Coffee Market Report
The analysts Safras & Mercado have reported that Brazil coffee farmers have sold around 78% of the estimated total production of 63 million bags from the July 2022 to June 2023 Brazil Coffee crop. This selling activity is seen somewhat lower when compared to the same time in 2022, ahead of the 2021/22 crop year. Safras & Mercado had foreseen sales of this crop, to be in the region of 86% sold forward at the same time. The report meanwhile specifies that an estimated 75% of arabica production already sold, against 83% in the same period last year and 84% of Conilon Robusta sales against 90% recorded at the same time last year. There remains a reticence on the part of producers to participate fully in forward sales activity, with the prevailing volatility in the higher value seen in the New York Coffee futures market. It is Brazil Carnival holidays this week, that is traditionally a quiet week of trade for Brazil and in this prevailing environment likely to see trade within this largest producer and exporter of coffee to consumer markets, somewhat muted for the days to come.
News has reached the markets over the weekend of heavy rainfall within Brazil’s Southeast state of Sao Paulo has caused widespread flooding and landslides, are cause for humanitarian impact concern with the government declaring a 180-day state of calamity for six cities after what experts described as an unprecedented, extreme weather event. Within the context of the coffee crop that is grown across this state, there is limited foreseeable impact at this time.
The latest Commitment of Traders report from the New York Arabica and London Robusta markets continues to be on hold, with the CFTC stating that the weekly Commitment of Traders report will only be published once all trades and data can be reported and validated.
The May 2023 to May 2023 contract arbitrage between the London and New York markets widened on Friday to register this at 90.59 usc/Lb. This equates to 48.77% 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 8,374 bags on Friday, to register these stocks at 832,230 bags, with 95.13% of these certified stocks being held in, Europe at a total of 791,703 bags and the remaining 4.87% being held in the USA at a total 40,527. Of this, a total 432,919 bags, or 52.02% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 44.78% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register no pending grading on the day.
It was an overall firmer day on the commodity markets on Friday, with the US Dollar index on track for its third week of overall gains, this while the US Federal Reserve continue to implement measures to control inflation. The Coffee, Cocoa, Corn, Soybean, Wheat, Gold, Silver and Platinum markets ended the day on a positive note, while the Sugar and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.203 Sterling, at 1.069 the Euro and with the US Dollar buying 5.167 Brazil Real.
The New York and London markets started the day trading on a modest near to par softer note, a continuation through the early morning session oscillating between par and mildly positive in early trade. As the day progressed, a firmer trend built as activity increased in New York. The arrival of the America’s at the start of their business day pushed New York higher, triggering buy stops along the way to accentuate the gains for the day, this assisted to trigger speculative short covering which saw the New York market gain ground quickly throughout the afternoon session, in large volumes of trade. The late afternoon session saw the London market follow suit. The New York market continued the upward momentum before being capped briefly very late in the day. Both the New York and the London markets settled near to the highs of the day, on very firm notes respectively.
The London market ended the day on a positive note with 81.25% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note with 83.33% of the earlier gains of the day intact. The New York market is closed today for the U.S.A. Presidents Day holiday, which is observed in not all but many of the States and shall leave the London market trading solo for the day. One might think that this shall slow trade within the London market for the day, and one might think the market is due for a hesitant start to early trade today, against the prices set on Friday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
MAY 2098 + 26 MAY 185.75 + 5.50
JUL 2081 + 25 JUL 184.25 + 4.70
SEP 2057 + 22 SEP 182.30 + 4.15
NOV 2029 + 17 DEC 180.35 + 3.80
JAN 2014 + 17 MAR 179.90 + 3.50
MAR 2013 + 19 MAY 180.55 + 3.40
MAY 2016 + 17 JUL 180.80 + 3.15
JUL 2022 + 15 SEP 181.10 + 3.15
