Coffee Market Report

With the arrival of the spring rains in Brazil, reports are conducive through most coffee growing areas, that the rainfall received thus far in November, has been conducive to set the flowering for the next biennial bearing crop to come in 2023/24. In this respect, early forecasts for this Brazil coffee crop may soon be anticipated to start to filter into the markets. The summer rainfall patterns will continue to be closely monitored through December, and beyond, as will the relative uncertainty of the arrival and potential strength of the forecast La Niña weather phenomenon. This latter phenomenon would historically bring drier weather conditions to the south-eastern regions of Brazil. There is some time ahead and for this next Brazil coffee crop to start to come to the fore to fuel local Brazil consumption as well as export coffee consumer demand, through to 2024.

The December 2022 to January 2023 contract arbitrage between the New York and London markets narrowed yesterday to register this at 70.24 usc/Lb. This equates to 46.00% 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 1,280 bags yesterday, to register these stocks at 484,089 bags, with 89.06% of these certified stocks being held in Europe at a total of 431,131 bags and the remaining 10.94% being held in the USA at a total 52,958. Of this, a total 285,166 bags, or 58.91% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 35.62% of these certified coffees, originating from Honduras. There was meanwhile a 7,589 bags increase to the number of bags pending grading to the exchange; to register 584,688 bags pending grading on the day.

It was a softer day the commodity markets yesterday, with the US Dollar index seeing gains of 0.3%. A stronger US Dollar is a bearish signal for commodities traded in other currencies. The London Robusta Coffee and Corn markets ended the day on a positive note, while the New York Arabica Coffee, Cocoa, Sugar, Soybean, Wheat, Gold, Silver, Palladium and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.188 Sterling, at 1.036 the Euro and with the US Dollar buying 5.423 Brazil Real.

The New York market started the day yesterday trading on a modest positive note, while the London market started the day trading to the south of par on a softer note. The early morning session would see both the New York and the London markets attract selling pressure to trend lower. The markets continued on a softer projection throughout the mid-morning session. As the afternoon progressed, both the New York and the London markets would be seen to hit a low point for the day, limiting the losses for the day’s trade. The markets found support near the lows of the day which saw the New York market recover to trend firmer towards par, before some degree of liquidation selling late in the day saw the market settle on a softer note at the close. The London market found support during the late afternoon session to recover all of the day’s losses and settle on a firmer note at the close.

The London market ended the day on a positive note with 72.22% of the earlier gains of the day intact, while the New York market ended the day on a negative note with 44.35% of the earlier losses of the day intact. This mixed but overall softer close for the markets does little to inspire confidence, albeit that the New York market recovered some of the earlier losses in what was a slim volume day. With first notice day approaching on the prompt month in New York on Monday, the 21st November 2022 one might think that the markets are due for little better than a follow through hesitant start to early trade today, against the prices set yesterday as follows:

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

JAN    1818 + 26                                        DEC    152.70 – 2.75
MAR  1794 + 16                                        MAR   156.35 – 2.05
MAY   1785 + 15                                       MAY   157.00 – 1.80
JUL     1780 + 13                                       JUL     157.35 – 1.70
SEP     1775 + 10                                       SEP     157.35 – 1.60
NOV   1769 + 9                                         DEC    157.60 – 1.45
JAN    1778 + 9                                         MAR   158.60 – 1.20
MAR  1787 + 9                                         MAY   159.35 – 1.00