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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

16 Jul 2021

The Green Coffee Association of the U.S.A. have announced that the country’s port warehouse stocks decreased by 35,678 bags or 0.61% during the month of June, to register these stocks at 5,779,461 bags at the end of the month. Of this total, 138,835 bags were registered in the U.S. Certified coffee stock warehouses at the time of reporting. The overall Green Coffee stocks reported, do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 585,000 bags per week, would conservatively have been at least 1.2 million bags.

This drawdown in stocks reported at the end of June 2021 marks the lowest point in the U.S Green Coffee Stock levels in the past two months. This new level of stocks reported at the end of June 2021, is close to the lowest point that has been seen since June 2015, when stocks were reported at 5.51 million bags., The current levels of coffee stocks, which include the certified coffee stocks that are held in certified warehouses and registered to the New York exchange, would equate to more than eleven weeks of roasting activity, which most would consider to be a safe reserve and are likewise still viewed to be well above the historic low which was registered by the U.S.A. Green Coffee Association in 2011 at a total 4 million bags.

The analysts Safras & Mercado have reported that Brazil coffee farmers have already sold around 48% of the estimated total production of 56.50 million bags from this current Brazil Coffee crop. The pace of sales at this time across a 5-year average is reported to be around 33% and illustrating that current crop sales are picking up pace over and above that of the recorded five-year average. This selling activity has been assisted to a degree by higher value seen in the New York Coffee Terminal Market, as well as the fact that this coffee year is seen to be an off year in the biennially bearing crop rotation of the Brazil Coffee crop.

With limited supply of current crop robusta coffee stocks within Vietnam, the internal market is relatively subdued. There remains the dynamic of the restrictive shipping environment, scarcity of equipment, space and high export demand, which has led to exponential increases in freight rates from the region. Weather conditions have been ideal meanwhile, with moderate rainfall over the Central Highlands providing good conditions for the development of the new October 2021 to September 2022 coffee crop ahead of the harvest which traditionally starts around October each year.

New crop coffees continue to freely flow to the internal market within Indonesia at this time, with supply of new crop Indonesia robusta coffees seeing increased volumes of green bean flow into the market. The new April 2021 to March 2022 mainly robusta coffee crop is estimated by private forecasters to be approximately 9.70 million bags of robusta coffee and 1.65 million bags of Arabica Coffee, these figures marginally smaller than the previous April 2020 to March 2021 coffee crop that was seen to be approximately 10 million bags of robusta coffee and 1.60 million bags of arabica coffee.

The September-to-September contract arbitrage between the London and New York markets widened yesterday to register this at 77.40 usc/Lb. This equates to 49.28% 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 3,755 bags yesterday, to register these stocks at 2,185,341 bags, with 93.65% of these certified stocks being held in Europe at a total of 2,046,506 bags and the remaining 6.35% being held in the USA at a total 138,835 bags. Of this, a total 1,150,741 bags, or 52.66% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 39.77% of these certified coffees, originating from Honduras. There was meanwhile a smaller in number 2,995 bags decrease to the number of bags pending grading to the exchange; to register these pending grading stocks at 22,432 bags.

It was a firmer day on the commodity markets yesterday, as the U.S Federal Reserve tended a more dovish approach to economic growth, this as some concerns were raised over a slowdown in global economic growth. The Sugar, New York Arabica Coffee, Corn, Wheat, Gold, Silver and Platinum markets ended the day on a positive note, while the Cocoa, London Robusta Coffee, Soybean and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.383 Sterling, at 1.181 the Euro and with the US Dollar buying 5.110 Brazil Real.

The New York and London markets started the day yesterday trading on a modest positive note, the New York market continued to oscillate around par for the remainder of the morning session, while the London market dropped back and was seen to be set on a softer track for the morning session. As the afternoon progressed the New York and London markets dropped back to hit a floor limiting the losses for the day. Late in the afternoon session saw the New York and London markets recover to a degree. The New York market recovered most of the losses of the day to settle on a firmer note at the close, while the London market was seen to settle on a modest softer note for the day.

The London market ended the day on a modest negative note and with 30% of the losses of the day intact, while the New York market ended the day on a modest positive note and with 25% of the gains of the day intact. This mixed close does little to indicate direction, with the New York market falling back from the highs of the day during the late afternoon session, one might think that the markets are only due for possibly a hesitant steady start to early trade today, against the prices set yesterday, as follows:

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

SEP 1756 – 6                                                            SEP 157.05 + 0.45
NOV 1750 – 6                                                          DEC 159.90 + 0.45
JAN 1734 + 4                                                           MAR 162.35 + 0.35
MAR 1717 + 7                                                         MAY 163.50 + 0.20
MAY 1707 + 8                                                         JUL 164.35 + 0.10
JUL 1706 + 8                                                           SEP 164.95 – 0.05
SEP 1713 + 8                                                           DEC 165.75 – 0.10
NOV 1721 + 8                                                         MAR 166.45 – 0.30