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

Coffee Market Report

23 Jul 2021

The New York market has for a third continuous day extended this week’s parabolic rally with the market gaining more than 21% in value over the last three days, this on the back of news of frost damage to certain areas in the Brazil coffee belt. There have been new reports filtering through overnight that initial loss estimates may be understated and that the quantification, although too early to accurately predict, of the extent of the effect that this frost event may have on the next 2022 and following 2023 Brazil coffee crop production is feared to be larger than initially thought.

The coffee supply to international consumer markets meanwhile is well established, this illustrated by the recently released July 2020 to June 2021 coffee marketing year export figures for Brazil. The Coffee Exporters Association in Brazil Cecafé have reported the cumulative exports of green coffee for the full July 2020 to June 2021 Brazil coffee year were seen to be 15% higher, overall, than the previous coffee year at a total of 41.63 million bags. This number proving to set a new historic record for green coffee exports from the world’s largest natural arabica coffee producer.

The September-to-September contract arbitrage between the London and New York markets broadened yesterday to register this at 107.97 usc/Lb. This equates to 55.76% 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 decrease by 9,863 bags yesterday, to register these stocks at 2,180,375 bags, with 93.67% of these certified stocks being held in Europe at a total of 2,042,365 bags and the remaining 6.33% being held in the USA at a total 138,010 bags. Of this, a total 1,150,741 bags, or 52.78% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 39.56% of these certified coffees, originating from Honduras. There was meanwhile a smaller in number 6,523 bags increase to the number of bags pending grading to the exchange; to register these pending grading stocks at 19,237 bags.

The Certified Robusta coffee stocks held against the London exchange have been reported to decrease by 25,167 bags over the week of trade leading up to Monday 19th July, to see these stocks registered at 2,430,167 bags, on the day.

It was a firmer day on the commodity markets yesterday, as U.S bond yields retreated to offset a firmer U.S Dollar, sparking renewed interest in the commodity sector. The Cocoa, Coffee, Gold, Silver, Platinum and Palladium markets ended the day on a positive note, while the Sugar, Wheat, Corn and Soybean markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.376 Sterling, at 1.177 the Euro and with the US Dollar buying 5.200 Brazil Real.

The New York and London markets started the day yesterday trading on a very firm note. The markets carried through support from the close on Wednesday to continue 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 were seen to hit a resistance level during the early afternoon session as the markets dropped back from the early in the day highs. The markets rallied once more towards the close to see both the New York and the London markets settle on a very positive note.

This third day of follow-through excitement in New York has triggered a positive response within the London market which added $ 110.00 per metric ton or up 6.10% in value as against New York adding the equivalent of US$ 389.00 per metric ton or 10.03% in value, reaching its highest close in over six years.

The London market ended the day on a very positive note and with 92.44% of the gains of the day intact, while the New York market ended the day on a likewise very positive note and with 90.51% of the gains of the day intact. This follow through firm close is a supportive factor for confidence in the market, although there is likely to be some degree of caution and hesitancy for early trade today, with further reports on the damage caused by frost in Brazil flowing in overnight, that the markets are due for a follow through steady start to early trade today, against the prices set yesterday, as follows:

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

SEP 1889 + 110                                                        SEP 193.65 + 17.65
NOV 1895 + 108                                                      DEC 196.60 + 17.70
JAN 1880 + 106                                                       MAR 198.55 + 17.50
MAR 1862 + 103                                                     MAY 199.00 + 17.05
MAY 1840 + 102                                                     JUL 199.25 + 16.70
JUL 1825 + 101                                                       SEP 199.40 + 16.45
SEP 1816 + 102                                                       DEC 200.30 + 16.30
NOV 1822 + 102                                                     MAR 200.60 + 16.30