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

Coffee Market Report

02 Aug 2021

The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector cut their net long position by 0.63% within the market over the week of trade leading up to Tuesday 27th. June: to register a net long position of 32,923 lots, which is the equivalent of 9,333,525 bags. This net long position has most likely been marginally decreased following the period of mixed but overall softer trade that has since followed.

The latest Commitment of Traders report from the London Robusta coffee market has seen the Speculative Managed Money Sector of this market cut their net long position by 16.82% within the market over the week of trade leading up to Tuesday 27th. July: to register a new net long position of 26,355 Lots which is the equivalent of 4,392,500 bags. This net long position has most likely been marginally decreased following the period of mixed but overall softer trade that has since followed.

With the month of July complete, the usual round of export reports are coming to the fore, the Indonesian government trade data from Sumatra, the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month of July were 220,419 bags or 66.41% lower than the same month last year, at a total of 111,489 bags. This contributes to the islands cumulative robusta coffee exports for the first ten months of the October 2020 to September 2021 coffee year to be 927,325 bags or 34.59% lower than the same period in the previous year, at a total of 1,753,571 bags. The prevalence of logistical and shipping corridor challenges across the globe, continue to disrupt movement of goods and exports.

The Coffee Terminal markets were seen to register a lower trend on Friday, on the back of news that frost concerns in Brazil were easing. This news dampening speculative sentiment, to see a long position liquidation which broke through technical gaps, to trigger further stops and accentuate the losses for the day.

The September-to-September contract arbitrage between the London and New York markets narrowed on Friday to register this at 90.54 usc/Lb. This equates to 50.43% 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 1,998 bags on Friday, to register these stocks at 2,174,208 bags, with 93.83% of these certified stocks being held in Europe at a total of 2,040,098 bags and the remaining 6.17% being held in the USA at a total 134,110 bags. Of this, a total 1,146,841 bags, or 52.75% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 39.68% of these certified coffees, originating from Honduras. There was meanwhile a larger in number 3,809 bags decrease to the number of bags pending grading to the exchange; to register these pending grading stocks at 12,033 bags.

It was a firmer day on the commodity markets on Friday, the US Dollar gained ground against a basket of other currencies, however this was shadowed by the US Federal Reserve’s reassurance that a interest rate hike was not on the cards for the imminent future. The Wheat and Palladium markets ended the day on a positive note, while the Sugar, Cocoa, Coffee, Soybean, Corn, Gold, Silver and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.390 Sterling, at 1.187 the Euro and with the US Dollar buying 5.213 Brazil Real.

The New York and London markets started the day on Friday trading on a modest close to par positive note. The markets would quickly slip back to trend on a softer path for the remainder of the morning session, before attracting a degree of buying support to see the markets recover slightly during the mid-day’s session. The markets, pressured by long liquidation selling started to slip back aggressively to accentuate the losses for the day’s trade. As the afternoon progressed the markets rebounded marginally from the lows of the day, to see both the New York and London markets settle on a very negative note at the close.

The London market ended the day on a very negative note and with 76.15% of the losses of the day intact, while the New York market ended the day on a likewise very negative note and with 94.69% of the losses of the day intact. This very soft close does little to inspire confidence and might indicate some degree consolidation for the coffee markets, one might think that the markets are due for a hesitant start to early trade today, against the prices set on Friday, as follows:

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

SEP 1786 – 99                                                         SEP 179.55 – 16.95
NOV 1801 – 99                                                       DEC 182.45 – 16.85
JAN 1787 – 98                                                        MAR 184.65 – 16.75
MAR 1781 – 98                                                      MAY 185.65 – 16.45
MAY 1772 – 100                                                     JUL 186.15 – 16.30
JUL 1762 – 109                                                      SEP 186.35 – 16.25
SEP 1752 – 118                                                      DEC 186.80 – 16.20
NOV 1755 – 122                                                    MAR 187.25 – 16.20