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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

20 May 2020

The respected United States Department of Agriculture USDA Global Agricultural Information Network have revised their estimate for Guatemala coffee crop that is mainly washed arabica coffee production over the coffee year from October 2019 to September 2020 to reach a total of 3.67 million bags, a decline on the previous production year of 3.77 million bags. The report further estimates a modest production decline for the coming October 2020 to September 2021 coffee year, estimated at 3.65 million bags, of which the report goes on to estimate 3.42 million bags will be exported to consumer markets from the coming crop harvest. The year on year carryover stocks are seen to have been depleted and are put at a relatively low 29,000 bags ahead of the new harvest to come. This new harvest traditionally begins around October each year, in the lower lying areas, to pick up pace as the cooler higher areas start harvest toward the end of the year. The loss-making prices that are experienced in relation to three years of low value reference prices in New York has taken a toll as the commercial farming sector is reported to have been reduced over the years, to now attribute 98.60% of the 305,000 hectares of coffee farming to small scale farms, vulnerable to an overall lack of affordability for inputs ahead of the coming 2020/2021 harvest.

The USDA report has revised their estimate for Guatemala domestic annual consumption meanwhile, to be 6% higher than the previous estimate at a total of 495,000 bags, consisting of both instant coffee soluble imports as well as roast and ground product, with institutional body ANACAFE reporting year on year growth, albeit from a low base, of out of home roast coffee consumption.

The July to July contracts arbitrage between the London and New York markets narrowed yesterday; to register this at 53.34 usc/Lb. This equates to 49.83% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were increase by 2,477 bags yesterday; to register these stocks at 1,793,935 bags, with 90.8% of these certified stocks being held in Europe at a total of 1,628,992 bags and the remaining 9.2% being held in the USA at a total of 164,961. There was a 6,544 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 1,250 bags.

The Certified Robusta coffee stocks held against the London exchange have been reported to decrease by 22,667 bags over the weeks of trade leading up to Monday 18th May, to see these stocks registered at 2,170,167 bags, on the day.

The commodity markets were firmer in trade yesterday, to see the overall macro commodity index taking a firm sideways track for the day. The Sugar, Cocoa and London Robusta Coffee markets ended the day on a positive note, while the New York Arabica Coffee markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.4626% higher; to see this index registered at 353.6665. The day starts with the U.S. Dollar steady, trading at 1.227 to Sterling, at 1.095 to the Euro and with the US Dollar buying 5.755 Brazilian Real.

The London and New York markets started the day yesterday trading on a modest soft note, both markets maintained this softer stance into the early afternoon trade. As the afternoon progressed the New York market started to gain momentum to trade on a modest positive note for the day only to hit a ceiling and drop off the highs of the day to settle on a negative note, while the London market gained support early in the afternoon trade to continue on a modest positive track for much of the afternoon trade.

The London market ended the day on a modest positive note and with 14.3% of the earlier gains of the day intact, while the New York market ended the day on a modest negative note 48.3% of the earlier gains of the day intact. This mixed close does little to indicate direction and one might expect 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 ARABICA USc/Lb. 

JUL    1184 + 2                                                                   JUL    107.05 – 0.70
SEP    1206 + 5                                                                   SEP   108.40 – 0.60
NOV   1226 + 7                                                                  DEC   110.20 – 0.65
JAN    1246 + 8                                                                   MAR  112.05 – 0.60
MAR   1266 + 10                                                                MAY  113.05 – 0.60
MAY 1286 + 13                                                      JUL 114.10 – 0.55
JUL    1306 + 16                                                                 SEP    115.10 – 0.55
SEP 1323 + 16                                                       DEC 116.45 – 0.55