The weather forecasts in Brazil continue to be a point of focus and for the speculative sector of the futures markets. In this respect and across the expansive arabica coffee growing belt, there have been conflicting reports coming to the fore. The historical weather data and in particular, soil moisture levels through the summer rainfall months October, through to February in these areas have been reported by Refinitiv to be on average 27.15mm below the past 5-year average of around 346.02mm in the top 0-1.6m of soil. Concerns have been raised within the interior however and subsequently, for the months of March through to May, to indicate rainfall patterns within key arabica coffee growing region Minas Gerais to have been lower over these past three months when in comparison to the average over the past 5 years, where the average is recorded at 123mm for March, 40mm for April and 31mm for May, whereas cumulative recorded levels of rainfall for these past three months in 2021 are reported at a lower overall 129.60mm. One might comment meanwhile that winter is traditionally a drier time for coffee growing areas in Brazil, that is conducive weather for their arabica harvesting that is currently picking up pace and the lack of rainfall at this time of year would be considered normal.

The concerns that have come to the fore meanwhile, are related to the months leading up to the traditionally dry winter season, and how this may impact ground water retention and soil moisture levels, with a view to the spring months in the latter quarter of this year. This factor to contribute towards the general condition of coffee plants that would have yielded a lower overall arabica crop in 2021, and ahead of the flowering for the 2022 crop year to come.

Somar Meteorologia have meanwhile reported this past week that rainfall in Minas Gerais, Brazil’s largest arabica growing area, has registered at 6.7mm or only 38% of the historical average for this time of year. Concerns about the drier weather have led to the Brazilian National Water Agency (ANA) declaring a water usage emergency from 1 June through to November this year, this allows ANA to restrict water usage during this time.

The Ivory Coast as west Africa’s leading robusta coffee producer, have reported that their coffee exports for the month of April were 103,433 bags or 94.20% lower than the same month in the previous year, at a total of 6,367 bags. This has contributed to their country’s cumulative coffee exports for the first seven months of the October 2020 to September 2021 coffee year to be 688,308 bags or 65.84% lower than the same period in the previous year, at a total of 357,151 bags.

Yesterday was the catholic Corpus Christi holiday for some catholic dominated countries and including Brazil, which shall likely encourage many within the country to take a bridge day follow on holiday today and an extended long weekend.

The July-to-July contract arbitrage between the London and New York markets widened yesterday; to register this at 85.52 usc/Lb. This equates to 54.26% price discount for the London Robusta coffee market. This wide arbitrage will likely be viewed by price sensitive roasters as an attractive alternative discount for robusta against the comparatively higher value arabica coffee.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 6,307 bags yesterday, to register these stocks at 2,085,890 bags, with 93.19% of these certified stocks being held in Europe at a total of 1,943,748 bags and the remaining 6.81% being held in the USA at a total 142,142 bags. Of this, a total 1,143,405 bags, or 54.82% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 36.44% of these certified coffees, originating from Honduras. There was meanwhile a larger in number 7,468 bags decrease to the number of bags pending grading to the exchange; to register these pending grading stocks at 127,978 bags.

It was a softer day on the commodity markets yesterday, as better than expected U.S employment and service sector data propelled the U.S Dollar higher and boosted expectations that the strong economic readings may reignite talks from the Federal Reserve. The Sugar, Cocoa, Coffee, Corn, Wheat, Soybean, Gold, Silver, Platinum and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.409 Sterling, at 1.211 the Euro and with the US Dollar buying 5.078 Brazil Real.

The New York and London markets started the day yesterday trading on a firmer note, the markets continued to gain momentum to oscillate around par for the remainder of the morning session. As the afternoon progressed both the New York and the London markets came under some degree of selling pressure to see sell stops triggered along the way accentuating the losses for the day. Both markets would drop back to hit a floor late in the day limiting the losses, the New York market settled on a very soft note at the close with the London market following suit albeit in a more sedate manner for the day.

The London market ended the day on a negative note and with 54.45% of the losses of the day intact, while the New York market ended the day on a likewise negative note and with 87.65% of the losses of the day intact. This softer close does little to inspire confidence and one might think that the markets are due little better than a hesitant steady start to early trade today, against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT                             NEW YORK USC/LB.

JUL 1589 – 12                                                        JUL 157.60 – 3.55
SEP 1616 – 11                                                        SEP 159.65 – 3.50
NOV 1633 – 11                                                      DEC 162.45 – 3.45
JAN 1645 – 12                                                       MAR 164.90 – 3.50
MAR 1656 – 12                                                     MAY 165.95 – 3.40
MAY 1669 – 12                                                     JUL 166.65 – 3.30
JUL 1683 – 12                                                       SEP 166.95 – 3.15
SEP 1698 – 13                                                       DEC 167.20 – 3.00