Coffee Market Report
The analysts Safras & Mercado have reported than an estimated total 89% of the new Brazil coffee crop has already been harvested. Based on their forecast for a new crop of 61.10 million bags, the report would indicate that so far approximately 54.40 million bags of the new crop coffee have been harvested. The coffee made up of around 21 million bags of conilon robusta coffee, for which the harvest is just about complete, and approximately 33.40 million bags of arabica coffee estimated to be harvested thus far. The pace of harvest at this time across a 5-year average is reported to be around 91%, thus illustrating that current crop harvest is almost on par in terms of timing when compared to that of the recorded five-year average.
The Brazilian National Statistics Agency IBGE, with the new crop harvest almost complete has come forth with a revised estimate for the current July 2022 to June 2023 Brazil coffee crop, to revise their forecast for the biennially bearing 22/23 coffee crop higher by 0.80%, from last months estimate, to total 53.20 million bags. In this report the IBGE has estimated that the 2022 arabica coffee crop shall be 9.60% larger than the 21/22 year at a total 35.10 million bags and likewise that the 2022 Conilon robusta crop shall be 6.80% larger than the 21/22 crop year to total 18.10 million bags. The IBGE is traditionally very conservative in terms of their figures and are usually considered to be between 5% and 10% below reality. The forecast would therefore be seen to be at the lower end of independent local and international surveys, the majority of these forecasting an estimated Arabica at a median of 39 million bags and Conilon Robusta crop in the region of 23 million bags.
The U.S. Governments National Weather Service’s Climate Prediction Centre have released an updated report to revise their earlier forecast and report that following the La Niña climatic conditions that have developed and prevailed, there is subsequently, a 60% chance for a La Niña phenomenon weather pattern to continue into December and through to the first two months of 2023. The La Niña weather phenomenon historically brings with it excessive rains for the Pacific Rim countries and in terms of coffee, having an impact upon the climatic conditions within Colombia, Indonesia and Peru, while it can also influence dry conditions for the arabica coffee districts in Southeast Brazil.
The September 2022 to September 2022 contract arbitrage between the London and New York markets widened yesterday to register this at 123.43 usc/Lb. This equates to 55.14% 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 20,054 bags yesterday, to register these stocks at 571,905 bags, with 90.20% of these certified stocks being held in Europe at a total of 515,832 bags and the remaining 9.80% being held in the USA at a total 56,073 Of this, a total 130,027 bags, or 22.74% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 62.46% of these certified coffees, originating from Honduras. There was meanwhile a 30,080 bags increase to the number of bags pending grading to the exchange; to register 194,162 bags pending grading on the day.
It was a mixed but overall firmer day on the commodity markets yesterday, the latest round of US consumer price index data released for the month of July, dampened speculation for a potential for further aggressive interest rate hike announcements to come from the US Federal Bank in the short term. The US Dollar closed slightly lower yesterday, the Coffee, Cocoa, Sugar, Corn, Soybean, Wheat, Platinum and Palladium markets ended the day on a positive note, while the Gold and Silver markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.219 Sterling, at 1.032 the Euro and with the US Dollar buying 5.159 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 was seen to quickly drop back from the open and trade below par on a softer note, the market continued to move lower, pressured by selling early in the day under limited volumes of trade. The London market moved firmer early in the morning session, trading on a positive note but holding steady for the remainder of the morning session. As the afternoon progressed the New York market was seen to build a firmer trend as the activity increased, with the prompt position in New York holding a relatively large open interest position of 50,058 lots. The arrival of the America’s at the start of their business day saw the New York market rally and push higher, triggering buy stops along the way to quickly accentuate the gains for the day. The London market followed suit, to likewise see support build through the session. The markets continued upward momentum in the afternoon before being capped very late in the day. This saw the New York market settle near to the highs of the day on a very firm note, while the London market followed suit to also settle on a firmer note at the close.
The London market ended the day on a positive note with 93.42% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note with 87.50% of the earlier gains of the day intact. This firmer close for the markets, might inspire some degree of follow through momentum and with first notice day on the prompt month in New York approaching on the 23rd of August, this may possibly see the markets set for a steady start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
SEP 2216 + 71 SEP 223.95 + 3.50
NOV 2223 + 74 DEC 219.55 + 3.90
JAN 2187 + 73 MAR 215.15 + 4.05
MAR 2154 + 70 MAY 212.50 + 4.00
MAY 2144 + 70 JUL 210.35 + 3.70
JUL 2132 + 70 SEP 208.90 + 3.55
SEP 2124 + 70 DEC 207.60 + 3.45
NOV 2113 + 67 MAR 206.15 + 3.25
