Coffee Market Report

There have been some internal reports from the trade within Vietnam that farmers are showing a degree of internal market price resistance, in anticipation of what they see to be potential higher prices to come for their remaining stocks from the October 2021 to January 2022 harvest, and with the next harvest of mainly Robusta coffees only due to start in October, the internal market is expected to remain relatively tight.

There are though and aside from the Vietnam and Indian robusta coffee crops that are presently coming to the market, the prospects for the new Indonesian and Ugandan robusta coffee crops to start to pick up in volume by May, which shall likewise be accompanied by the biennially bearing larger Brazil Conilon robusta coffees that might be looking for a home within the consumer markets. The notably wide arbitrage meanwhile, between arabica and robusta coffee remains steady at around 55% discount, which continues to attract price sensitive roasters to increase robusta usage and at the expense of more expensive, finer cup arabica coffees.

This, with the new India and Vietnam larger coffee exporting nations steadily exporting coffees within the limited and still restrained worldwide shipment congestion, soon Indonesia and Uganda along with the new, larger Conilon robusta Brazil coffee crop to come, the question remains of timing and arrival of these coffees to consumer markets, which may potentially weigh in on speculative sentiment as the supply and demand within the robusta supply context, should start to see balance begin to shift to replenish consumer coffee stock levels in the months ahead.

The May 2022 to May 2022 contract arbitrage between the London and New York markets narrowed yesterday to register this at 129.26 usc/Lb. This equates to 57.65% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 12,832 bags yesterday, to register these stocks at 1,021,976 bags, with 94.46% of these certified stocks being held in Europe at a total of 965,387 bags and the remaining 5.54% being held in the USA at a total 56,589. Of this, a total 450,261 bags, or 44.06% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 46.26% of these certified coffees, originating from Honduras. There were meanwhile 105 bags increase to the number of bags pending grading to the exchange; to register 136,413 bags pending grading on the day.

It was a modest firmer day on the commodity markets yesterday, as some degree of consolidation was seen in the commodity basket, with investors taking on board US inflation data for the month of February which indicated the largest year-on-year jump since 1982. This was expected but has taken somewhat of a backseat, as the world witnesses the humanitarian crisis in war torn Ukraine, the markets focus on the developing economic uncertainties in the commodities sector, energy and agricultural supply impact that this war, along with the economic sanctions applied, will continue to impact upon supply around the globe. It was a firmer day for Sugar, Cocoa, Corn, Soybean, Gold, Silver, Platinum and Palladium markets, while the Coffee and Wheat markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.308 Sterling, at 1.100 the Euro and with the US Dollar buying 5.011 Brazil Real.

The New York market started the day yesterday trading on a modest near to par firmer note, while the London market started the day yesterday trading on a very negative note. Both markets quickly attracted a degree of selling pressure to see the New York market trend softer and the London market accentuate the losses for the morning session. As the afternoon progressed the New York and London markets would continue to project in a negative direction which would see the markets soon hit a floor for the day, pressured by long liquidation selling.

Both the New York and the London markets rebounded from the lows of the day to stage a modest recovery late during the afternoon session which saw both the New York and London market recover some of the earlier losses of the day and settle on a softer note respectively.

The London market ended the day on a negative note with 51.06% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note with 67.55% of the earlier losses of the day intact. This follow through soft close for the markets, does little to inspire confidence nor does it indicate direction and with the underlying volatility within the commodity basket, 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.

MAY 2093 – 24                                           MAY 224.20 – 5.10
JUL 2072 – 24                                             JUL 223.45 – 4.80
SEP 2069 – 24                                             SEP 221.95 – 4.75
NOV 2067 – 23                                           DEC 219.50 – 4.65
JAN 2066 – 20                                            MAR 217.00 – 4.45
MAR 2065 – 18                                          MAY 215.30 – 4.20
MAY 2068 – 18                                          JUL 212.95 – 4.05
JUL 2069 – 18                                            SEP 210.05 – 4.00