Coffee Market Report

The respected United States Department of Agriculture Foreign Agriculture Service (USDA) have reported that due to a combination of factors to include reduced fertiliser application due to increased prices, that coffee production in Kenya for the coming October 2022 to September 2023 coffee year shall be 80,000 bags or 10.26% lower, to total only 700,000 bags., noting that this shall be for a country that some 40 years ago used to produce in excess of 2 million bags per annum.

The July 2022 to July 2022 contract arbitrage between the London and New York markets widened yesterday to register this at 122.34 usc/Lb. This equates to 56.36% 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.

Today is the Ascension Day public holiday for many leading European countries but does not impact upon the USA and UK and the coffee markets. It is likely though in terms of physical trade and the significant consumer market share of the Western Europeans, to somewhat mut business for the day.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 9,593 bags yesterday, to register these stocks at 1,090,155 bags, with 95.77% of these certified stocks being held in Europe at a total of 1,043,946 bags and the remaining 4.23% being held in the USA at a total 46,209. Of this, a total 558,648 bags, or 51.24% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 40.26% 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 but overall softer day on the commodity markets yesterday, after this weeks US Federal Reserve meeting suggested that the central bank would stick to an aggressive policy strategy and look to further interest rate hikes as tool to curb inflation. The Coffee, Corn and Palladium markets ended the day on a positive note, while the Cocoa, Sugar, Soybean, Wheat, Gold, Silver and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.256 Sterling, at 1.068 the Euro and with the US Dollar buying 4.824 Brazil Real.

The New York and London markets started the day yesterday trading on a modest firmer note, both markets would continue to trend in a positive direction for the remainder of the morning session, oscillating around par. As the afternoon progressed the firmer trend built as more activity increased in New York. This momentum carried into the early afternoon as buy stops were triggered to accentuate the gains for the day. The late afternoon session saw the New York market drop back and trend towards par briefly before gaining momentum with as the market buoyed in a firmer direction. 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 firm note, while the London market followed to also settle on a firmer note at the close. Weather conditions within Brazil expected to remain mostly dry over the course of the next week, with temperatures expected to rise in the coming days.

The London market ended the day on a positive note with 86.54% of the earlier gains of the day intact, while the New York market ended the day on a positive note with 73.11% of the earlier gains of the day intact. This firmer close for both the New York and London markets, might inspire some degree of follow through confidence to possibly set the markets for a steady start to early trade today, against the prices set yesterday, as follows:

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

JUL 2088 + 45                                            JUL 217.05 + 3.40
SEP 2088 + 43                                            SEP 217.30 + 3.35
NOV 2071 + 31                                          DEC 217.00 + 3.20
JAN 2054 + 21                                           MAR 215.90 + 2.90
MAR 2045 + 17                                         MAY 214.60 + 2.85
MAY 2036 + 13                                         JUL 212.80 + 2.75
JUL 2032 + 11                                           SEP 210.55 + 2.65
SEP 2026 + 9                                             DEC 208.30 + 2.75