Coffee Market Report
The fine washed arabica producer Peru, whose export season is underway, and coffee shipments to consumer markets are progressing, from the current April 2021 to March 2022 coffee crop. This, current crop forecast to be somewhere in the region of 3.5 million bags, or around 10% lower than the previous April 2020 to March 2021 coffee year.
During the virtual 10th edition of the Expo Café held in Mexico, meanwhile it was announced that Peru has become the 8th largest exporter of coffee to the world consumer markets. The Governing agricultural authority in the country, MIDAGRI has announced the implementation of the 2019-2030 National Coffee Action Plan which aims to increase domestic consumption by more than 30%, as well bring together all key players in the coffee value chain to connect the public and the private sectors.
A combination of news of wet weather forecast to reach the Brazil Coffee belt during the course of next week as well as weakness in the Brazil Real against the US Dollar, the Brazil Real fell to a 5-week low against the US Dollar yesterday, remain a bearish influence on the markets at present.
The developments within Vietnam in terms of the country’s lockdown are that the Government has announced that there will be an easing of restrictions from the 1st October. This follows an extended period of movement restrictions following the increase of Covid19 cases through August which culminated in the authorities implementing a full lockdown since mid-September. This has seen additional pressure building on supply of various commodities within the country, leading to increased pressure on the already severely strained export capacities. Thus, despite the news of tomorrow’s gradual easing of lockdown restrictions in this country, there remains little to indicate that the backlog of commodities, to include coffee export shipments being held in port warehouses, incurring excessive costs, may be alleviated in the short to medium term.
The November-to-December contract arbitrage between the London and New York markets narrowed yesterday to register this at 97.42 usc/Lb. This equates to 50.37% 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 17,740 bags yesterday, to register these stocks at 2,101,155 bags, with 94.06% of these certified stocks being held in Europe at a total of 1,976,256 bags and the remaining 5.94% being held in the USA at a total 124,859 bags. Of this, a total 1,109,925 bags, or 52.83% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 39.71% of these certified coffees, originating from Honduras. There was meanwhile a smaller in number 7,800 bags increase to the number of bags pending grading to the exchange; to register 7,800 grading stocks on the day.
It was a softer day on the commodity markets on yesterday, the US Dollar gained further ground for the second consecutive day against a basket of other currencies, with expectations that the US Federal Reserve will soon implement a interest rate hike. 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, Corn, Soybean, Wheat markets ended the day on a positive note, while the Sugar, Coffee, Gold, Silver, Platinum and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.345 Sterling, at 1.161 the Euro and with the US Dollar buying 5.415 Brazil Real.
The New York and London markets started the day yesterday trading on a modest close to par softer note. The markets continued to oscillate around par before dropping back to be set on a softer path for the remainder of the morning session. The markets hesitantly traded south of par before coming under severe selling pressure during the early afternoon session, pressured by long liquidation selling to accentuate the losses for the day’s trade. Both markets settled near to the lows of the day at the close.
The London market ended the day on a negative note and with 84.62% of the losses of the day intact, while the New York market ended the day on a likewise negative note and with 92.52% of the losses of the day intact. This softer close, with both markets settling near to the lows of the day, does little to inspire to indicate direction, nor does this inspire confidence and one might think that the markets are due for little better than a hesitant start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
NOV 2116 – 44 DEC 193.40 – 5.20
JAN 2110 – 35 MAR 196.25 – 5.20
MAR 2059 – 29 MAY 197.35 – 5.25
MAY 2036 – 28 JUL 197.90 – 5.30
JUL 2029 – 29 SEP 198.20 – 5.35
SEP 2030 – 29 DEC 198.55 – 5.45
NOV 2034 – 29 MAR 198.90 – 5.45
JAN 2040 – 29 MAY 199.25 – 5.45
