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

Coffee Market Report

25 May 2021

The latest Commitment of Traders report from the New York arabica coffee market has seen the shorter term in nature Managed Money fund sector of this market cut their net long position within this market by 0.23% over the week of trade leading up to Tuesday 18th. May; to register a new net long position of 41,249 lots. Meanwhile the longer term in nature Index Fund sector of this market cut their net long position within the market by 0.32%, to register a net long position of 78,980 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector of this market raised their net long position within the market by 1.97% to register a new net long position 35,346 Lots, which is the equivalent of 10,020,434 bags. This net long position has most likely been increased marginally following the period of mixed but overall firmer trade that has since followed.

The respected U.S. Department of Agriculture Global Agricultural Network USDA have forecast that the next October 2021 to September 2022 Vietnam coffee crop that is due to start being harvested in October, shall be 6.31% larger than the previous October 2020 to September 2021 crop, to total 30.83 million bags. This crop they foresee, to be made up from 29.68 million bags Robusta coffee and 1.15 million bags of Arabica coffee. Added to this they foresee that carryover stocks from the present coffee year shall add 7.23 million bags of coffee, to confirm continued good supply into the next October 2021 to September 2022 coffee year.

Of this new October 2021 to September 2022 crop, the forecast is that Vietnam will export 9.30% or 2.2 million bags more than the current October 2020 to September 2021 coffee year, at a total of 25.85 million bags. This increase in exports expected due to the ongoing logistical difficulties that have been faced over the course of the current year in Vietnam.

The July-to-July contract arbitrage between the London and New York markets narrowed yesterday; to register this at 81.96 usc/Lb. This equates to 55.01% 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 17,770 bags yesterday, to register these stocks at 2,067,706 bags, with 93.56% of these certified stocks being held in Europe at a total of 1,934,579 bags and the remaining 6.44% being held in the USA at a total 133,127 bags. Of this, a total 1,124,822 bags, or 54.40% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 36.68% of these certified coffees, originating from Honduras. There was meanwhile a smaller in number 5,608 bags decrease to the number of bags pending grading to the exchange; to register these pending grading stocks at 97,967 bags.

It was a mixed day on the commodity markets yesterday, as the U.S Dollar weakened, while investors awaited data due this week that should indicate the pace of economic recovery in the U.S.A. The Sugar, Gold, Silver and Platinum markets ended the day on a positive note, The London Robusta Coffee market remained unchanged on the day, while the New York Arabica Coffee, Cocoa, Corn, Wheat, Soybean and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.418 Sterling, at 1.223 the Euro and with the US Dollar buying 5.320 Brazil Real.

The New York and London markets started the day yesterday trading on a modest softer note, the markets quickly came under some degree of selling pressure to drop back further into negative territory for the morning session. As the afternoon progressed the markets were seen to recover briefly, heading back towards par for the day only to hit a ceiling limiting the gains for the day. The New York market would drop back trending softer for the remainder of the afternoon session, a short late rally saw the market recover some of the earlier losses to settle on a softer note for the day. The London market was also seen to rally late in the day, hitting a ceiling to limit the gains for the afternoon session, this saw the market drop back slightly settling unchanged from Fridays close.

The London market remained unchanged on the day, while the New York market ended the day on a negative note and with 41.51% of the losses of the day intact. This close does little to inspire confidence and one might expect to see little better than a cautious and hesitant start to early trade today, against the prices set yesterday, as follows:

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

JUL 1478 Unch                                                        JUL 149.00 – 1.10
SEP 1504 + 1                                                           SEP 151.00 – 1.10
NOV 1521 + 1                                                         DEC 153.70 – 1.05
JAN 1533 Unch                                                       MAR 156.05 – 1.00
MAR 1546 + 1                                                         MAY 157.05 – 1.00
MAY 1560 + 2                                                         JUL 157.70 – 0.90
JUL 1574 + 2                                                           SEP 157.90 – 0.90
SEP 1586 + 2                                                           DEC 158.15 – 0.90