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

Coffee Market Report

10 May 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 0.91% within the market over the week of trade leading up to Tuesday 4th. May: to register a net long position of 33,869 lots, which is the equivalent of 9,601,711 bags. This net long position has most likely been been further increased following the period of overall firmer trade that has since followed.

The latest Commitment of Traders report from the London Robusta coffee market has seen the Speculative Managed Money Sector of this market increase their net long position by 165.67% within the market over the week of trade leading up to Tuesday 4th May; to register a new net long position of 16,665 Lots which is the equivalent of 2,777,500 bags. This new net long position has most likely been further increased following the period of overall firmer trade that has since followed.

The Brazil Real currency has shown a degree of muscle against the US Dollar over the last week, reaching its highest level in over three months against the US Dollar. A stronger Brazil Real traditionally discourages export selling from Brazil’s coffee producers, which could bring a degree of buoyancy to the coffee futures markets in the coming days, should this trend continue.

The July-to-July contract arbitrage between the London and New York markets narrowed on Friday; to register this at 83.09 usc/Lb. This equates to 54.34% price discount for the London Robusta coffee market. This wide arbitrage will likely 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 9,600 bags on Friday, to register these stocks at 1,993,853 bags, with 95.34% of these certified stocks being held in Europe at a total of 1,900,970 bags and the remaining 4.66% being held in the USA at a total 92,883 bags. Of this, a total 1,047,800 bags, or 52.55% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 38.07% of these certified coffees, originating from Honduras. There was meanwhile a smaller in number 7,680 bags decrease to the number of bags pending grading to the exchange; to register these pending grading stocks at 44,196 bags.

It was a firmer day on the commodity markets on Friday, the US Dollar lost ground against a basket of other currencies, following weaker indicators from this largest consumer economy. A softer US Dollar is seen to be a bullish factor for many of the US Dollar based commodity markets when trading in other currencies. The Cocoa, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note, while the Sugar, Coffee, Platinum and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.405 Sterling, at 1.215 the Euro and with the US Dollar buying 5.233 Brazil Real.

The New York market started the day on Friday trading on a modest softer note for the day, while the London market started the day on Friday trading on a modest positive note for the day. Both markets would trade around par for the remainder of the early morning session before coming under a degree of selling pressure to see the markets drop back and set on a softer path for the morning session. As the afternoon progressed the New York and London markets recovered some of the earlier in the day losses to gain momentum however this was short lived as the markets soon fell back to hit a low for the day. The markets bounced off of the lows of the day to settle on a softer note.

The London market ended the day on a modest negative note and with 40% of the losses the day intact, while the New York market ended the day on likewise negative note and with 27.72% of the losses of the day intact. This softer close does little to indicate direction, with the markets recovering from the earlier in the day losses in what many may see as consolidation from the earlier in the week surge, to set the markets for a hesitant start to early trade today, against the prices set on Friday, as follows:

LONDON ROBUSTA US$/MT                             NEW YORK USC/LB.
 
JUL 1539 – 8                                                           JUL 152.90 – 1.40
SEP 1561 – 8                                                           SEP 154.80 – 1.40
NOV 1577 – 8                                                         DEC 157.25 – 1.30
JAN 1591 – 8                                                          MAR 159.35 – 1.25
MAR 1604 – 7                                                        MAY 160.15 – 1.15
MAY 1618 – 6                                                        JUL 160.55 – 1.05
JUL 1631 – 5                                                          SEP 160.65 – 0.95
SEP 1642 – 4                                                          DEC 160.70 – 0.95