Coffee Market Report
Brazil weather data and in particular, soil moisture levels through the summer rainfall months of October through to February, are thus far accumulated from various sources accumulated and reported by Refinitiv, to be on average 110.80mm above the levels at the same time in the previous year. This reported at an average total of 398.90mm per month, in the top 0-1.6m of soil. The arrival of spring rain season across the vast coffee growing areas in Brazil, have thus far produced positive rainfall figures, and weather reports continue to indicate a widespread rainfall across the vast majority of the Brazil coffee growing areas. A continuation of these seasonal rains will assist to continue to boost soil moisture levels, thus far weather conditions are reported to be conducive at the outset of the flowering phase that will in time develop the next Brazil 2023/24 coffee crop.
The flow of current crop Brazil coffees has been slow from the interior, where for the most part, producers have sufficient finance in hand and forward sales ahead of harvest already concluded, prepared to withdraw from further selling activity. The measured selling activity of the past few weeks has stalled in light of the recent and sharp decline in value on the coffee futures markets, while exporters look to take cover for earlier concluded forward commitments. The Brazil Real has lost some 2.61% in value against the US Dollar over the past fortnight, while looking ahead meanwhile the country heads for the Brazil presidential runoff election on the 30th of this month.
The Ugandan Coffee Development Authority UCDA have reported that their country’s coffee exports for the month of September were 82,850 bags or 14.13% lower than the same month last year, at a total of 503,695 bags. Uganda Robusta exports registered a 14.72% decrease when compared to the same month last year, to total 464,118 bags and Arabica exports likewise registered a 6.43% decrease when compared to the same month last year to total 39,577 bags exported in September this year. The UCDA also reports that the cumulative exports for the full October 2021 to September 2022 coffee year to be 643,147 bags or 9.90% lower than the same period in the previous year, at a total of 5,852,513 bags.
The UCDA have reported that over the same twelve months of the October 2021 to September 2022 coffee year, the value of exports has been seen to have increased by 39.11% when compared to the same period in the previous year. The increased return in value terms reflective to some degree of the improved value in the futures markets, over the same period, with arabica export proceeds contributing to the overall earnings report. Arabica export volume was seen to increase by 43.66% over the twelve-month period similarly translated into 126.80% increase in value.
The November 2022 to December 2022 contract arbitrage between the London and New York narrowed yesterday to register this at 101.80 usc/Lb. This equates to 52.18% 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 600 bags yesterday, to register these stocks at 397,399 bags, with 86.34% of these certified stocks being held in Europe at a total of 343,102 bags and the remaining 13.66% being held in the USA at a total 54,297. Of this, a total 240,661 bags, or 60.56% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 32.70% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register 3,436 bags pending grading on the day.
It was a softer day on the commodity markets yesterday, with the US Dollar staging a recovery during yesterday’s session. The US Dollar index edged higher; a stronger US Dollar is seen as a bearish factor for commodities traded in other currencies. The Palladium markets ended the day on a positive note, while the Coffee, Cocoa, Sugar, Cocoa, Corn, Soybean, Wheat, Gold, Silver and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.132 Sterling, at 0.984 the Euro and with the US Dollar buying 5.241 Brazil Real.
The New York market started the day yesterday trading to the north of par on a modest firmer note, while the London market started the day yesterday trading on a firmer note. The New York market oscillated around par before attracting a degree of selling pressure to see the market drop back and trend softer into the mid-morning session, while the London market took a firmer track into the early-morning session. As the afternoon progressed both the New York and London markets were seen to attract further selling pressure, accentuating the losses for the day. The mid-afternoon session saw the markets rebound from the earlier lows and to gain momentum, under some degree of consolidation following the speculative long liquidation seen in previous sessions, which saw both the New York and London markets trade in positive territory. This support was short lived, as both the New York and London markets fell back from the modest highs to drop into negative territory. This saw both the New York and the London markets settle on relatively modest softer notes at the close.
The London market ended the day on a negative note with 53.85% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note with 19.15% of the earlier losses of the day intact. This follow through softer close for the markets does little to indicate direction, albeit that the markets recovered most of the earlier losses 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 yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
NOV 2057 – 7 DEC 195.10 – 0.45
JAN 2034 – 11 MAR 190.30 – 1.05
MAR 2011 – 11 MAY 187.65 – 1.35
MAY 2000 – 10 JUL 186.00 – 1.30
JUL 1996 – 10 SEP 184.50 – 1.30
SEP 1992 – 10 DEC 183.75 – 1.40
NOV 1981 – 6 MAR 183.75 – 1.45
JAN 1980 – 4 MAY 183.85 – 1.45
