Coffee Market Report

In the latest round of independent forecast updates, Rabobank has come forth to reduce their earlier forecast for the upcoming Brazil 2022/2023 coffee crop, by 2.01% to now be 63.20 million bags, compromising of 40.10 million bags of Arabica Coffee and 23.10 million bags of Conilon Robusta Coffee. The report likewise indicates Rabobank’s preliminary forecast for the Brazil 2023/2024 coffee crop at 8.39% larger than the current year, at a total of 68.50 million bags. The report makes reference to a recovery in production as the country experiences conducive weather over the main coffee growing areas. One might however note the potential strength of the forecasted La Niña weather phenomenon, which would historically bring drier weather conditions to the south-eastern regions of Brazil as a factor that will continue to be closely watched by all coffee market players, as this next 2023/24 Brazil coffee crop, develops.

The December 2022 to January 2023 contract arbitrage between the New York and London markets narrowed yesterday to register this at 82.64 usc/Lb. This equates to 50.04% 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 increase by 15,812 bags yesterday, to register these stocks at 441,899 bags, with 88.02% of these certified stocks being held in Europe at a total of 388,941 bags and the remaining 11.98% being held in the USA at a total 52,958. Of this, a total 281,396 bags, or 63.68% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 30.32% of these certified coffees, originating from Honduras. There was meanwhile a 61,372 bags increase to the number of bags pending grading to the exchange; to register 266,146 bags pending grading on the day.

It was a softer on the commodity markets yesterday, with the US Dollar finding support yesterday, to see the US Dollar index up 0.9% ahead of key US CPI data due to be released later today, while US mid-term election results are tailed this week. The Cocoa, Sugar and Soybean markets ended the day on a positive note. The Coffee, Corn, Wheat, Gold, Silver, Platinum and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.140 Sterling, at 1.003 the Euro and with the US Dollar buying 5.186 Brazil Real.

The New York market started the day yesterday trading on a modest firmer note, while the London market started the day trading to the south of par on a very soft note as the market carried through pressure from the close on Tuesday. Both the New York and the London markets oscillated around par for the remainder of the mid-morning session. As the afternoon progressed, the markets attracted a large degree of selling pressure which saw both the New York and London markets tracked below par. The mid-afternoon session saw a brief recovery as the markets found support, however this was short lived, and both the New York and London markets quickly dropped back into negative territory for the day. The markets rebounded from the lows, with some degree of buying support late in the day to see the New York market recover most of the earlier losses to settle on a softer note at the close, while the London market followed suit to likewise settle on a modest near to unchanged softer note at the close.

The London market ended the day on a negative note with 29.27% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note with 46.43% of the earlier losses of the day intact. This follow through softer close for the markets does little to inspire confidence, albeit that both the New York and the London markets recovered most of the earlier losses in what was a fair volume day, ahead of first notice approaching on the prompt month in New York, on the 21st. November. 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.

JAN 1819 – 12                                                  DEC 165.15 – 1.30
MAR 1808 – 8                                                  MAR 162.35 – 1.80
MAY 1800 – 6                                                  MAY 161.55 – 1.85
JUL 1794 – 6                                                    JUL 160.85 – 1.70
SEP 1788 – 6                                                    SEP 159.95 – 1.55
NOV 1781 – 6                                                  DEC 159.05 – 1.35
JAN 1790 – 4                                                   MAR 159.05 – 1.45
MAR 1798 – 4                                                 MAY 158.95 – 1.70