Coffee Market Report
The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector increase their net long position by 31.98% within the market over the week of trade leading to Tuesday 31st. May 2022: to register a net long position of 23,453 lots, which is the equivalent of 6,648,821 bags. This net long position has most likely been increased further following the period of overall firmer trade that has since followed.
The latest Commitment of Traders report from the London Robusta coffee market has seen the Speculative Managed Money Sector of this increase their net long position by 26.76% within the market over the week of trade leading up to Tuesday 31st. May 2022: to register a new net long position of 20,459 Lots which is the equivalent of 3,409,833 bags. This net long position has most likely been increased further following the period of overall firmer trade that has since followed.
The respected United States Department of Agriculture USDA Global Agricultural Information Network have reported that the October 2022 to September 2023 Indian coffee crop shall be 3.79% higher than the previous year at a total of 5,740,000 bags. This figure is made up from the production of 1,320,000 bags of arabica coffee and 4,420,000 bags of robusta coffee. The report further anticipates green coffee exports from this primarily Robusta producing country to reach 3,920,000 bags in the October 2022 to September 2023 coffee year. 2.35% higher than the previous year.
In the same report, the USDA reports that the increase in expected production during the October 2022 to September 2023 crop year is expected with higher yields for both Arabica and Robusta due to the availability of adequate moisture and good pre-monsoon rainfall. The USDA estimates October 2022 to September 2023 yields for Arabica at 383 kilograms, per hectare, two percent higher than last year. The yields for Robusta are estimated at 1,216 kilograms per hectare, three percent higher than last year.
The USDA estimates the October 2022 to September 2023 Indian domestic coffee consumption to grow by nearly 2 percent to 1,240,000 bags. This is largely driven by growth in sales of soluble coffee for at home consumption through retail and e-commerce channels. It is expected however that rising inflation will negatively impact the foodservice sector, mainly out of home consumption and that it is likely consumers will curb spending and shift towards more affordable at home consumption options. This in-home consumption of coffee, an important driver of demand is expected to rise with the increased demand for instant coffee (soluble coffee). Estimated soluble coffee consumption at 800,000 bags, three percent higher than last year.
The July 2022 to July 2022 contract arbitrage between the London and New York markets narrowed on Friday to register this at 135.51 usc/Lb. This equates to 58.31% 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 7,139 bags on Friday, to register these stocks at 1,023,477 bags, with 95.49% of these certified stocks being held in Europe at a total of 977,268 bags and the remaining 4.51% being held in the USA at a total 46,209. Of this, a total 508,251 bags, or 49.66% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 41.29% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register 7,800 bags pending grading on the day.
It was an overall softer day on the commodity on Friday, as the US Dollar steadied against a basket of other commodities, as the US Federal Reserve look for indicators that inflation has peaked ahead of further discussions on potential interest rate hikes. The New York Coffee, Sugar, Cocoa, Corn, Soybean, Wheat, Gold, Silver, Platinum and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.250 Sterling, at 1.073 the Euro and with the US Dollar buying 4.776 Brazil Real.
The New York market trading solo for a shortened day of trade on Friday started the day trading on a modest firmer note, the market quickly gained momentum supported in early trade some degree of buoyancy this was however short lived as the market was quickly capped and dropped back from the highs of the morning to be set on a softer path for the remainder of the session. As the afternoon progressed the New York market continued to be driven lower by mostly speculative selling activity. This saw the New York market continue on a softer path to the close, to see the market settle near to the lows of the day on a very soft note. Today is Pentecost or Whit Monday holiday for many countries and including many of the Western European countries, which may dampen physical coffee trade for the day.
The London market ended the day on Wednesday on a positive note with 81.08% of the earlier gains of the day intact, while the New York market ended the day on Friday on a negative note with 86.03% of the earlier losses of the day intact. This softer close for the New York market trading solo on the day, does little to inspire confidence and with the market settling near to the lows of the day, one might think that the markets are due for little better than a hesitant start to early trade today, against the prices set on Friday in New York and on Wednesday in London, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
Close: 01/06/2022 Close: 03/06/2022
JUL 2136 + 30 JUL 232.40 – 5.85
SEP 2139 + 29 SEP 232.55 – 5.70
NOV 2128 + 28 DEC 231.75 – 5.65
JAN 2112 + 26 MAR 229.95 – 5.65
MAR 2106 + 26 MAY 227.95 – 5.60
MAY 2099 + 26 JUL 225.60 – 5.55
JUL 2095 + 26 SEP 223.10 – 5.35
SEP 2087 + 26 DEC 220.90 – 5.00
