Coffee Market Report

Brazil’s government food supply and statistics agency CONAB have come forth to report that they foresee the next 2021 new Brazil coffee crop, due to the biennial bearing nature of the arabica coffee farms shall be 22% lower than the previous 2020 Brazil coffee crop, at a total of 48.80 million bags. The CONAB forecasts are traditionally very conservative, and many would therefore see this as an indication that the new 2021 Brazil coffee crop might still reach closer to 52 million bags, as some other independent forecasters have already released.

The report details the 2021 Brazil coffee crop production estimate for a 31% decrease in primarily natural process arabica coffee production which CONAB foresee at a possible total 33.36 million bags and an 8% increase in Conilon Robusta coffee production, which independent forecasters may consider well below the median average for the crop that is currently in harvest, to total 15.40 million bags.

The respected United States Department of Agriculture USDA Global Agricultural Information Network have reported that over the April 2021 to March 2022 Coffee marketing year, the Peruvian new crop of fine washed arabica coffees, shall be 581,000 bags or 17% larger than the previous crop, at a total of 3.95 million bags. While the report indicated domestic consumption at only a relatively modest 225,000 bags thus releasing most of the new crop coffee to enter the consumer markets.

The report does meanwhile highlight that Peru has approximately 330,000 hectares of harvestable coffee, the anticipated average yield is put at a relatively modest 718 Kgs. per hectare, which is well below the potential from the coffee farms. A factor that would indicate that as and when international coffee market prices improve and can allow the country’s coffee farmers to invest further into increased inputs and better agricultural practices, that there is potential for a significant longer-term increase in Peru coffee production and supply.

The July-to-July contract arbitrage between the London and New York markets widened yesterday; to register this at 83.01 usc/Lb. This equates to 55.16% price discount for the London Robusta coffee market. This wide arbitrage will likely be viewed by price sensitive roasters as an attractive alternative discount for robusta against the comparatively higher value arabica coffee.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 2,200 bags yesterday, to register these stocks at 2,065,506 bags, with 93.55% of these certified stocks being held in Europe at a total of 1,932,376 bags and the remaining 6.45% being held in the USA at a total 133,130 bags. Of this, a total 1,124,822 bags, or 54.45% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 36.65% of these certified coffees, originating from Honduras. There was meanwhile a smaller in number 5,830 bags increase to the number of bags pending grading to the exchange; to register these pending grading stocks at 103,797 bags.

The Certified Robusta coffee stocks held against the London exchange have been reported to decrease by 1,333 bags over the weeks of trade leading up to Monday 24th. May, to see these stocks registered at 2,650,833 bags, on the day.

It was a firmer day on the commodity markets yesterday, as the U.S Dollar weakened further with U.S Treasury yields slipping back amid expectations that the U.S Federal Reserve will keep its monetary policy accommodative. The Sugar, Coffee, Wheat, Soybean, Gold, Silver, Palladium and Platinum markets ended the day on a positive note, while the Cocoa and Corn markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.417 Sterling, at 1.226 the Euro and with the US Dollar buying 5.331 Brazil Real.

The New York and London markets started the day yesterday trading on a modest close to par softer note, the markets would oscillate around par for the remainder of the early morning session before taking somewhat of a softer path into the late morning session. As the afternoon progressed the markets quickly hit a floor to bounce off the lows of the day and buoyed by buying support, trend firmer. Both the New York and the London markets rallied late in the day to hit a ceiling for the day, the markets dropped back from these highs to both settle on positive notes respectively.

The London market ended the day on a positive note and with 40% of the gains of the day intact, while the New York market ended the day on a likewise positive note and with 50% of the gains of the day intact. This firmer close might inspire some degree of confidence albeit that the markets dropped back from the earlier highs of the day, to possibly set the markets for a follow through hesitant start to early trade today, against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT                             NEW YORK USC/LB.

JUL 1488 + 10                                                         JUL 150.50 + 1.50
SEP 1512 + 8                                                          SEP 152.45 + 1.45
NOV 1529 + 8                                                        DEC 155.20 + 1.50
JAN 1541 + 8                                                         MAR 157.55 + 1.50
MAR 1554 + 8                                                       MAY 158.60 + 1.55
MAY 1568 + 8                                                       JUL 159.25 + 1.55
JUL 1582 + 8                                                         SEP 159.50 + 1.60
SEP 1594 + 8                                                         DEC 159.75 + 1.60