Coffee Market Report
The analysts Safras & Mercado have reported that Brazil coffee farmers have already sold around 86% of the estimated total production of 56.50 million bags from this current Brazil Coffee crop. The pace of sales at this time across a five-year average is reported to be around 80%, thus illustrating that current crop sales are picking up pace, over and above that of the recorded five-year average. This selling activity has been assisted to a degree by the higher value to be had in against the futures terminal markets.
The weather conditions within Brazil meanwhile have reported good rainfalls across the Brazil coffee belt during the first week of February. There have been fresh forecasting reports coming to the fore, to report the potential for a lower Brazil crop this year. This is a factor that shall be closely watched by the market as the crop readies to begin harvest in a few months’ time.
The Vietnam Customs Authority have reported that Vietnam’s coffee exports for the month of January have registered 3.60% lower from the previous month, at 2,722,067 bags. This number is proving to be slightly lower than the 2.91 million bags that had been initially forecast for the month’s coffee exports. This sees the cumulative export performance from Vietnam, the largest producer of robusta coffee at 1,077,200 bags or 13.61% higher than the same period in the previous year, at a total 8,989,917 bags in the first four months of the current October 2021 to September 2022 coffee year.
The General Statistics office of Vietnam have at the same time reported the country’s coffee revenue value for the month of January, shall be 2.20% lower than the previous month, at a total of approximately 370.60 million US Dollars.
With the month of January complete, the Indonesian government trade data from Sumatra, the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month of January were 109,584 bags or 29.54% lower than the same month last year, at a total of 261,404 bags. This contributes to the islands cumulative robusta coffee exports for the first four months of the current October 2021 to September 2022 coffee year to be 403,721 bags or 25.75% lower than the same period in the previous year, at a total of 1,163,957 bags.
A Reuters poll taken with ten leading trade and market analysts has concluded that the present October 2021 to September 2022 global coffee deficit shall be approximately 8.45 million bags due to a combination of a biennially bearing smaller 2021 Brazil crop and recovering global consumption since the beginning of the Covid-19 pandemic. The poll concluded that global coffee supply is seen to be balanced for the next October 2022 to September 2023 coffee year.
The poll also concluded that, due to an easing of global logistical pressures the coffee markets shall soften later in the year and that it is likely that the New York market shall be trading at around 245 usc/Lb or down 4% from yesterdays close and the London market at around US$ 2,275.00 per Mt., or down 0.20% from yesterdays close, by the end of the year.
While in terms of the global coffee supply factor and while the poll concluded that this year’s biennially bearing lower Brazil crop is likely to be around 54.40 million bags. The poll has likewise 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 63.38 million bags, down from 70 million bags during the previous the previous July 2020 to June 2021 biennially bearing larger crop year.
The poll has reported that the production from the current Vietnam October 2021 to September 2022 crop year shall reach 31 million bags or 6.90% larger than the previous year.
The U.S. Governments National Weather Service’s Climate Prediction Centre have updated their forecast to report that La Niña climatic conditions have developed and that there is now a 77% chance for a La Niña phenomenon weather pattern to continue through March to May 2022. Thereafter it is anticipated to dissipate, with a more weather neutral environment expected toward the end of May this year.
The March 2022 to March 2022 contract arbitrage between the London and New York markets narrowed yesterday to register this 151.83 usc/Lb. This equates to 59.49% 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 453 bags yesterday, to register these stocks at 1,035,410 bags, with 94.35% of these certified stocks being held in Europe at a total of 976,871 bags and the remaining 5.65% being held in the USA at a total 58,539. Of this, a total 369,968 bags, or 35.73% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 54.35% of these certified coffees, originating from Honduras. There was meanwhile a 5,914 bags decrease to number of bags pending grading to the exchange; to register 40,337 bags pending grading on the day.
It was a softer day on the commodity yesterday, the US Dollar lost ground against a basket of other currencies yesterday, after newly released US consumer price data showed a sharp increase confirming the ongoing inflationary conditions. The London Robusta Coffee, Cocoa, Silver and Platinum markets ended the day on a firmer note, while the New York Arabica Coffee, Sugar, Corn, Soybean, Wheat, Gold and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.353 Sterling, at 1.138 the Euro and with the US Dollar buying 5.250 Brazil Real.
The New York and London markets started the day yesterday trading on a firmer note. Both markets were buoyed by buying support early in the day to trend firmer during the morning session. During the Mid-morning session the markets encountered resistance to drop back from the early highs and be seen to be set on a softer path for the remainder of day. As the afternoon progressed the New York market attracted a degree of long liquidation pressure to see the market trend softer for the remainder of the afternoon session. The London market followed suit, in a more sedate manner.
The late afternoon session saw New York market continue on a softer path and hit a floor late in the day, thus limiting the losses to see the market settle on a negative note at the close, while the London market bounced off the lows of the day to recover all of the losses and settle on a modest near to unchanged firmer note at the close.
Following the last few days technical rally in light prompt month options expiry on the 10th February as well as first notice day approaching on the 17th February, trading volumes have been comparatively heavy, with a degree of consolidation seen during trade yesterday.
The London market ended the day on a modest near to unchanged positive note with 60% of the earlier gains of the day intact, while the New York market ended the day on negative note with 67.02% of the earlier losses of the day intact. This mixed but mostly softer close, with the New York market retaining most of the earlier losses of the day might indicate some degree of consolidation, 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.
MAR 2279 + 9 MAR 255.20 – 3.15
MAY 2263 + 4 MAY 255.25 – 3.20
JUL 2240 – 4 JUL 253.60 – 3.40
SEP 2233 – 4 SEP 251.95 – 3.40
NOV 2231 – 5 DEC 249.00 – 3.50
JAN 2230 – 5 MAR 246.10 – 3.55
MAR 2228 – 5 MAY 243.40 – 3.70
MAY 2224 – 5 JUL 240.00 – 3.55
