired power generation rose in most of Asia’s major economies last year, boosting demand, according to BMO Capital Markets. “Thermal coal — once again it is powering Asian growth and urbanisation,” said Glencore’s chief executive Ivan Glasenberg. “It’s another commodity where there’s been under-investment over the years.” Australian coal with an energy content of 6,000 kcal/kg — benchmark for the vast Asia market — is trading at $103 a tonne, according to a price assessment from Argus Media. Six months ago it was just above $80 a tonne. On the supply side, big new thermal coal mines are not in the works and projects are becoming more difficult to finance as banks and investors fret about their environmental credentials. This has helped tighten the market and drive up prices. Of the new tonnes that are entering the market, traders say much of this is lower quality material from Indonesia that does not have a high calorific value and is not favoured by big utility companies in Asia. As well as the strength of the Asia industrial cycle, other factors have helped boost thermal coal prices across the region, analysts say. China is allowing more coal-fired power generation this winter because of gas shortages and has loosened import restrictions. Domestic production in India has yet to pick up meaningfully, forcing it to buy from overseas and there is heavy congestion at ports in Australia, one of the world’s biggest suppliers. “Supply is still very tight, probably not going to catch up with demand easily in January and February,” said Shirley Zhang, principal analyst at Wood Mackenzie. Traders reckon thermal coal could remain about $100 a tonne ahead of the annual contract negotiations between Japanese utility companies and Australian producers, which are usually led by Tohoku Electric Power and Glencore respectively. The April-March contracts historically accounted for up to half of Japan’s annual thermal coal imports. While that figure has fallen they are still used as a benchmark across the region by other consumers. Japanese power utilities typically pay a premium to secure supplies from Australia on long-term contracts because the coal works well in their boilers and meets environmental controls. Last year the contracts were settled at $85 when the prevailing price was roughly $77. A price of $90 this year would deliver a big windfall for Glencore, which produces coal at $48 a tonne. Over the long-term, analysts say coal faces significant headwinds, not least in China where the government wants to replace coal-fired boilers and more widely the huge falls in the cost of renewable energy.
China’s steel production growth is expected to slow sharply in 2018 as state-mandated factory closures and policies to protect the environment begin to bite. The world’s largest producer of the metal will experience just a small rise in output of 0.6 per cent this year, a poll of 15 analysts found in a Financial Times survey. Steel is often viewed as a barometer of economic activity because it is used in carmaking, construction and manufacturing, which means a significant price move could have repercussions for the broader economy. For the steelmakers, the Chinese slowdown could have positive effects. A modest increase in production from China, which accounts for about half the 1.7bn tonnes churned out worldwide, could restore balance to a global market that was ravaged by a collapse in prices two years ago due to oversupply. The anticipated slowdown comes despite a robust outlook for the Chinese economy and contrasts with a 5.7 per cent jump in its crude steel output during the first 11 months of 2017, according to World Steel Association figures. Even so, global annual production in 2018 is slated to increase 2.1 per cent, according to an average of the analysts’ forecasts. World output increased 5.4 per cent between January and November 2017, compared with the same period a year before. Rod Beddows of HCF International Advisors said: “The total market appears to be reverting to a more stable ‘normal’ with Chinese exports under control.” Donald Trump’s pledge to renew US infrastructure, coupled with the impact of import restrictions against steel deemed unfairly traded, were cited as factors behind the average forecast of a 3.4 per cent jump in the country’s steel production in 2018. Alistair Ramsay of the publication Metal Bulletin said that US producers had been winning customers back from external suppliers, partly due to a weak dollar. “We suspect this pattern will continue in 2018 enabling local mills to benefit further from the recent revival in local steel usage following a two-year depression,” he said. Steelmakers in the EU are expected to produce 2.4 per cent more as the economic recovery in many countries across the bloc gains strength. Brussels has similarly slapped tariffs on material deemed to be unfairly traded. Recommended What to watch in metals market in 2018 ArcelorMittal’s Italian deal runs into political storm Electric car push drives premiums for greener metals China, in particular, has faced accusations of dumping excess steel illegally on international markets, although its outbound shipments have retreated over the past two years. Under reforms of its bloated steel and coal sectors, Beijing has ordered the shutdown of the most inefficient and dirty mills. It has also imposed seasonal restrictions on a range of industries and large construction projects in a bid to reduce air pollution during winter. Peter Archbold, senior director in the metals and mining team at Fitch, the rating agency, said: “We expect the capacity closures which have already taken place in China to continue to have a positive impact on steel markets globally in 2018. Share this graphic “[These closures] have also lowered the volumes being exported which has improved the market balance and domestic prices in other regional steel markets.” Seth Rosenfeld, analyst at Jefferies, said Chinese steel demand was the “biggest uncertainty” for the wider industry in 2018.