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

Coffee Market Report

28 May 2020

The respected U.S. Department of Agriculture Global Agricultural Network USDA have reported their forecast for the production from the predominantly Robusta coffee producing nation of Indonesia for the current April 2020 to March 2021 coffee marketing year, to reach an overall 10,300,000 bags, or 3.74% lower than the previous coffee marketing year in April 2019 to March 2020, with production that is reported at 10,700,000 bags. The production figures for the April 2020 to March 2021 coffee year are forecast to be made up of 9,000,000 bags Robusta coffee and 1,300,000 bags Arabica Coffee.

Of this new crop, the forecast is that Indonesia will export 3.22% or 196,000 bags less than the previous marketing year at a total of 5,900,000 bags of green coffee. This number is slightly less than the 6,096,000 bags of green coffee exported by Indonesia during the April 2019 to March 2020 Coffee marketing year, but still substantially more than the 4,907,000 bags of green coffee exported over the April 2018 to March 2019 coffee marketing year.

The Indonesian domestic coffee consumption has meanwhile, grown exponentially over recent years, reporting high single digit increases in consumption year on year. This is supported by the development of local roasting and value add industries, absorbing a percentage of local coffee production as well as assisted by permitted imports of other origin coffees. This domestic coffee consumption bolstered by a developing urban coffee shop culture. The latest USDA report goes on to forecast a likely decline in year on year coffee consumption, the effect of the months of coronavirus related societal lockdown, could see a significant impact upon the demand for coffee. This, in addition to Indonesia’s increasing unemployment numbers and shift in buying power for consumers adding to the foreseeable decline in domestic consumption of coffee products. Domestic consumption in Indonesia is made up of a combination of local and imported soluble products as well as local and imported roast and ground coffee products and is forecast by the USDA to be in the region of 4,300,000 bags in the 2020/2021 coffee marketing year, compared to 4,900,000 bags or 12.24% lower than the same period last year.

The July to July contracts arbitrage between the London and New York markets narrowed yesterday; to register this at 47.61 usc/Lb. This equates to 46.45% 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 8,131 bags yesterday; to register these stocks at 1,778,195 bags, with 90.9% of these certified stocks being held in Europe at a total of 1,615,657 bags and the remaining 9.1% being held in the USA at a total of 162,538. There was a smaller in number 1,721 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 5,985 bags.

The commodity markets were softer in trade yesterday, to see the overall macro commodity index taking a sideways track for the day. The Sugar, Cocoa and Coffee markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.7028% lower; to see this index registered at 353.8352. The day starts with the U.S. Dollar steady, trading at 1.226 to Sterling, at 1.101 to the Euro and with the US Dollar buying 5.274 Brazilian Real.

The London and New York markets started the day yesterday trading on modest positive note, both markets continued on a positive track into the early afternoon trade. As the afternoon progressed both markets attracted selling pressure to limit the gains for the day and to move onto a negative track for the afternoon trade, both the London and New York markets continued to trade on this negative track to see the markets close on a soft note for the day.

The London market ended the day on a modest negative note and with 64.3% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note 71.23% of the earlier losses of the day intact. This softer close does little to indicate direction, with the New York market dropping back substantially late in the day, one might think the markets are possibly due for little better than a hesitant steady start to early trade today, against the prices set on yesterday, as follows:

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

JUL    1210 – 9                                                                      JUL    102.50 – 2.60
SEP    1232 – 10                                                                    SEP   104.20 – 2.45
NOV   1253 – 9                                                                     DEC   106.35 – 2.40
JAN    1274 – 7                                                                      MAR  108.40 – 2.45
MAR   1295 – 6                                                                     MAY  109.70 – 2.30
MAY 1317 – 4                                                          JUL 110.95 – 2.30
JUL 1340 Unch                                                         SEP 112.15 – 2.25
SEP 1358 + 2                                                            DEC 113.70– 2.20