Coffee Market Report

The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector switch their net long position within the market to a new net short position within the market over the week of trade leading up to Tuesday 2nd June; to register a new net short position of 11,163 Lots which is the equivalent of 3,164,661 bags. This new net short position has most likely been dramatically increased, following the period of 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 2.88% over the week of trade leading up to Tuesday 1st June; to register a short-sold position of 35,857 Lots. This net short sold position is the equivalent of 5,976,167 bags and has most likely been little increased following the period of mixed but overall soft sideways trade that has since followed.

The respected U.S. Department of Agriculture Global Agricultural Network USDA have forecast that Tanzania is due to see its coffee production for the forthcoming July 2020 to June 2021 coffee year to be 100,000 bags or 8.00% higher than the previous crop, at a total of 1,350,000 bags, this they say is attributed to favourable weather conditions across the coffee growing regions. This they say, shall be related to the production of 700,000 bags of arabica coffee, 7.70% higher than the previous crop and 650,000 bags of robusta coffee, 8.33% higher than the previous crop.

Of this new crop, the forecast is that Tanzania will export 16.67% or 200,000 bags less than the previous marketing year at a total of 1,000,000 bags of green coffee. The USDA also forecast that there will be no change to the annual domestic consumption which is to remain at 50,000 bags or only 3.7% of the country's total crop production for the July 2020 to June 2021 coffee year. This is indicated in the report to be mainly due to the consumer preference for tea and the perceived relatively high price of coffee compared to the price of tea.

This report in terms of both the official new crop forecast and many trade and industry forecasts, would appear to be quite ambitious. As most forecast a relatively sharp dip in coffee production for the new coffee crop in Tanzania, with indications that it might struggle to exceed 800,000 bags. With indications that arabica coffee production might only be approximately 500,000 bags and robusta coffee production to be sharply lower, at around 300,000 bags. One might anticipate that as it is still relatively early in the harvesting year, the greater portion of coffee intake is to come from the smallholder coffee growing community, and as deliveries continue, this will provide greater transparency on the question of overall new crop production in the coming months.

The July to July contracts arbitrage between the London and New York markets narrowed on Friday; to register this at 42.98 usc/Lb. This equates to 43.46% 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 825 bags on Friday; to register these stocks at 1,744,586 bags, with 91.1% of these certified stocks being held in Europe at a total of 1,588,424 bags and the remaining 8.9% being held in the USA at a total of 156,162. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 24,489 bags.

The commodity markets were slightly firmer in trade on Friday, to see the overall macro commodity index taking a sideways track for the day. The Oil, Natural Gas, Sugar, Cocoa, Coffee, Cotton, Copper, Orange Juice and Corn markets ended the day on a positive note, the Soybean market remained unchanged on the day, while the Wheat, Gold and Silver markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.6008% higher; to see this index registered at 364.177. The day starts with the U.S. Dollar steady, trading at 1.269 to Sterling, at 1.128 to the Euro and with the US Dollar buying 4.959 Brazilian Real.

The London and New York markets started the day on Friday trading on modest close to par positive note, both markets continued on a positive track into the early afternoon trade buoyed by buying support. As the afternoon progressed both the New York and the London markets started to attract further buying support to move deeper into positive territory to see the London market close on a very positive note for the day while the New York market hit a ceiling to drop back from the highs of the day to settle on a positive note for the day.

The London market ended the day on a positive note and with 84.10% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note 46.90% of the earlier gains of the day intact. This positive close might inspire some degree of confidence to possibly set the market 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.

JUL 1233 + 37                                                                   JUL 98.90 + 0.75
SEP 1245 + 35                                                                   SEP 100.65 + 0.95
NOV 1260 + 33                                                                 DEC 103.00 + 1.00
JAN 1276 + 30                                                                  MAR 105.30 + 1.10
MAR 1292 + 27                                                                MAY 106.80 + 1.10
MAY 1310 + 23                                                                JUL 108.30 + 1.15
JUL 1328 + 22                                                                  SEP 109.65 + 1.15
SEP 1342 + 20                                                                  DEC 111.40 + 1.10