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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

29 Jun 2020
The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector raise their net short position within the market by 14.56% over the week of trade leading up to Tuesday 23rd. June: to register a new net short sold position of 27,669 Lots which is the equivalent of 7,844,039 bags. This new net short position has most likely been further increased, following the period of mixed but overall softer trade that has since followed.

The latest Commitment of Traders report from the London Robusta coffee market has seen the Speculative Managed Money Sector of this market increase their net short sold position within the market by 17.42% over the week of trade leading up to Tuesday 23rd. June; to register a short-sold position of 40,805 Lots.  This net short sold position is the equivalent of 6,800,833 bags and has most likely been further increased following the period of mixed but overall soft sideways trade that has since followed.

With the month of June coming to a close and with the shipment statistics already at hand, the Vietnam General Statistics office have estimated that the coffee exports for the month of June shall be approximately 2,333,333 bags.  This they say, shall result in the countries coffee exports for the first half of this year to be 3.7% higher than the same period last year, at a total of 15,916,667 bags.

The General Statistics office of Vietnam have at the same time estimated that the value of the country’s coffee exports for the first half of this year, shall be 2.5% higher than the same period last year, at a total of approximately 1.61 billion US Dollars. Although the Vietnamese Government enforced a countrywide lockdown in early April, for the most part within the coffee and other agricultural sectors within the country and barring a small degree of disruption to the flow of goods from the interior, subsequent to the lockdown generally business has taken place as usual throughout the month of June.

The analysts Safras & Mercado have estimated that almost 41% of the new Brazil coffee crop has already been harvested. This based on the Safras & Mercado forecast for a new crop of 68 million bags, the report would indicate that so far approximately 28 million bags of the new crop have been harvested. These coffees made up from approximately 12 million bags of conilon robusta coffees and approximately, 16 million bags of arabica coffees. The harvest this year is at a slower pace, compared to the same week in 2019 when approximately 54% of the crop was harvested, although the size of this biennial bearing larger crop can be attributed to the slower harvest time this year. After weeks of dry weather meanwhile, a cold wet front is due to reach the Southeast regions of the Brazil Coffee Belt this week, which is not anticipated to disrupt harvest. The natural process is primarily the method for Brazil coffees, one might anticipate that outdoor cherry drying may be slightly delayed in isolated areas, if any are to be affected by the cold front to come. Across the expansive coffee growing areas however, with many producers having access to mechanical drying options, the harvest continues in a routine manner.

The September to September contract arbitrage between the London and New York markets widened on Friday; to register this at 44.35 usc/Lb. This equates to 45.89% 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 672 bags on Friday; to register these stocks at 1,662,571 bags, with 92.4% of these certified stocks being held in Europe at a total of 1,535,489 bags and the remaining 7.6% being held in the USA at a total of 127,082 bags. There was meanwhile a smaller in number 150 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 33,082 bags.

It was a softer day overall on the commodity markets on Friday, to see the overall macro commodity index taking something of a soft sideways track for the day. The New York Arabica Coffee market ended the day on a positive note, while the Sugar, Cocoa and London Robusta Coffee markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.8758% higher; to see this index registered at 352.7911. The day starts with the U.S. Dollar steady, trading at 1.237 to Sterling, at 1.125 to the Euro and with the US Dollar buying 5.484 Brazilian Real.

The New York and London markets started the day on Friday trading on a modest close to par positive note, both markets maintained this firm stance into the early afternoon trade. As the afternoon progressed the New York market started to attract a selling pressure on the back of a weaker Brazil Real, the London market soon followed suit. Late in the afternoon session saw both the London and New York markets slip back into deeper negative territory, the New York market bounced back off the lows of the day, late in the day, to settle on a modest positive note, while the London market settled on a close to par modest negative note for the day.

The London market ended the day on a modest close to par negative note and with 10% of the earlier losses of the day intact, while the New York market ended the day on a modest close to par positive note and with 65.38% of the earlier gains of the day intact. This mixed close to par close does little to indicate direction and on might expect the markets are due for 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.

SEP 1153 – 1                                                                           SEP 96.65 + 0.85
NOV 1172 – 2                                                                          DEC 98.95 + 0.70
JAN 1191 – 1                                                                           MAR 101.05 + 0.65
MAR 1209 – 2                                                                         MAY 102.30 + 0.55
MAY 1229 – 2                                                                         JUL 103.60 + 0.50
JUL 1249 – 2                                                                           SEP 104.85 + 0.40
SEP 1265 – 4                                                                            DEC 106.60 + 0.35
NOV 1283 – 3                                                                          MAR 108.30 + 0.30