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

Coffee Market Report

21 Jul 2021

The Conilon robusta crop that is related to mostly the northern coffee districts of Brazil is near to harvest completion and has been estimated by the private trade and industry reports, to have been between 19.50 and 20.50 million bags. While the new arabica coffee crop from the central and southern coffee districts of Brazil is mid harvest with indications that this new arabica coffee crop that still remains under question and with many varied forecasts in play, is due to be completed in the few weeks’ time.

It was once again a day of mostly Brazil yesterday; with the New York market opening up to renewed speculative buying against the weather reports of the possibility of overnight frost damage to the certain areas in the Brazil coffee belt, which have been reported in areas of Minas Gerais and Sao Paulo. It is too early to quantify the potential damage of the frost reported, while the weather news from various forecasters report that temperatures are due to start rising later this week when the cold front lifts. These frost reports as well as the climatic contribution of a full moon on 24th July, could likely see a continuation of weather-related market speculation for the coming days. With the current harvest in full swing in the Arabica areas, the question of light frost damage to coffee trees at this stage, would likely have a greater impact on the next 2022 arabica crop to come, early extension growth might be hampered in the prevailing cooler weather affected areas. There are nevertheless, still many months ahead for the formation of the next Brazil coffee crop to come in 2022, that is still at this early stage anticipated to be a biennially bearing larger crop year.

This weather sentiment meanwhile, has buoyed the New York market, but with roasters seemingly mostly side-lined and watching the developing buoyancy, buy stops and perhaps some hedge lifting coming into play, to accentuate the gains. The excitement in New York did however only trigger a modest positive response within the London market which added $ 29.00 per metric ton or up 1.67% in value as against New York adding the equivalent of US$ 229.00 per metric ton or 6.65% in value, reaching close to a new four and a half year high.

The September-to-September contract arbitrage between the London and New York markets broadened yesterday to register this at 86.92 usc/Lb. This equates to 52.11% 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 remain unchanged yesterday, to register these stocks at 2,187,463 bags, with 93.65% of these certified stocks being held in Europe at a total of 2,048,628 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 52.61% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 39.80% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register these pending grading stocks at 21,665 bags.

It was a firmer day on the commodity markets yesterday, as the US Dollar gained little ground against a basket of other currencies. The Sugar, Cocoa, Coffee, Corn, Wheat, Soybean, Gold and Palladium markets ended the day on a positive note, while the Silver and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.362 Sterling, at 1.177 the Euro and with the US Dollar buying 5.221 Brazil Real.

The New York and London markets started the day yesterday trading on a modest firm note. The markets continued to trade in positive territory for the remainder of the morning session. As the afternoon progressed the New York market started to add more value and with buy stops triggered along the way, accentuating the gains for the day. The London market followed suit with the influence of further weight being added within the New York market, to likewise add more value and gain momentum throughout the session. Both markets hit ceilings during the afternoon session, as sellers returned to the floor, to limit the gains for the day to some degree in New York and to a larger degree in London, but to still see the markets settle very positive at the close.

The London market ended the day on a very positive note and with 47.54% of the gains of the day intact, while the New York market ended the day on a likewise very positive note and with 86.31% of the gains of the day intact. This very firm close is a somewhat supportive factor for confidence in the market, there is likely to be some degree of caution and hesitancy for early trade today and thus one might expect to see only a modest follow through support to early trade today, against the prices set yesterday, as follows:

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

SEP 1761 + 29                                                         SEP 166.80 + 10.40
NOV 1763 + 30                                                       DEC 169.70 + 10.35
JAN 1750 + 31                                                        MAR 171.95 + 10.20
MAR 1735 + 30                                                      MAY 173.05 + 10.15
MAY 1723 + 24                                                      JUL 173.80 + 10.00
JUL 1721 + 19                                                        SEP 174.35 + 9.90
SEP 1728 + 18                                                        DEC 174.95 + 9.75
NOV 1738 + 18                                                      MAR 175.50 + 9.70