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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

09 Jul 2021

The analysts Safras & Mercado have reported than an estimated 54% of the new Brazil coffee crop has already been harvested. Based on the forecast for a new crop of 56.50 million bags, the report would indicate that so far approximately 30 million bags of the new crop have been harvested. The coffee made up of around 16 million bags of conilon robusta coffee, which begin harvest earlier in the seasonal year, and approximately 14 million bags of arabica coffee harvested thus far.

The U.S. Governments National Weather Service’s Climate Prediction Centre has refreshed the earlier El Niño La Niña Southern Oscillation (ENSO) neutral outlook, to forecast that there is now a 66% chance for a La Niña phenomenon to develop later this year. The La Niña weather phenomenon historically brings with it excessive rains for the Pacific Rim countries and in terms of coffee, having an impact upon the climatic conditions within Colombia, Indonesia and Peru, while it can also influence dry conditions for the arabica coffee districts in South East Brazil. Should this La Niña phenomenon come into play, with which the relative strength can only be determined during the course of the next few months., aside from concerns over excessive rain damage for the coffee crops in Colombia, Peru and Indonesia, it would bring forth concerns over the threat of drought damage for the next 2022 Brazil crop, which may as the time nears for the onset of spring and summer rains in Brazil, to set the flowering and next crop potential for 2022, become a factor that shall be closely watched by the market.

The September-to-September contract arbitrage between the London and New York markets widened yesterday to register this at 74.82 usc/Lb. This equates to 49.14% 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 2,497 bags yesterday, to register these stocks at 2,163,375 bags, with 93.57% of these certified stocks being held in Europe at a total of 2,024,215 bags and the remaining 6.43% being held in the USA at a total 139,160 bags. Of this, a total 1,151,066 bags, or 53.21% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 39.90% of these certified coffees, originating from Honduras. There was meanwhile a larger in number 2,930 bags decrease to the number of bags pending grading to the exchange; to register these pending grading stocks at 42,165 bags.

It was a mixed day on the commodity markets yesterday, as the commodity markets were pressured by the US Dollar that rallied against many of the world’s major currencies. The Coffee markets ended the day on a positive note, while the Sugar, Cocoa, Corn, Wheat, Soybean, Gold, Silver, Palladium and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.378 Sterling, at 1.183 the Euro and with the US Dollar buying 5.258 Brazil Real.

The New York market started the day yesterday trading on a modest firm note, while the London market started the day yesterday trading on a softer note. The markets started to drop back to be set seen to be set on a softer track into the late morning session, with the London market trading through a wide range. As the afternoon progressed the New York market hit a floor early in the afternoon session to rebound and trend firmer for the remainder of the day’s trade, this saw the market continue to climb and settle near to the highs of the day at the close. The London market followed suit albeit in a more sedate manner to see the market drop back from the highs of the day and settle near to unchanged on a modest firmer note at the close.

The London market ended the day on a modest positive note and with 29.41% of the gains of the day intact, while the New York market ended the day on a likewise positive note and with 79.31% of the gains of the day intact. This firmer might close for both markets might inspire some degree of follow through confidence for the markets to possibly set the markets for a hesitant steady start to early trade today, against the prices set yesterday, as follows:

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

SEP 1707 + 5                                                           SEP 152.25 + 2.30
NOV 1696 + 2                                                         DEC 155.15 + 2.20
JAN 1690 + 2                                                          MAR 157.75 + 2.15
MAR 1680 + 4                                                        MAY 159.05 + 2.10
MAY 1673 + 4                                                        JUL 160.10 + 2.05
JUL 1678 + 4                                                          SEP 160.90 + 2.00
SEP 1686 + 1                                                          DEC 161.90 + 1.95
NOV 1695 Unch                                                     MAR 162.90 + 1.85