Coffee Market Report

Following the news that the Coffee Exporters Association in Brazil Cecafé, have reported lower export figures for both Arabica and Conilon coffees for the month of July, there are continued logistical challenges being experienced from Brazil for shipments to main consumer markets. One might speculate that the latest round of reduced export figures reported are still, to some extent, a reflection of these logistical challenges as well as a slightly delayed arabica harvest this seasonal year. The arabica coffee harvest is nearing completion. The lower export figures reported for July 2022 versus the same month last year, similarly report a substantially lower export result for Brazil Conilon robusta coffee, at 266,141 bags lower, against the same month last year.

While the Brazil Conilon robusta crop, which has mostly completed harvest, is forecast to come in at similar levels to that of 2021 year, at 21.50 million bags, these coffees are readily absorbed by the country’s domestic roaster consumer market within Brazil. This supportive local interest which leans toward a preference for Conilon robusta may continue, so long as the wide arbitrage between the London and New York market encourages price sensitive roasters, for such coffees and against the comparatively higher value arabica coffees that are gradually becoming available from the new 2022 harvest. The substantially lower export figures over the last seven months of these coffees to be 60.07% or 1,413,613 bags lower than the same cumulative export figure of the year before for the same period, which is likely to be related to the increase in internal Conilon absorption with Brazil.

The internal market trade within Brazil has been reported to be relatively lacklustre as the arabica harvest progresses. There remains a reticence on the part of producers to participate in the market in the hope of better value to come, the past two weeks have seen the Brazil Real appreciate against the softening US Dollar, by 3.07%, to underscore the lack of active selling participation from this, largest coffee producer and exporter to the world.

The September 2022 to September 2022 contract arbitrage between the London and New York markets widened yesterday to register this at 123.15 usc/Lb. This equates to 55.86% 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 18,200 bags yesterday, to register these stocks at 591,959 bags, with 90.53% of these certified stocks being held in Europe at a total of 535,886 bags and the remaining 9.47% being held in the USA at a total 56,073 Of this, a total 144,977 bags, or 24.49% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 61.19% of these certified coffees, originating from Honduras. There was meanwhile a 54,975 bags increase to the number of bags pending grading to the exchange; to register 164,082 bags pending grading on the day.

It was a mixed but overall firmer day on the commodity markets yesterday, as US Consumer Price data released yesterday did not increase in July, this a first sign of a possible pause in inflation, however this was offset by comments from the US Federal Reserve that indicated an unlikely let up in their aggressive monetary policy stance. The Coffee, Cocoa, Sugar, Corn, Wheat, Silver, Platinum and Palladium markets ended the day on a positive note, while the Soybean and Gold markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.218 Sterling, at 1.028 the Euro and with the US Dollar buying 5.095 Brazil Real.

The New York and London markets started the day yesterday trading on a modest near to par firmer note, the New York market quickly gained momentum buoyed by buying support in the early session under relatively thin trade volumes. The London market continued to trade around par, taking a firmer stance into the late afternoon session. As the afternoon progressed both the New York and the London markets moved firmer. The support in New York was seen to push the market higher, before gains were capped late in the day which saw the market drop back slightly to settle on a very firmer note at the close, while the London market followed the New York market higher to likewise settle on a very firm note at the close.

The London market ended the day on a positive note with 84.75% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note with 89.53% of the earlier gains of the day intact. This marks the second consecutive follow through firmer close for the markets, and with the markets gaining momentum throughout the session to settle near to the highs of the day, one may think that this may inspire some degree of confidence to possibly set the markets 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.

SEP 2145 + 50                                             SEP 220.45 + 7.70
NOV 2149 + 49                                           DEC 215.65 + 6.65
JAN 2114 + 49                                            MAR 211.10 + 5.80
MAR 2084 + 45                                           MAY 208.50 + 6.10
MAY 2074 + 45                                           JUL 206.65 + 6.05
JUL 2062 + 44                                             SEP 205.35 + 6.05
SEP 2054 + 44                                             DEC 204.15 + 6.05
NOV 2046 + 44                                           MAR 202.90 + 6.05