Coffee Market Report
The current and record-breaking production that has come from the Brazil coffee seasonal year July 2020 to June 2021, has thus far, from July to November reflected the record crop that has been harvested and continues to flow to consumer markets in record numbers. Brazil has reported exports at a cumulative total of 18.17 million bags, in the first five months of the country’s coffee year. The export reports for the month of December, likely to follow in the new week.
The climate in Brazil as the new July 2021 to June 2022 crop sets on the trees, has after a tenuously drier month in November, since reported improved rainfall and dispersion across the vast coffee growing areas, to indicate conducive weather for the continued development of the new coffee crop. This crop, which has been forecast to be at a median total of 57 million bags for the forthcoming biennially lower bearing crop year, and of this 38 million bags natural arabica coffees, and 19 million bags Conilon Robusta coffees.
Looking ahead, one might anticipate reviewed surveys and forecasts for the 2021/22 Brazil coffee crop, to start to come to the markets in come forth early in the New Year, with speculative market participant attention fixed on this largest coffee producers’ potential and production performance for the coming year, as well as, though it is still early days, the prospects and potential for the next biennially bearing 2022/23 Brazil coffee crop year, which is likely to continue to lend an influence to speculative sentiment and positions on the coffee futures markets.
The Colombia, Mexico and Central America October 2020 to September 2021 seasonal washed arabica coffee year crops are currently in harvest. Delays have been noted in the coffee flow in the interior, which is being primarily attributed to delayed ripening and resultant slower coffee flow, when compared to traditional flows for this time of the year. There is no doubt however that many of these higher cost, labour intensive washed arabica producers have sustained continued losses over the past four years against the values set against New York that has consistently traded below 150 usc/Lb.,; the new challenges that are being experienced for harvesting and protocols within Covid19 conditions aside; this main producer bloc of quality washed arabica producers have traditionally the manual, labour intensive, cost prohibitive practice of only ripe cherry picking, which with the lower overall market prices already seen the regularity of picking rounds cut in past seasons, with a collective impact upon overall volume and quality of coffee within the interior. The circumstances, internal financial support structures for coffee farmers and therefore the severity of the consistently low terminal market prices, having a varied impact from producer country to country, it is difficult to anticipate that these fine washed arabica producer countries will report year on year higher coffee production this 2020/21 coffee year, which as a combined washed arabica producer bloc is looking to be around 31.8 million bags, or 1.12% lower than the previous 2019/20 coffee year.
The harvest in Vietnam which was initially delayed by a continuation of the rain season into November, is well underway, with new crop coffees moving from the interior to the ports. The significant increases in ocean freight costs from this area to the world, which have come about at relatively short notice, primarily driven by an increase in finished goods demand to large consumer markets over December, is showing limited signs of subsiding as the year draws to a close.
The main coffee importing consumer blocs in the northern hemisphere, USA, Canada, European Union countries, that are collectively around 86 million bags of global coffee consumption, continue (as is the situation for most parts of the world at the moment), to operate through various degrees of Covid19 related lockdown environments. This, within the context of coffee consumption, has in this past challenging year, reported mixed results and for these developed coffee consumer markets, reflected increases in retail supermarket and online demand, whereas hotels, restaurants, catering and coffee shop outlets have been worst hit, in many instances little to no income for months, along with a commercially uncertain future. This latter sector that by nature of cup by cup coffee sales, traditionally has an improved likelihood of seeking out quality coffees along with the associated affordability, that is not related to the wider spectrum, aggressive retail price competition on shelf.
The March 2021 to March 2021 contract arbitrage between the London and New York markets narrowed yesterday: to register this at 62.99 usc/Lb. This equates to 50.23 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 5,967 bags yesterday, to register these stocks at 1,420,202 bags, with 94.1% of these certified stocks being held in Europe at a total of 1,336,150 bags and the remaining 5.9% being held in the USA at a total 84,052 bags. There was meanwhile a larger in number 21,755 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 137,962 bags.
It was a firmer day overall on the commodity markets yesterday, to see the overall macro commodity index taking something of a sideways track for the day. The Sugar and Cocoa markets ended the day on a positive note, the New York Arabica Coffee market remained unchanged on the day, while the London Robusta Coffee market ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.9982% higher; to see this index registered 456.7830. The day starts with the U.S. Dollar, trading at 1.362 Sterling, at 1.230 the Euro and with the US Dollar buying 5.194 Real.
The New York and London markets started the day yesterday trading on a modest softer note, as the morning session progressed both markets trended firmer to hit a ceiling limiting the gains for the early morning session. As the afternoon progressed both the New York and London markets fell back from the highs of the day to see the New York market remain unchanged for the day, while the London market settled on a modest softer note for the day.
The London market ended the day on a modest softer note with 70% of the earlier losses of the day intact, while the New York remained unchanged on the day. This mostly unchanged close provides little in the way of direction for these markets in the coming week, with many players still on holiday for the remainder of the week, thus one would guess and with nothing in the way of striking new fundamental news in play, that the markets are due for 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.
MAR 1376 – 7 MAR 125.40 Unch
MAY 1387 – 6 MAY 127.30 Unch
JUL 1401 – 7 JUL 129.00 + 0.05
SEP 1417 – 7 SEP 130.45 + 0.05
NOV 1433 – 7 DEC 131.95 + 0.05
JAN 1449 – 7 MAR 133.40 + 0.10
MAR 1464 – 7 MAY 133.95 + 0.10
MAY 1482 – 7 JUL 134.55 + 0.10
