Coffee Market Report
The latest Commitment of Traders report from the New York arabica coffee market has seen the shorter term in nature Managed Money fund sector of this market cut their net long position within this market by 8.49% over the week of trade leading up to Tuesday 15th. June; to register a new net long position of 40,598 lots. Meanwhile the longer term in nature Index Fund sector of this market cut their net long position within the market by 2.42%, to register a net long position of 74,121 Lots on the day.
Over the same week, the Non-Commercial Speculative sector of this market cut their net long position within the market by 13.88% to register a new net long position 34,703 Lots, which is the equivalent of 9,838,147 bags. This net long position has most likely been marginally increased following the period of mixed but overall firmer trade that has since followed.
The U.S. Department of Agriculture (USDA) Foreign Agricultural Services have revised their forecast for global coffee supply for the present October 2020 to September 2021 coffee year, to be up by 0.17% to now forecast global coffee supply at 175.80 million bags. While they have forecast that global coffee demand for the same period shall be 163.20 million bags.
Their latest forecast would indicate the potential for a global surplus coffee supply of 12.60 million bags, that is made up primarily of Brazil natural arabica from the Brazil 2020 crop year, and which comes in over and above what is seen to be still reasonable consumer market stock levels. The respected U.S. Department of Agriculture Global Agricultural Network USDA have also reported their forecast for the end of year global coffee stocks for the October 2020 to September 2021 coffee year to be 39.90 million bags.
The USDA forecast global coffee production for the coming October 2021 to September 2022 coffee year to reach 164.80 million bags, 6.24% lower than the previous year. This, due primarily to the biennially bearing nature of the Brazil coffee crop and the coming off year in the cycle. In this respect, the USDA have forecast an estimated production output in Brazil for the July 2021 to June 2022 coffee year to be 13.60 million bags or 19.46% lower than the previous record production coffee year, to reach a potential total of 56.30 million bags in 2021/22.
The USDA have forecast that global coffee demand for the year, despite the prevailing uncertainty within many coffee consumer markets, that have reported lower coffee consumption performance as a result of pandemic related lockdowns; this for the same period to come is seen to be a positive figure and while not what one might consider to be a more traditional 2% to 3% growth year on year, is an overall global coffee consumption increase that is forecast at 1.10% from the previous year, to possibly reach a total 165 million bags in the coming 2021/22 coffee year.
There are a number of independent forecasters that have indicated that internal Brazil coffee stocks are relatively high, as the Brazil July 2020 to June 2021 coffee year draws to a close, and at the end of the current season the USDA estimates these end year coffee stocks to be 4,012,000 bags, heading into the new July 2021 to June 2022 biennially bearing smaller Brazil arabica coffee crop year. These carryover stocks are likely to supplement and fuel supplies into Brazil’s strong domestic coffee consumption, as well as consumer markets for the coming months and leading into the next anticipated biennial bearing larger crop to come, in the July 2022 to June 2023 coffee year.
The July 2021 to June 2022 Brazil coffee crop harvest is currently underway, and apart from a few light showers reported over a few specific areas over the last few days, winter, cool conditions prevail. Weather forecasts are mostly for the low temperatures to be somewhere in the lower teens in degrees Celsius for the next week through full moon, and harvest is progressing in conducive weather conditions for this time of the seasonal year.
The September-to-September contract arbitrage between the London and New York markets broadened yesterday; to register this at 80.70 usc/Lb. This equates to 52.39% 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 remain unchanged yesterday, to register these stocks at 2,162,757 bags, with 93.52% of these certified stocks being held in Europe at a total of 2,022,622 bags and the remaining 6.48% being held in the USA at a total 140,135 bags. Of this, a total 1,151,076 bags, or 53.22% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 38.83% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register these pending grading stocks at 47,095 bags.
It was a firmer day on the commodity markets yesterday, as gains in the U.S Dollar stalled against a basket of other currencies. The Sugar, Cocoa, Coffee, Soybean, Gold, Silver, Platinum and Palladium markets ended the day on a positive note, while the Corn and Wheat markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.391 Sterling, at 1.190 the Euro and with the US Dollar buying 5.013 Brazil Real.
The New York and London markets started the day yesterday trading close to par, the markets quickly came under a large degree of selling pressure to see both the New York and the London markets trend softer for the remainder of the morning session. As the afternoon progressed the markets bounced off the lows of the day and recovered to be set on a firmer more buoyant path for the remainder of the days’ trade. The New York market settled on a positive note retaining most of the earlier gains of the day, while the London market followed suit albeit in a more sedate manner for the day.
The London market ended the day on a very modest positive note and with 16.67% of the gains of the day intact, while the New York market ended the day on a likewise positive note and with 61.76% of the gains of the day intact. New York registered a wide range in trading levels over the session yesterday, the firmer close registered below the highs of the day, to possibly set the markets for a follow through hesitant steady start to early trade today, against the prices set yesterday, as follows, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
SEP 1617 + 1 SEP 154.05 + 2.10
NOV 1639 + 2 DEC 156.95 + 2.00
JAN 1652 + 1 MAR 159.65 + 2.05
MAR 1664 + 1 MAY 161.05 + 2.05
MAY 1676 + 1 JUL 162.15 + 2.05
JUL 1691 + 1 SEP 163.10 + 2.10
SEP 1704 + 1 DEC 164.25 + 2.05
NOV 1715 + 1 MAR 165.45 + 2.10
