Coffee Market Report

The reports from Brazil indicate that the main arabica coffee districts in Southeast Brazil have been in receipt of good rains over the recent days and it is forecast to see these rains continue over the next week. This has assisted to raise the ground water retention levels and to assist with the setting of the flowers for the next Brazil 2023/2024 biennially bearing lower cyclical crop. There has been some discussion around the prospects for recovery of 2021 frost damaged fields, that may supplement the coming biennial bearing production cycle. It is however still early days, and the Brazil coffee farms will require regular and good rains through to March next year in order to support the 2023 crop.

It is the early stages of the October 2022 to September 2023 new crop harvest season for Colombia, Central America and Mexico coffee producers, where quality washed coffee harvests are soon to pick up pace. This while the seasonal hurricane season in the Gulf of Mexico has begun and following Hurricane Ian, one might anticipate further storms to form over the next couple of months to bring along spells of heavy winds and rainfall. The weather within this largest quality washed arabica producer bloc which accounts for an average 68% washed arabica production, is for the most part experiencing conducive weather conditions for harvesting activities to take place.

The November 2022 to December 2022 contract arbitrage between the London and New York narrowed yesterday to register this at 101.04 usc/Lb. This equates to 52.54% 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 remain unchanged 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 an overall softer day on the commodity markets yesterday, with the overall macroeconomic indicators of increased inflation and an anticipation of lower consumer activity to come, dampening speculative sentiment within the greater commodity basket. The latest data to come from the United States, widely expected to see interest rate hikes announced following the next round of US Federal Reserve Bank meetings, in November. The Cocoa and Soybean markets ended the day on a positive note, while the Coffee, Cocoa, Sugar, Corn, Wheat, Gold, Silver, Palladium and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.122 Sterling, at 0.978 the Euro and with the US Dollar buying 5.306 Brazil Real.

The New York and London markets started the day yesterday trading on a modest softer note, both the New York and the London markets oscillated around par for the remainder of the early morning session. The late morning session attracted selling pressure, which saw both the New York and the London markets trend in a softer direction. As the afternoon progressed, both the New York and the London came under severe selling pressure in mainly technical trade. The markets continued to project lower, pressured further by selling in the market to accentuate the losses for the day’s trade, pressured lower as speculative liquidation continued on the favourable weather news from Brazil. The late afternoon session saw both the New York and the London markets rebound from the earlier lows, to find some degree of support. This assisted to see both markets recover more than half of the earlier losses of the day, to see the markets settle on a softer note, whilst trending in a firmer direction at the close.

The London market ended the day on a negative note with 56.25% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note with 56.57% of the earlier losses of the day intact. This follow through softer close for the markets, does little to indicate direction nor does it inspire confidence, albeit that both the New York and London markets recovered some of the earlier losses of the day, indicating perhaps some degree of consolidation that one might think that the markets are due for a hesitant steady start to early trade today, against the prices set yesterday, as follows:

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

NOV   2012 – 45                                     DEC    192.30 – 2.80
JAN    2000 – 34                                     MAR   187.25 – 3.05
MAR  1981 – 30                                     MAY    184.70 – 2.95
MAY  1970 – 30                                     JUL      183.20 – 2.80
JUL    1963 – 33                                     SEP      181.80 – 2.70
SEP    1958 – 34                                     DEC     181.10 – 2.65
NOV  1950 – 31                                     MAR    181.05 – 2.70
JAN   1954 – 26                                     MAY    180.90 – 2.95