Coffee Market Report

The analysts Safras & Mercado have reported that Brazil coffee farmers have sold around 60% of the estimated total production of 58.20 million bags from this current Brazil Coffee crop. The pace of sales at this time across a 5-year average is reported to be around 58%, thus illustrating that current crop sales are picking up pace over and above that of the recorded five-year average. This selling activity has been assisted to a degree by higher value seen in the New York Coffee Terminal Market over the last three months. However, it must be noted that the very recent drop in value seen in the New York market over the last week has seen the internal market within Brazil tighten considerably, with trade somewhat stalled as producers are reticent sellers under the volatile falling market conditions, while exporters look to take cover for their earlier forward commitments.

It is reported that the rain season in Vietnam is tailing off and thus triggering more active new crop coffee harvesting activity, which is likely to start peaking in five to seven weeks’ time. Medium to Longer term weather forecasts are for occasional rain and thunder showers, which may see harvesting activity interrupted, but with another relatively large crop forecast for this leading robusta coffee producer, there is likely to be good volumes of new crop coffees starting to flow from the interior to Ho Chi Minh City, by mid-December.

The November 2022 to December 2022 contract arbitrage between the London and New York narrowed yesterday to register this at 98.29 usc/Lb. This equates to 51.45% 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 4,672 bags yesterday, to register these stocks at 392,727 bags, with 86.32% of these certified stocks being held in Europe at a total of 339,004 bags and the remaining 13.68% being held in the USA at a total 53,723. Of this, a total 235,989 bags, or 60.09% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 32.07% of these certified coffees, originating from Honduras. There was meanwhile a 3,436 bags decrease to the number of bags pending grading to the exchange; to register 0 bags pending grading on the day.

It was an overall firmer day on the commodity markets yesterday, with the US Dollar index dropping back against a basket of other currencies. The London Robust Coffee, Cocoa, Corn, Soybean, Wheat, Gold, Silver, Platinum and Palladium markets ended the day on a positive note, while the New York Arabica Coffee and Sugar markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.118 Sterling, at 0.976 the Euro and with the US Dollar buying 5.218 Brazil Real.

The New York market started the day yesterday trading on a modest firmer note, while the London market started the day trading on a softer note. The New York market quickly tracked below par to see the market set a low for the morning, this was short lived as the New York market gained support to trade to the north of par for the remainder of the morning session. The London market continued to oscillate around par before gaining support to see the market trend firmer. As the afternoon progressed, the New York market dropped back from the midmorning highs nto negative territory, with the market trading in a relatively wide range for the day. The New York market bounced off the lows of early afternoon to gain momentum and support, the market quickly made trended firmer to set a new high for the day. The New York market was capped late in the day, with long liquidation selling late in the day pressuring the market lower, this saw the New York market slip back below par to set a new low late in the afternoon session, before buying support reversed the trend to see the New York market settle on a softer note at the close recovering most of the earlier losses. The London market continued to gain momentum during the late afternoon session, on the back of the support in New York. This saw the London market hit a ceiling late in the day to limit the gains for the day. Late selling in the market saw the London market settle on a positive note, losing some of the earlier gains of the day.

The London market ended the day on a positive note with 61.11% of the earlier gains of the day intact, while the New York market ended the day on a negative note with 30.49% of the earlier losses of the day intact. This marks the seventh consecutive trading day that has seen the New York market pressured by some degree of speculative liquidation activity. There may be a degree of corrective buoyancy, with the New York market recovering most of the losses late in the day yesterday, to possibly see the markets set for a hesitant steady start in early trade today, against the prices set yesterday, as follows:

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

NOV   2045 + 33                                     DEC    191.05 – 1.25
JAN    2041 + 41                                     MAR   186.40 – 0.85
MAR  2019 + 38                                     MAY    183.85 – 0.85
MAY  2008 + 38                                     JUL      182.35 – 0.85
JUL    2002 + 39                                     SEP      180.75 – 1.05
SEP    1996 + 38                                     DEC     179.95 – 1.15
NOV  1986 + 36                                     MAR    179.90 – 1.15
JAN   1991 + 37                                     MAY     179.65 – 1.25