I. & M. Smith (Pty) Ltd. since 1915
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I. & M. Smith (Pty) Ltd.

Coffee Market Report

27 Jul 2020

The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector cut their net short position within the market by 14.46% over the week of trade leading up to Tuesday 21st. July: to register a new net short sold position of 20,293 Lots which is the equivalent of 5,752,976 bags. This net short position has most likely been decreased, following the period of mixed but overall sideways positive trade that has since followed.

The latest Commitment of Traders report from the London Robusta coffee market has seen the Speculative Managed Money Sector of this market cut their net short sold position within the market by 40.01% over the week of trade leading up to Tuesday 21st. July; to register a short-sold position of 24,989 Lots.  This net short sold position is the equivalent of 4,164,833 bags and has most likely been dramatically decreased following the period of mixed but overall positive trade that has since followed.

The analysts Safras & Mercado have estimated that almost 71% of the new Brazil coffee crop has already been harvested. This based on the Safras & Mercado forecast for a new crop of 68 million bags, the report would indicate that so far approximately 48 million bags of the new crop have been harvested. These coffees made up from approximately 18 million bags of conilon robusta coffees and approximately, 30 million bags of arabica coffees.

The Brazil harvest this year is at a slower pace, compared to the same week in 2019 when approximately 83% of the crop was harvested, although the size of this biennial bearing larger crop can be attributed to the slower harvest time this year. Mild to warm temperatures are forecast to prevail over the next week throughout the Brazil Coffee belt.

The September to September contract arbitrage between the London and New York markets widened on Friday; to register this at 46.81 usc/Lb. This equates to 43.18% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 180 bags on Friday to register these stocks at 1,597,752 bags, with 94.1% of these certified stocks being held in Europe at a total of 1,504,260 bags and the remaining 5.9% being held in the USA at a total of 93,492 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 7,451 bags.

It was a softer day overall on the commodity markets on Friday, to see the overall macro commodity index taking something of a sideways track for the day. The Cocoa, Coffee, Orange Juice, Wheat and Gold markets ended the day on a positive note, while the Oil, Natural Gas, Sugar, Cotton, Copper, Corn, Soybean and Silver markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.0876% lower; to see this index registered at 383.6967. The day starts with the U.S. Dollar steady, trading at 1.283 to Sterling, at 1.170 to the Euro and with the US Dollar buying 5.233 Brazilian Real.

The New York and London markets started the day on Friday trading on a modest positive note, both markets came under slight pressure in the early morning trade but to recover shortly thereafter and trend positive into the early afternoon trade. As the afternoon progressed both the London and the New York markets gained momentum backed by buying support to see the markets hit a high for the day, albeit that both markets dropped back off the high of the day to settle on a positive note for the day.

The London market ended the day on a positive note and with 47.05% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 56.25% of the earlier gains of the day intact. This marginally firmer close might inspire a small degree of confidence to possibly set the markets for a hesitant steady start to early trade today, against the prices set on Friday, as follows:

LONDON ROBUSTA US$/MT                                           NEW YORK ARABICA USc/Lb.

SEP 1358 + 8                                                                        SEP 108.40 + 0.90
NOV 1371 + 8                                                                       DEC 111.30 + 1.00
JAN 1385 + 7                                                                        MAR 113.30 + 0.95
MAR 1399 + 7                                                                      MAY 114.25 + 0.85
MAY 1414 + 7                                                                      JUL 115.10 + 0.75
JUL 1430 + 7                                                                        SEP 115.90 + 0.65
SEP 1444 + 7                                                                        DEC 117.50 + 0.60
NOV 1461 + 7                                                                      MAR 119.20 + 0.60