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

Coffee Market Report

14 May 2021

The U.S. Governments National Weather Service’s Climate Prediction Centre have reported that La Niña weather conditions have ended and that there remains a 67% chance that El Niño-Southern Oscillation (ENSO) neutral weather conditions are likely to continue through June to August.

Meanwhile it has been mostly dry and warm over the main coffee districts in Brazil so far this month, which is assisting to accelerate the maturing on the new crop cherries. This, with harvesting already underway for many Conilon Robusta coffee farmers and the start of the new Arabica coffee crop now only a few weeks to the fore.

The Brazilian National Statistics Agency IBGE and with the new crop cherries maturing on the trees, reported a revised estimate for the coming July 2021 to June 2022 Brazil harvest, to forecast the new 2021 coffee crop by 0.6% lower, which they now foresee at 46.70 million bags. The report forecasts 31.7 million bags of Arabica coffee and 15 million bags of Conilon Robusta coffee. The IBGE is traditionally very conservative in terms of their figures and are usually considered to be between 5% and 10% below reality. The forecast would therefore be seen to be at the lower end of independent local and international surveys, the majority of these forecasting an estimated Brazil Arabica crop ahead of harvest at a median of 32 million bags and Conilon Robusta 2021 crop in the region of a median 21 million bags.

The July-to-July contract arbitrage between the London and New York markets widened yesterday; to register this at 78.59 usc/Lb. This equates to 53.68% 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 5,440 bags yesterday, to register these stocks at 2,020,210 bags, with 95.48% of these certified stocks being held in Europe at a total of 1,928,876 bags and the remaining 4.52% being held in the USA at a total 91,334 bags. Of this, a total 1,074,656 bags, or 53.20% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 37.57% of these certified coffees, originating from Honduras. There was meanwhile a larger in number 50,946 bags increase to the number of bags pending grading to the exchange; to register these pending grading stocks at 67,306 bags.

It was a softer day on the commodity markets yesterday, after U.S Treasury Yields dropped yesterday following data that U.S consumer prices had the biggest increase in nearly 12 years during April. This intensified concerns over rising inflation and fuelled speculation around the prospects of USA interest rate hikes to come. The Cocoa, Gold and Palladium markets ended the day on a positive note, the Silver market remained unchanged on the day, while the Sugar, Coffee, Corn, Wheat, Soybean, and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.404 Sterling, at 1.208 the Euro and with the US Dollar buying 5.308 Brazil Real.

The New York and London markets started the day yesterday trading on a softer note, the markets would continue to oscillate around par for the remainder of the early morning session before coming under a large degree of selling pressure to drop back and hit a low for the day. As the afternoon progressed both the New York and the London markets gained momentum to see the markets trend firmer buoyed by buying support. The Markets hit a ceiling late in the day limiting the gains for the afternoon session, and to also see the markets reflect off of the highs leading to a modest close to par softer close in New York and a negative close in London.

The London market ended the day on a negative note and with 61.29% of the losses the day intact, while the New York market ended the day on likewise modest close to par negative note and with 3.77% of the losses of the day intact. This softer close, with the New York market recovering all of the earlier in the day losses to settle near to unchanged on the day, might assist towards some degree of stability to see the markets set for a hesitant steady start to early trade today, against the prices set yesterday, as follows:

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

JUL 1495 – 19                                                         JUL 146.40 – 0.10
SEP 1520 – 17                                                         SEP 148.35 – 0.10
NOV 1537 – 17                                                       DEC 150.80 – 0.05
JAN 1551 – 16                                                        MAR 152.95 Unch
MAR 1564 – 17                                                      MAY 153.85 + 0.10
MAY 1577 – 18                                                      JUL 154.40 + 0.25
JUL 1591 – 17                                                        SEP 154.65 + 0.40
SEP 1603 – 17                                                        DEC 154.85 + 0.50