Coffee Market Report

The coffee terminal markets posted moderate gains yesterday, as the recent frost events of the past two weeks, have caused some sense of concern over the prospective damage that this may potentially cause to the next July 2022 to June 2023 Brazil crop to come. These estimates are starting to come to the fore, with the prevailing range of potential damage to the next 2022 crop, to possibly be anywhere from 2 million bags at the lower end, upwards of 8 million bags at the higher end of industry estimates. This potential frost damage to the coffee trees has been reported in varying degrees.

The focus of the Coffee markets remains on Brazil at this time. The month of August, which is seasonally, the last of the winter months, weather forecasters indicate temperate weather conditions for the next fortnight, to likely dampen any residual cool weather speculative activity within the coffee terminal markets as the frost window comes to an end. Speculative focus will soon be turning once more upon the longer-term forecasts and weather prospects for the onset of the new spring and summer rain season for Brazil, to come in the last quarter of the year, to trigger the flowering for the next 2022 crop to come.

The September-to-September contract arbitrage between the London and New York markets broadened yesterday to register this at 94.47 usc/Lb. This equates to 54.03% 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 10,036 bags yesterday, to register these stocks at 2,166,691 bags, with 93.86% of these certified stocks being held in Europe at a total of 2,033,556 bags and the remaining 6.14% being held in the USA at a total 133,135 bags. Of this, a total 1,145,866 bags, or 52.89% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 39.42% of these certified coffees, originating from Honduras. There was meanwhile a smaller in number 8,200 bags increase to the number of bags pending grading to the exchange; to register these pending grading stocks at 19,902 bags.

It was a softer day on the commodity markets yesterday, as investors await new US jobs data that could influence the response of the US Federal Reserve. The Sugar, Cocoa Coffee and Silver markets ended the day on a positive note, while the Cocoa, Wheat, Corn, Soybean, Gold, Platinum and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.393 Sterling, at 1.187 the Euro and with the US Dollar buying 5.197 Brazil Real.

The New York market started the day yesterday trading on a firmer note, while the London market started the day yesterday trading on a softer note. The New York market quickly gained momentum early in the day to see the market buoyed by buying support. The London markets fortunes reversed and followed the path of the New York market early in the day to be set on a positive track for the remainder of the session. As the afternoon progressed the markets continued to trend north of par, this saw both markets hit a ceiling during the early afternoon session, limiting the gains for the day. Both the New York and the London markets dropped back from the highs of the day to settle on a firmer note at the close.

The London market ended the day on a positive note and with 40.43% of the gains of the day intact, while the New York market ended the day on a likewise positive note and with 41.84% of the gains of the day intact. This firmer might close for both markets might inspire some degree of follow through confidence for the markets to possibly set the markets for a hesitant steady start to early trade today, against the prices set yesterday, as follows:

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

SEP 1772 + 19                                                         SEP 174.85 + 2.05
NOV 1787 + 21                                                       DEC 177.85 + 2.10
JAN 1785 + 29                                                        MAR 180.40 + 2.15
MAR 1780 + 31                                                      MAY 181.60 + 2.10
MAY 1775 + 32                                                      JUL 182.40 + 2.15
JUL 1769 + 32                                                        SEP 183.00 + 2.15
SEP 1764 + 33                                                        DEC 183.90 + 2.15
NOV 1772 + 34                                                      MAR 184.75 + 2.20