Coffee Market Report
The Indonesian government trade data from Sumatra, which is the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month of December were 31,038 bags or 10.85% lower than the same month last year, at a total of 255,000 bags. This contributes to the islands cumulative robusta coffee exports for the first three months of the October 2020 to September 2021 coffee year to be 129,037 bags or 11.77% lower than the same period in the previous year, at a total of 967,410 bags.
This dip in cumulative exports for the first three months of the present coffee year follows a relatively good performance for the previous October 2019 to September 2020 coffee year, where Sumatra recorded robusta coffee exports for the year to have been 323,208 bags or 11.82% higher than the same period in the previous 2018/2019 coffee year, at a total of 3,058,673 bags. Thus, one might think that even though Sumatra may continue to post relatively modest robusta coffee export volumes in the coming months, this is in line with expectations. The country’s April 2020 to March 2021 coffee year is now drawing to a close, ahead of the new April 2021 to March 2022 coffee crop and harvest that climate permitting, should start around April this year, and the new crop coffee harvest that is forecast to come in slightly lower year on year, should see shipments to consumer markets increase in volume by May this year.
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 increase in coffee exports from Brazil post the larger biennially bearing coffee crop is however not bringing to the fore significant incentive for the countries arabica coffee farmers to be active sellers, as while reference prices of the New York market have posted a 1.12% drop year on year, the Brazil Real has strengthened by 8.80% to the US Dollar over the past 2 months, for the moment discouraging additional export selling activity. The recent increases in value seen in the New York market has meanwhile assisted to add value, though with good early and profitable sales in hand, this is likely to contribute towards some degree of internal market price resistance for new sales in anticipation of a potentially firmer market to come. This, with the biennially bearing smaller Brazil crop ahead, that is set to start harvest in the Conilon areas around April this year, and a generally optimistic outlook for global consumption to kick of the new year, following news of various countries Covid-19 vaccine rollout strategies, which may be contributory factors to provide modest short-term support to the fortunes of the terminal markets.
The 2020 year has ended with the Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets firmer and ending the year 8.80% up from the end of the previous year, but with the Coffee Terminal Markets having fared marginally worse than the overall mix of commodity markets. The New York arabica coffee market ending the year 1.12% lower and the London robusta coffee market a less dramatic 0.28% higher, than the end of the previous year.
The March 2021 to March 2021 contract arbitrage between the London and New York markets widened on Thursday: to register this at 65.39 usc/Lb. This equates to 50.99 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 300 bags on Thursday, to register these stocks at 1,419,902 bags, with 94.1% of these certified stocks being held in Europe at a total of 1,335,850 bags and the remaining 5.9% being held in the USA at a total 84,052 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 137,962 bags.
These Certified washed arabica stocks have decreased by 612,247 bags or 30.12% through 2020. While with follow through new crops now coming in from Mexico, Central America, and Colombia and to be followed by a potentially good crop, albeit lower than the previous year, starting in Peru during the second quarter of this year, one might expect to see these certified stocks buoyed slightly during 2021.
The Certified Robusta coffee stocks held against the London exchange have been reported to increase by 44,833 bags over the weeks of trade leading up to Monday 21st. December, to see these stocks registered at 2,283,167 bags, on the day. These Certified Robusta stocks have decreased by 254,333 bags or 10.02% through 2020.
The commodity markets had an overall slow day on Thursday ahead of the New Year’s Eve Holiday celebrations and with many of the field of play, taking an extended long weekend, it was a marginally firmer day overall on the commodity markets on Thursday, to see the overall macro commodity index taking something of a positive sideways track for the day. The Sugar, Cocoa and Coffee markets ended the day on a positive note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.7021% higher; to see this index registered 459.9903. The day starts with the U.S. Dollar, trading at 1.368 Sterling, at 1.225 the Euro and with the US Dollar buying 5.194 Real.
The New York and London markets started the day on Thursday trading on a modest firmer note, as the morning session progressed both markets were seen to trend positive only 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 settle on a firmer note for the day and the London market following suit albeit in a more sedate manner.
The London market ended the day on Thursday on a positive note with 83.33% of the earlier gains of the day intact, while the New York ended the day on Thursday on a likewise positive note with 79.16% of the earlier gains of the day intact. This firmer close for the markets might inspire some confidence to possibly set the markets for a follow through steady start to early trade today, against the prices set on Thursday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
MAR 1386 + 10 MAR 128.25 + 2.85
MAY 1395 + 8 MAY 130.15 + 2.85
JUL 1408 + 7 JUL 131.85 + 2.85
SEP 1424 + 7 SEP 133.30 + 2.85
NOV 1439 + 6 DEC 134.80 + 2.85
JAN 1455 + 6 MAR 136.25 + 2.85
MAR 1471 + 7 MAY 136.85 + 2.90
MAY 1488 + 6 JUL 137.45 + 2.90
