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 17.12% over the week of trade leading up to Tuesday 22nd. June; to register a new net long position of 33,647 lots. Meanwhile the longer term in nature Index Fund sector of this market cut their net long position within the market by 2.02%, to register a net long position of 72,623 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 23.75% to register a new net long position 26,461 Lots, which is the equivalent of 7,501,576 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 harvest of the Brazil July 2021 to June 2022 arabica coffee crop is presently underway, with weather conditions conducive for this seasonal time of year. It has been some twenty-seven years since the main coffee producing districts within south eastern Brazil have encountered any significant damaging frost event, with coffee planting areas migrated away from the higher risk frost areas. World weather is erratic however and whereas many within the industry and the speculative sectors of the coffee markets have never encountered market reaction to an actual frost event, there is some awareness of the historical influence that cold front volatility can have upon the markets. This volatility continues as the worlds’ largest coffee producer moves deeper into the main winter months, and through to end August.

With the month of June coming to a close and with the shipment statistics already at hand, the Vietnam General Statistics office have estimated that the coffee exports for the month of June shall be 13.80% lower than the same month last year, at a total of approximately 1,833,333 bags. This they say, shall result in the countries coffee exports for the first six months of this calendar year to be 12.30% lower than the same period last year, at a total of 13,750,000 bags.

There is the supposition meanwhile, that while the lower production to come from Vietnam in the prevailing coffee year has a part to play in the lower overall reported export statistics, the prevailing shipping challenges have similarly contributed toward the lower coffee export reports, the resultant congestion and bottlenecks at ports and warehouses holding inventories which are not meeting sailing commitments, while the compounding shipment demands are not being met with equipment and vessel space, and the perpetual constraint is not showing any signs of subsiding in the near future.

The General Statistics office of Vietnam have at the same time estimated that the value of the country’s coffee exports for the first six months of this year, shall be 4.50% lower than the same period last year, at a total of approximately 1.52 billion US Dollars.

The September-to-September contract arbitrage between the London and New York markets widened yesterday; to register this at 85.09 usc/Lb. This equates to 52.30% 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 962 bags yesterday, to register these stocks at 2,178,300 bags, with 93.59% of these certified stocks being held in Europe at a total of 2,038,765 bags and the remaining 6.41% being held in the USA at a total 139,535 bags. Of this, a total 1,150,751 bags, or 52.83% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 39.43% 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 22,546 bags.

It was a firmer day on the commodity markets yesterday, the leading in influence Oil markets registered upward momentum during the session, while the US Dollar slipped back in value against a basket of other major currencies. The Sugar, Coffee, Corn, Wheat, Soybean, Gold, Silver and Palladium markets ended the day on a positive note, the Cocoa market remained unchanged on the day, while the Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.387 Sterling, at 1.191 the Euro and with the US Dollar buying 4.924 Brazil Real.

The New York and London markets started the day yesterday trading on a modest firm note. The markets continued to trade in positive territory for the remainder of the early morning session, oscillating a little north of par before dropping back towards par as the late morning session came to a close. As the afternoon progressed the New York market started to add more value and with buy stops triggered along the way, accentuating the gains for the day. The London market followed suit with the influence of further weight being added within the New York market, to likewise add more value and gain momentum throughout the session. Both markets hit ceilings late in the day, as sellers returned to the floor, to limit the gains for the day to some degree but still see the markets settle very positive at the close.

The London market ended the day on a positive note and with 84.21% of the gains of the day intact, while the New York market ended the day on a likewise positive note and with 83.05% of the gains of the day intact. This firmer close is a somewhat supportive factor for confidence in the market, as the markets continue their momentum from the close on Friday, there is likely to be some degree of caution and hesitancy for early trade today and thus one might expect to see only a modest follow through support to early trade today, against the prices set yesterday, as follows:

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

SEP 1711 + 32                                                         SEP 162.70 + 4.90
NOV 1723 + 30                                                       DEC 165.45 + 4.80
JAN 1730 + 31                                                        MAR 168.05 + 4.85
MAR 1733 + 28                                                      MAY 169.25 + 4.80
MAY 1738 + 27                                                      JUL 170.15 + 4.70
JUL 1749 + 26                                                        SEP 170.90 + 4.60
SEP 1762 + 26                                                        DEC 172.00 + 4.60
NOV 1773 + 26                                                      MAR 173.05 + 4.60