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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

02 Sep 2021

With the month of August 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 August were 248,584 bags or 70.45% lower than the same month last year, at a total of 104,178 bags. This contributes to the islands cumulative robusta coffee exports for the first eleven months of the October 2020 to September 2021 coffee year to be 1,175,909 bags or 38.76% lower than the same period in the previous year, at a total of 1,857,749 bags. The current April 2021 to March 2022 Indonesia crop is estimated to reach a total 11.35 million bags, or 2.16% decrease on that of the previous year. The lower exports reported may be attributed to a lack of container and shipment availability, as the prevalence of logistical and shipping corridor challenges across the globe, continue to disrupt movement of goods and exports.

The developments of a stricter lockdown within Vietnam has seen supply chains of various commodities disrupted within the country, this has led to an further pressure on the severe shortfall on export capacities, while there remains little to indicate that the backlog of these commodities, to include coffee shipments that are being held in warehouses and incurring excessive costs, may be alleviated in the foreseeable months to come. The main city of Ho Chi Minh is under strict travel restrictions which are causing difficulties for exporters to transport goods around the country. The Vietnam Coffee and Cocoa Association has been in talks with the Government to relax restrictions in order to restore the flow of goods internally within Vietnam however thus far there has been no changes from the Vietnamese Government.

The weather conditions within Brazil remain a point of focus this week, as weather forecasters are presenting models of dry warmer weather that is due to continue over the course of the next week throughout the Arabica growing regions of the Brazil coffee belt. Whereas sporadic light rains are due for Espirito Santo and South of Bahia, Conilon’s main production region.

The November-to-December contract arbitrage between the London and New York markets narrowed yesterday to register this at 101.94 usc/Lb. This equates to 52.10% 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 2,165,261 bags, with 94.22% of these certified stocks being held in Europe at a total of 2,040,127 bags and the remaining 5.78% being held in the USA at a total 125,134 bags. Of this, a total 1,151,885 bags, or 53.20% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 39.29% 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 4,078 bags.

It was a softer day on the commodity markets yesterday, as investors await key US economic labour data that could influence the Federal Reserve’s decision on monetary policy support. The London Robusta Coffee and Silver markets ended the day on a positive note, while the Sugar, Cocoa, New York Arabica Coffee, Wheat, Corn, Soybean, Gold, Platinum and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.377 Sterling, at 1.184 the Euro and with the US Dollar buying 5.185 Brazil Real.

The New York and London markets started the day on yesterday trading on a modest close to par positive note. Both markets would quickly gain momentum to see both the New York and London markets trend in a positive direction for the remainder of the morning session. As the afternoon progressed the New York market was seen to hit a ceiling limiting the gains for the day, this would see the market drop back from the morning highs to quickly slip back into negative ground for the session, there was a brief recovery before coming under a degree of selling pressure late in the day to see the market settle on a modest near to unchanged softer note at the close. The London market meanwhile gained momentum late in the day, hitting a ceiling during the late afternoon session to limit the gains for the day and see the London market settle on a firmer note at the close.

The London market ended the day on a positive note and with 60.61% of the gains of the day intact, while the New York market ended the day on a modest close to par negative note and with 14.29% of the losses of the day intact. This mixed but mainly firmer close, with the New York market losing all of the gains of the day and settling near to unchanged on a modest softer note does little to indicate direction and one might think that the markets are due for little better than a hesitant start to early trade today, against the prices set yesterday, as follows:

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

NOV 2066 + 40                                                       DEC 195.65 – 0.25
JAN 2028 + 34                                                        MAR 198.14 – 0.25
MAR 1979 + 20                                                      MAY 199.25 – 0.20
MAY 1960 + 13                                                      JUL 199.80 – 0.15
JUL 1954 + 12                                                        SEP 200.25 – 0.10
SEP 1953 + 11                                                        DEC 200.85 – 0.10
NOV 1956 + 9                                                        MAR 201.30 – 0.10
JAN 1966 + 9                                                         MAY 201.60 – 0.10