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 increase their net long position within this market by 1.54% over the week of trade leading up to Tuesday 3rd. August; to register a new net long position 39,075. Meanwhile the longer term in nature Index Fund sector of this market cut their net long position within the market by 0.56%, to register a net long position of 64,691 Lots on the day.
Over the same week, the Non-Commercial Speculative sector of this market raised their net long position within the market by 2.70% to register a new net long position 33,814 Lots, which is the equivalent of 9,586,119 bags. This net long position has most likely been decreased following the period of mixed but overall softer trade that has since followed.
A Reuters poll taken with eleven leading trade and market analysts has concluded that the present October 2020 to September 2021 global coffee surplus shall be approximately 7.10 million bags, but that with the combination of a biennially bearing smaller 2021 Brazil crop and steadily recovering global consumption, that there shall be a global coffee supply deficit of approximately 8.95 million bags for the next October 2021 to September 2022 coffee year.
The poll also concluded that due to the change in supply and demand for the last quarter of the year, as well the frost event that impacted an estimated 11% of the Brazil coffee growing areas, is that the coffee markets shall firm later in the year and that it is likely that the New York market shall be trading at around 199 usc/Lb or up 9.07% from Mondays’ close and the London market at around US$ 1,983.00 per Mt., or up 10.47% from Mondays’ close, by the end of the year.
While in terms of the global coffee supply factor and while the poll concluded that the coming July 2021 to June 2022 Brazil crop is likely to be around 54.20 million bags, there have to be questions as to the potential damaging effects that will come from the frost that occurred in the second half of July, for the 2022/23 crop cycle. The poll has indicated that for the coming Brazil July 2022 to June 2023, the next biennially bearing ‘on year’ in the Brazil coffee cycle, that production levels will be around 64.12 million bags, down from 70 million bags during the previous the previous July 2020 to June 2021 biennially bearing larger crop year.
The lower-than-average rainfall that was recorded in the summer months in Brazil, predominantly in the second quarter of 2021, and ahead of the seasonally drier winter months, has sparked discussions regarding the prospective rainfall potential for the coming last quarter of 2021, a little earlier than usual. The onset of the rains in spring months in Brazil traditionally trigger coffee flowering, and the extent of the rainfall, dispersion and regularity, is likely to be a focal point for both the speculative sector and industry alike, to set the next crop to come in 2022, will be closely monitored in the months to come.
Looking ahead, industry focus is likely to remain on largest coffee producer, Brazil, coffee growing areas and rain weather conditions, whether or not, this is seen to be conducive to set and hold, the next biennial bearing larger July 2022 to June 2023 crop to come. This may continue to influence speculative and fund sector sentiment within the markets and one might comment that with the Brazil spring and summer season ahead, there is some degree of volatility yet to come for the coffee futures markets, before the end of this year
The September-to-September contract arbitrage between the London and New York markets broadened yesterday to register this at 98.38 usc/Lb. This equates to 54.85% 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 2,159,236 bags, with 93.92% of these certified stocks being held in Europe at a total of 2,027,851 bags and the remaining 6.08% being held in the USA at a total 131,385 bags. Of this, a total 1,145,541 bags, or 53.05% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 39.22% 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 23,848 bags.
It was a softer day on the commodity markets yesterday, the US Dollar gained ground against a basket of other currencies. A stronger US Dollar is seen to be a bearish factor for many of the US Dollar based commodity markets when trading in other currencies. The Cocoa and Coffee markets ended the day on a positive note, while the Sugar, Corn, Soybean, Wheat, Crude Oil, Gold, Silver, Palladium and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.384 Sterling, at 1.174 the Euro and with the US Dollar buying 5.233 Brazil Real.
The New York market started the day yesterday trading on a modest softer note, while the London market started the day yesterday trading on a modest positive note. Both markets would oscillate either side of par for the remainder of the morning session. As the afternoon progressed both the New York and the London markets started to gain momentum, buoyed by a large degree of buying support which saw buy stops triggered along the way as the markets trended firmer. This saw both the New York and London markets hit new highs late in the day to see both markets settle near to the highs of the day at the close.
The London market ended the day on a positive note and with 76.36% of the gains of the day intact, while the New York market ended the day on a likewise positive note and with 72.83% of the gains of the day intact. This firmer close and with both the New York and the London markets settling near to the highs of the day, might inspire some degree of follow through confidence to possibly set the markets for a steady start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
SEP 1785 + 42 SEP 179.35 + 3.35
NOV 1797 + 43 DEC 182.45 + 3.40
JAN 1795 + 40 MAR 185.10 + 3.40
MAR 1794 + 38 MAY 186.15 + 3.25
MAY 1794 + 34 JUL 186.90 + 3.15
JUL 1792 + 30 SEP 187.55 + 3.10
SEP 1794 + 29 DEC 188.40 + 2.90
NOV 1805 + 29 MAR 189.20 + 2.85
