Coffee Market Report

The respected United States Department of Agriculture Foreign Agriculture Service (USDA) have reported that Ecuador, once an exporter of both arabica and robusta coffees that has over the past couple of decades grown to be a nett importer of green coffee, and exporter of value-added soluble coffees, is experiencing some degree of growth in coffee production. In this respect they foresee that the countries green coffee production for the October 2022 to September 2023 coffee year shall increase by 93,000 bags or 35.63%, to total 354,000 bags. This made up from an approximate 70:30 ratio, of robusta and arabica coffees.

However, with an estimated domestic coffee consumption of 328,000 bags per annum and with exports of mostly soluble coffees which account for close to 88% of total coffee exports, the equivalent of 465,000 bags of coffee, the country remains very much a consumer rather than producer country.

Weather conditions meanwhile within Brazil have been reported to be dry for the first half of this week, with temperatures expected to rise in the coming days. Independent weather forecasters are not forecasting another cold front until the first week of June, the intensity of which remains a question and will be closely monitored across the main arabica growing districts of Southeast Brazil. The reports of cold fronts that may or may not be potentially due to develop over the Brazil winter, remains a focus of the speculative and investor sector of the markets with the damaging frost occurrence of Brazil mid-winter last year, still fresh in memory, so too, to an extent the coffee industry participants within the coffee futures markets. These weather reports from Brazil may potentially bring with continued cautious market supportive talk of damaging cold, and a continuation of weather market volatility within the coffee futures markets in the weeks to come.

The July 2022 to July 2022 contract arbitrage between the London and New York markets narrowed yesterday to register this at 120.98 usc/Lb. This equates to 56.62% price discount for the London Robusta coffee market. This wide arbitrage may 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 1,925 bags yesterday, to register these stocks at 1,099,748 bags, with 95.80% of these certified stocks being held in Europe at a total of 1,053,539 bags and the remaining 4.20% being held in the USA at a total 46,209. Of this, a total 564,993 bags, or 51.37% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 40.16% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register 5,200 bags pending grading on the day.

It was a mixed day on the commodity markets yesterday, as growing global economic concerns regarding inflationary pressures were offset in part by the recent weakness in the US Dollar. The London Robusta Coffee, Soybean, Gold, Silver and Palladium markets ended the day on a positive note, the Sugar market remained unchanged on the day, while the Cocoa, New York Arabica Coffee, Corn, Wheat and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.254 Sterling, at 1.070 the Euro and with the US Dollar buying 4.819 Brazil Real.

The New York and London markets started the day yesterday trading on a modest firmer note. The New York market was seen to oscillate around par for the remainder of the early morning session before trending firmer, this saw the London market follow suit to trade to the north of par for the remainder of the morning session. As the afternoon progressed the New York market attracted a degree of long liquidation pressure, trending softer for the remainder of the afternoon session. The London market followed suit, in a more sedate manner. The late afternoon session saw the markets recover somewhat and the New York market settle on a softer note at the close, while the London market recovered all of the earlier losses to settle on a modest near to unchanged firmer note at the close.

The London market ended the day on a positive note with 14.29% of the earlier gains of the day intact, while the New York market ended the day on a negative note with 44.21% of the earlier losses of the day intact. This mixed but mostly follow through softer close for the markets, with the New York market retaining some of the earlier losses of the day does little to indicate direction nor inspire confidence leading one to think that the markets may possibly be set for a hesitant start to early trade today, against the prices set yesterday, as follows:

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

JUL 2043 + 2                                              JUL 213.65 – 2.10
SEP 2045 + 2                                              SEP 213.95 – 2.00
NOV 2040 + 3                                            DEC 213.80 – 1.90
JAN 2033 + 2                                             MAR 213.00 – 1.95
MAR 2028 + 2                                           MAY 211.75 – 2.00
MAY 2023 + 2                                           JUL 210.05 – 2.00
JUL 2021 + 2                                             SEP 207.90 – 2.00
SEP 2017 + 2                                             DEC 205.55 – 2.15