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

Coffee Market Report

01 Feb 2021

The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector cut their net long position by 6.52% within the market over the week of trade leading up to Tuesday 26th. January: to register a new net long position of 22,105 which is the equivalent of 6,266,670.  This net long position has most likely been decreased, following the period of mixed but overall sideways trade that has since followed.  

One of Brazil’s prominent and respected coffee exporters Comexim has come forth to forecast that the July 2021 to June 2022 Brazil coffee crop shall be 20.73% or 14.10 million bags lower than their current July 2020 to June 2021 Brazil coffee crop estimate, to potentially see this new coffee crop come in at 53.90 million bags. The lower estimate is being attributed to the biennially bearing nature of the Brazil coffee crop and the coming July 2021 to June 2022 coffee year, a low year in the cycle. The report has also forecast that coffee exports to come from the new Brazil crop, is estimated to be 15.11% or 6.80 million bags lower than the previous July 2020 to June 2021 coffee year, at a total of 38.20 million bags.

This report forecasts that even if Brazil coffee exports from the July 2020 to June 2021 coffee crop were to get close to a record 45 million bags and along with an estimated domestic consumption of 21 million bags, the country shall have an estimated 6.7 million bags of carry over coffee stocks into the next 2021/2022 harvest. Thus, the assumption that carryover stocks from the record 2020/21 coffee crop year and new crop 2021/22, will reach a combined total of 60.60 million bags, so long as there are no unforeseen climatic problems coming to the fore to damage the potential of this next 2021/22 coffee crop. This forecast would, once Brazil's own domestic consumption is considered, indicate that Brazil's carryover stocks heading into the following July 2022 to June 2023 coffee year will be tighter, estimated at 1.33 million bags. There are still some months ahead meanwhile, for the July 2021 to June 2022 Brazil coffee crop to develop toward harvest, with a multitude of new crop forecasts anticipated to still come to the markets. The evidence meanwhile of significant month on month exports from Brazil and related increases in consumer coffee stocks as the current Brazil bumper crop continues to flow to consumer markets, may continue to dampen short to medium term speculative spirits.

The March 2021 to March 2021 contract arbitrage between the London and New York markets narrowed on Friday: to register this at 63.66 usc/Lb. This equates to 51.78% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 3,382 bags on Friday, to register these stocks at 1,622,191 bags, with 94.8% of these certified stocks being held in Europe at a total of 1,537,514 bags and the remaining 5.6% being held in the USA at a total 84,677 bags. There was meanwhile a larger in number 5,375 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 136,107 bags.

It was a neutral 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, Sugar and London Robusta Coffee markets ended the day on a positive note, while the New York Arabica Coffee market ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.3117% higher; to see this index registered 469.4144. The day starts with the U.S. Dollar, trading at 1.375 Sterling, at 1.213 the Euro and with the US Dollar buying 5.463 Real.

The New York and London markets started the day on Friday trading close to par on a modest softer note, both markets continued to oscillate around par for the remainder of the morning session. As the afternoon progressed the New York and London markets dropped back to see the markets trade in modest negative territory, the London market soon hit a floor limiting the losses for the session, whilst the New York market continued to trend softer for the day. This saw the New York market settle on a negative note for the day, while the London market recovered to a degree to settle on a modest firmer note for the day.

The London market ended the day on a modest positive note with 60% of the earlier gains of the day intact, while the New York market ended the day on a negative note with 53.85% of the earlier losses of the day intact. This mixed close with the London market settling near to unchanged for the day does little to inspire confidence and one might think that the markets are due for little better than 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.

MAR 1306 + 3                                              MAR 122.95 – 1.05
MAY 1319 + 6                                              MAY 125.00 – 1.10
JUL 1330 + 4                                                JUL 126.95 – 1.05
SEP 1344 + 2                                                SEP 128.80 – 1.05
NOV 1361 + 2                                              DEC 130.75 – 1.05
JAN 1377 + 3                                               MAR 132.50 – 1.05
MAR 1395 + 3                                             MAY 133.25 – 1.05
MAY 1410 + 3                                              JUL 133.85 – 1.05