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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

22 Sep 2021

Brazil’s government food supply and statistics agency CONAB have come forth to report that Brazilian Coffee producers due to smaller biennial bearing factors for the arabica coffee farms are forecast to produce 46.90 million bags of coffee for the July 2021 to June 2022 crop year.

This estimate has been revised downwards by 3.89% from their previous estimate of 48.80 million bags released in May this year. CONAB has projected that arabica coffee production is forecast to be 36.90% lower than last year at a total of 30.70 million bags, while Robusta production is forecast to be 12.80% higher than last year at a total of 16.20 million bags. The CONAB forecasts are traditionally very conservative, and many would therefore see this as an indication that the 2021 Brazil coffee crop is likely to have come in at around the 53.50 million bag mark that has already been forecast by independent industry forecasters and is, with the harvest now complete, looking to be closer to reality.

Weather reports coming forth from Brazil where the new July 2021 to June 2022 crop is soon to start flowering, with the onset of the spring and summer rains, vary. There are reports of low measure rainfall received in isolated areas of the main Brazil arabica coffee growing area, though not widely dispersed and temperatures are being recorded at the higher end of the daily average for the month so far. The seasonal rains that traditionally come to the Brazil coffee belt around October each year, is necessary to set the flowering and maintain fruit development ahead of this next coffee crop, which arabica coffees have around eleven months of development ahead, before the harvest to come, around midyear, in 2022.

The November-to-December contract arbitrage between the London and New York markets narrowed yesterday to register this at 84.62 usc/Lb. This equates to 46.34% 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 320 bags yesterday, to register these stocks at 2,163,697 bags, with 94.17% of these certified stocks being held in Europe at a total of 2,037,588 bags and the remaining 5.83% being held in the USA at a total 126,109 bags. Of this, a total 1,155,065 bags, or 53.38% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 39.14% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register no grading stocks on the day.

It was a firmer day on the commodity markets yesterday, as investors await news from the US Federal Reserve’s policy meeting due to continue today. The Sugar, Cocoa, Coffee, Soybean, Gold, Silver, Platinum and Palladium markets ended the day on a positive note, while the Corn and Wheat markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.366 Sterling, at 1.172 the Euro and with the US Dollar buying 5.270 Brazil Real.

The New York and London markets started the day yesterday trading on a modest firmer note. Both the New York and London markets continued to gain momentum during the early morning session before dropping back from the highs of the day during the late morning session. As the afternoon progressed the markets gained a degree of buying support which buoyed the markets in a firmer direction. The markets would soon hit a ceiling during the early afternoon session limiting the gains for the day, this would see the New York and London markets carry through some degree of confidence to settle on a modest firmer note at the close.

The London market ended the day on a modest positive note and with 50% of the gains of the day intact, while the New York market ended the day on a likewise positive note and with 25.42% of the gains of the day intact. This modest firmer close does, albeit that the markets dropped back from the earlier in the day highs, might inspire some degree of follow through confidence to possibly set the markets for a hesitant steady start to early trade today, against the prices set yesterday, as follows:

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

NOV 2160 + 8                                                        DEC 182.60 + 0.75
JAN 2122 – 1                                                         MAR 185.40 + 0.75
MAR 2057 – 2                                                       MAY 186.60 + 0.70
MAY 2029 – 7                                                       JUL 187.40 + 0.70
JUL 2020 – 7                                                         SEP 187.95 + 0.65
SEP 2020 – 4                                                         DEC 188.60 + 0.65
NOV 2022 – 4                                                       MAR 189.20 + 0.65
JAN 2028 – 4                                                        MAY 189.70 + 0.65