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

Coffee Market Report

11 Dec 2020

Trade in Vietnam is now in full swing as farmers are starting to consistently deliver more coffee. The harvest of the October 2020 to September 2021 new crop is estimated to be 25% complete and gaining momentum now that more favourable, drier weather conditions. The harvest had been delayed to start due to a continuation of wet weather into November, while in terms of volume of coffee that is due from this new crop, most of the forecasts vary between 27 million and 28 million bags.

Indonesia, which traditionally produces an average of 86% robusta and 14% arabica coffees from their harvest per annum, has reported slow trade this week due to the limited remaining coffee availability from their April 2020 to March 2021 seasonal coffee year, which harvest was forecast to be 11.60 million bags. The development of Indonesia’s local roasting and soluble manufacturing industry seen over the past decade or so, has resulted in a supportive local market for their coffees, in local price competition to the green coffee export market.

The weather in Brazil is reported to be more conducive at the outset of December, with this month bringing along with it, soaking rain across the vast coffee growing areas in Brazil. The wet weather is welcome post the on average, drier month of November, and as the new July 2021 to June 2022 coffee crop, sets. The current, record biennial higher bearing coffee crop continues to report month on month positive export performance to coffee consumer markets, while Brazil’s local consumption at around 21.50 million bags per annum, may be anticipated to record a marginally lower overall consumption comparatively, year on year, in reaction to Covid19 slower demand in the out of home and HORECA markets. The latter, is a situation that is universal within Covid19 related lockdown environment, likely to have a greater impact on coffee consumption within newer and developing coffee consumer markets, where the greater percentage of coffee is traditionally consumed out of home.

The January 2021 to March 2021 contract arbitrage between the London and New York markets widened yesterday: to register this at 60.90 usc/Lb. This equates to 50.31% 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 2,140 bags yesterday, to register these stocks at 1,313,995 bags, with 93.9% of these certified stocks being held in Europe at a total of 1,235,510 bags and the remaining 6.1% being held in the USA at a total 78,485 bags. There was meanwhile a larger in number 11,330 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 105,434 bags.

It was a firmer day overall on the commodity markets yesterday, to see the overall macro commodity index taking something of a positive track for the day. The Cocoa and Coffee markets ended the day on a positive note, while the Sugar market ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.8591% higher; to see this index registered 438.2110.  The day starts with the U.S. Dollar, trading at 1.331 Sterling, at 1.216 the Euro and with the US Dollar buying 5.026 Real. 

The New York and London markets started the day yesterday trading close to par on a modest softer note, the New York market was quickly buoyed by buying support, to see the market set on a firm path for the remainder of the morning session. The London market dropped further back accentuating the losses for the morning trade. As the afternoon progressed the New York market continued to trend firmer to see the market settle on a very positive note for the day, while the London market followed suit in a more sedate manner.

The London market ended the day on a positive note with 82.35% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note with 84.21% of the earlier gains of the day intact. This firmer close might inspire some degree of confidence, with the New York market settling near to the high of the day, to possibly see the markets set for a follow-through hesitant steady start to early trade today, against the prices set yesterday, as follows:

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

JAN 1326 + 14                                                MAR 121.05 + 4.00
MAR   1351 + 17                                                     MAY   122.85 + 4.05
MAY   1364 + 17                                                    JUL 124.35 + 4.00
JUL   1380 + 16                                                      SEP    125.80 + 3.95
SEP    1398 + 17                                                      DEC     127.40 + 3.90
NOV   1415 + 18                                                     MAR    128.95 + 3.85
JAN   1430 + 18                                                      MAY   129.70 + 3.85
MAR   1445 + 18                                                     JUL   130.40 + 3.85