I. & M. Smith (Pty) Ltd. since 1915
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I. & M. Smith (Pty) Ltd.

Coffee Market Report

05 Jan 2021
The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector raise their net long position by 8.67% within the market over the week of trade leading up to Tuesday 29th. December: to register a new net long position of 23,122 Lots which is the equivalent of 6,554,985 bags.  This net long position has most likely been increased, following the period of mixed but overall firmer trade that has since followed.

The National Coffee Institute of Honduras (IHCAFE) have reported that the country’s coffee exports for the month of December were 17.20% lower than the same month last year, at a total of 281,471 bags. The report also states that coffee exports for the first three months of the current October 2020 to September 2021 coffee year are 31.50% lower than the same period in the previous year, at a total of 357,432 bags. The decline in year-on-year exports aligns with reports from the interior concerning a delay in harvesting at the outset of this seasonal year, while the devastation and infrastructural damage caused by the back-to-back hurricanes Eta and Iota which swept through Honduras and Nicaragua in November, has likewise taken a toll. There is time ahead for this new seasonal washed arabica crop to start to flow more readily to consumer markets. The question though, of the cumulative impact and damage that coffee trees may have sustained and possible crop loss as a result of the high winds and flooding brought about as a result of these two unprecedented weather systems, is still being assessed, and pre-hurricane forecasts for this largest Central American washed arabica coffee producer, to produce an estimated 6.28 million bags, reported ahead of the harvest by IHCAFE possibly due to be reviewed lower, in the short to medium term.

The Brazil government have reported that the country’s green coffee exports for the month of December were 1,078,683 bags or 34.09% higher than the same month last year, at a total of 4,242,533 bags. The December green coffee exports for Brazil are 143,134 bags or 3.49% higher when compared to the same month in the previous biennially bearing larger crop year of 2018. The large increase in reported exports for this month when compared to the same month in the previous years can be attributed to the biennially bearing larger production for the 2020 coffee year, to similarly reflect the increased exports of Conilon robusta, to consumer markets over the same month in the previous year, the official breakdown of coffee exports by description for December will soon be released and can be anticipated to illustrate this factor more accurately.

The March 2021 to March 2021 contract arbitrage between the London and New York markets narrowed yesterday: to register this at 63.92 usc/Lb. This equates to 50.66 price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 7,155 bags yesterday, to register these stocks at 1,427,057 bags, with 94.1% of these certified stocks being held in Europe at a total of 1,343,005 bags and the remaining 5.9% being held in the USA at a total 84,052 bags. There was meanwhile a smaller in number 1,390 bags decrease to the number of bags pending grading for this exchange; to register these pending grading stocks at 136,572 bags.

The commodity markets had an overall mixed day yesterday, it was a marginally firmer day overall on the commodity markets yesterday, to see the overall macro commodity index taking something of a positive sideways track for the day. The Sugar market ended the day on a positive note, while the Cocoa and Coffee markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.3749% higher; to see this index registered 461.6649. The day starts with the U.S. Dollar, trading at 1.359 Sterling, at 1.227 the Euro and with the US Dollar buying 5.297 Real.

The New York market started the day yesterday trading on a firmer note, quickly gaining momentum to see the market trend positive early in the day, while the London market started the day yesterday trading on a modest positive note and continuing to oscillate around par for the remainder of the morning session. As the afternoon progressed both markets came under a degree of selling pressure to see the markets drop back from the highs of the day and set on a softer path, the markets soon hit a floor to bounce off the lows of the day and settle on a negative note.

The London market ended the day on a negative note with 70% of the earlier losses of the day intact, while the New York ended the day on a likewise negative note with 70% of the earlier losses of the day intact. This softer close does little to indicate direction, albeit that the markets managed to recover to a degree from the earlier in the day lows, one might think that the markets are due for little better than a hesitant steady start to early trade today, against the prices set on yesterday, as follows:

LONDON ROBUSTA US$/MT                NEW YORK ARABICA USc/Lb.

MAR 1372 – 14                                           MAR 126.15 – 2.10
MAY 1382 – 13                                           MAY 128.10 – 2.05
JUL 1395 – 13                                             JUL 129.80 – 2.05
SEP 1410 – 14                                             SEP 131.25 – 2.05
NOV 1425 – 14                                           DEC 132.90 – 1.90
JAN 1441 – 14                                            MAR 134.45 – 1.80
MAR 1457 – 14                                          MAY 135.10 – 1.75
MAY 1474 – 14                                          JUL 135.70 – 1.75