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 decrease their net long position within this market by 7.05% over the week of trade leading up to Tuesday 9th. November; to register a new net long position 47,908 lots. Meanwhile the longer term in nature Index Fund sector of this market increased their net long position within the market by 2.25%, to register a net long position of 55,751 Lots on the day.

Over the same week, the Non-Commercial Speculative sector of this market decrease their net long position within the market by 5.40% to register a new net long position 40,547 lots, which is the equivalent of 11,494,894 bags. This net long position has most likely been increased marginally following the period of mixed but overall firmer trade that has since followed.

The Green Coffee Association of the U.S.A. have announced that the country’s port warehouse stocks fell by 46,816 bags or 0.78% during the month of October, to register these stocks at 5,976,107 bags at the end of the month. Of this total, 71,602 bags were registered in the U.S. Certified coffee stock warehouses at the time of reporting. The overall Green Coffee stocks reported, do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 595,000 bags per week, would conservatively have been at least 1.2 million bags.

The decline in coffee stocks reported at the end of October 2021 marks the second consecutive month of a reduction to the U.S Green Coffee stock levels. The continued drawdown in consumer market coffee stocks was somewhat expected as roasters turn to local stocks for inventory support, as the global freight and logistics landscape remains tenuous. This new level of stock reported at the end of October 2021, is near the lower point registered in June 2015, when stocks were reported at 5.51 million bags. The current levels of coffee stocks however, which include the certified coffee stocks that are held in certified warehouses and registered to the New York exchange, would equate to more than twelve weeks of roasting activity, which most would consider to be a safe reserve and are likewise still viewed to be well above the historic low which was registered by the U.S.A. Green Coffee Association in 2011 at a total 4 million bags.

The December 2021 to January 2022 contract arbitrage between the New York and London markets widened yesterday to register this at 120.06 usc/Lb. This equates to 53.90% 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 2,302 bags yesterday, to register these stocks at 1,793,543 bags, with 96.01% of these certified stocks being held in Europe at a total of 1,721,941 bags and the remaining 3.99% being held in the USA at a total 71,602 bags. Of this, a total 926,539 bags, or 51.66% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 42.46% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register 4,292 bags pending grading on the day.

It was a firmer day on the commodity markets yesterday, this as commodities have been boosted by an increase in US consumer prices and the major central banks that remain in favour of maintaining low interest rates in an effort to stimulate the economy, in the short term. The Cocoa, New York Arabica Coffee, Soybean, Corn, Gold, Platinum and Palladium markets ended the day on a firmer note, while the Sugar, London Robusta Coffee, Wheat and Silver markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.343 Sterling, at 1.138 the Euro and with the US Dollar buying 5.458 Brazil Real.

The New York and London markets started the day yesterday trading on a modest near to par softer note, both markets continued to oscillate around par for the remainder of the early morning session. Both the New York and the London markets were seen to attract a degree of buying support in technical trade during the late morning session, this saw the New York market trend firmer into the afternoon, while the London market hit a ceiling early to drop back onto a softer path for the early afternoon session. As the afternoon progressed the New York market started to add more value and quickly trigger buy stops along the way to accentuate the gains for the day.

The London market would in turn follow suit with the influence of further weight being added within the New York market, to bounce off the morning lows and likewise add more value to turn positive, gaining momentum throughout the session. The London market encountered resistance late in the day to drop back and settle near to unchanged on a modest softer note at the close. The New York market continued to be driven by further technical sentiment with speculative buy stops triggered along the way before hitting a ceiling late in the day, to limit the gains and see the market drop back and settle with on a firmer note at the close.

The London market ended the day on a modest near to unchanged negative note and with 86.67% of the losses of the day intact, while the New York market ended the day on a positive note and with 49.19% of the earlier gains of the day intact. This mixed but mostly firmer close, saw the New York market carry through momentum form the close on Friday to garner support throughout Monday’s session, albeit that the market dropped back from the highs of the day one might think that the markets are due for a follow through steady start to early trade today, against the prices set yesterday, as follows:

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

JAN 2264 – 13                                                       DEC 222.75 + 3.05
MAR 2209 – 13                                                     MAR 225.00 + 3.05
MAY 2185 – 11                                                     MAY 225.50 + 3.05
JUL 2182 – 9                                                         JUL 225.65 + 3.05
SEP 2177 – 9                                                         SEP 225.70 + 3.00
NOV 2175 – 9                                                       DEC 225.95 + 2.95
JAN 2181 – 9                                                         MAR 226.25 + 2.90
MAR 2179 – 9                                                       MAY 226.45 + 2.85