Coffee Market Report
The respected U.S. Department of Agriculture Global Agricultural Network USDA have released a report outlining the potential for fertilizer disruptions to Brazil, the world’s largest natural arabica coffee producing nation. To support their agricultural sector Brazil relies upon imported inputs such as fertilizers, annually Brazil will import over 85% of their total fertilizer needs. As the report indicates, Russia accounts for about a quarter of all fertilizer imports into Brazil. Over the past weeks the Brazilian government has engaged in talks with Russian and other sources of supply, in an effort to maintain the flow of fertilizers into the country. Brazil is meanwhile, the world’s largest coffee, sugar and soybean producer, and exporter to consumer markets, as well as a leading corn producer, geared to local consumption. Within the coffee sector, concerns are being raised that Brazilian coffee producers may not be able to expand upon planted areas during the 22/23 coffee year due to the rising cost and challenges to source inputs. The Brazilian Government has developed a National Fertilizer Plan to decrease the country’s dependency on imported inputs, this however is expected to take some time to implement.
The May 2022 to May 2022 contract arbitrage between the London and New York markets widened yesterday to register this at 137.92 usc/Lb. This equates to 59.22% 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 increase by 8,859 bags yesterday, to register these stocks at 1,001,144 bags, with 94.35% of these certified stocks being held in Europe at a total of 944,555 bags and the remaining 5.65% being held in the USA at a total 56,589. Of this, a total 429,781 bags, or 42.93% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 47.19% of these certified coffees, originating from Honduras. There was meanwhile 6,425 bags increase to the number of bags pending grading to the exchange; to register 123,829 bags pending grading on the day.
The Certified Robusta coffee stocks held against the London exchange have been reported to decrease by 9,500 bags over the week of trade leading up to Monday 7th. March to see these stocks registered at 1,524,500 bags, on the day.
It was a firmer day on the commodity markets yesterday, as soaring energy prices are resulting in very strong inflationary pressures providing underlying support to the greater commodity basket with the leading in influence oil market firmer. The Sugar, Coffee, Corn, Soybean, Gold, Silver, Platinum and Palladium markets ended the day on a firmer note, the Cocoa market remained unchanged on the day, while the Wheat markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.312 Sterling, at 1.092 the Euro and with the US Dollar buying 5.060 Brazil Real.
The New York and London markets started the day yesterday trading on a modest firmer note, with the markets continuing to oscillate around par for the remainder of the early morning session. A firmer trend built as activity increased in New York. The arrival of the America’s at the start of their business day pushed New York higher, triggering further buy stops along the way to accentuate the gains for the day. The markets which were seen to trade in what one may consider an oversold position over the last number of days assisted to trigger speculative short covering which saw the markets gain ground quickly late in the day.
The late afternoon session saw the London market bounce off the modest lows of the morning session to follow the trend firmer during the afternoon session. The New York market continued on its upward momentum path before being capped briefly very late in the day. This saw the New York market settle near to the highs of the day on a very firm note, while the London market followed suit albeit in a more sedate manner to also settle on a firmer note at the close.
The London market ended the day on a very firm note with 92.19% of the earlier gains of the day intact, while the New York market ended the day on a likewise very firm note with 94.48% of the earlier gains of the day intact. This very firmer close, with the markets rallying late in the day to settle near to the highs of the day, is likely to provide some degree of direction and momentum and one might think that the markets might be pressured 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.
MAY 2094 + 59 MAY 232.90 + 8.65
JUL 2071 + 57 JUL 231.70 + 8.60
SEP 2069 + 60 SEP 230.10 + 8.20
NOV 2068 + 61 DEC 227.65 + 7.70
JAN 2066 + 60 MAR 225.10 + 7.10
MAR 2067 + 59 MAY 223.20 + 6.65
MAY 2072 + 57 JUL 220.70 + 6.25
JUL 2076 + 57 SEP 217.80 + 6.00
