With the arrival of the spring rains in Brazil, reports are conducive through most coffee growing areas, that the rainfall received thus far in October, has been conducive to set the flowering for the next biennial bearing upcycle crop to come in 2022/23. In this respect, early forecasts for this Brazil coffee crop may soon be anticipated to start to filter into the markets. The summer rainfall patterns will continue to be closely monitored through December, and beyond, as will the relative uncertainty of the arrival and potential strength of the forecast La Nina weather phenomenon. This latter phenomenon would historically bring drier weather conditions to the south-eastern regions of Brazil. There is some time ahead and for this next Brazil coffee crop to start to come to the fore to fuel local Brazil consumption as well as export coffee consumer demand, through to 2023.

The current Brazil July 2021 to June 2022 coffee year of which is finding physical coffee trade within the interior to be modestly active as Brazilian producers release coffees at a measured pace, the Brazil Real having lost 8.37% of this currency’s value against the US Dollar since mid-July, this year. The weaker Brazil Real bringing in increased returns to producers, following US Dollar based sales. This, the largest in agricultural terms, exporter of coffee, orange juice, beef, as well as a key producer and exporter to the world, specifically northern hemisphere consumer key trading partner markets of soybean, sugar, corn, wheat, poultry, continue to report logistical congestion, high shipping container demand in combination with limited vessel space, where primary routes to market via the shipping arterial routes in the Pacific to Asia and North America remain severely backlogged.

The West Coast USA ports meanwhile, account for an estimated 40% of goods imported through Los Angeles and Long Beach, and these shipping supply chain and congestion issues are so pronounced to have reached US Federal government attention. Following last weeks’ address by the Presidency, that this largest consumer economy must move toward comprehensive full-time operations in an effort to clear the flow of goods to and from the interior. The political will is however likely to take time to translate into practical reality, with the complexities of required support of stakeholders in satellite industries, hauliers, shipping and railway lines, as well as the introduction of new equipment into the supply chain. This, nevertheless, a proactive move for one of the key consumer markets, while the disruptive logistical backlog to supply chains internationally is a continual and still worsening situation in many parts of the world. The introduction of new vessels and equipment, with prevailing demand likely to boost current, as well as to attract new service providers into the market, to meet and alleviate supply chain demand in the medium term.

The January 2022 to December 2021 contract arbitrage between the London and New York markets narrowed yesterday to register this at 106.46 usc/Lb. This equates to 53.37% 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 increase by 5,466 bags yesterday, to register these stocks at 1,909,879 bags, with 95.54% of these certified stocks being held in Europe at a total of 1,824,787 bags and the remaining 4.46% being held in the USA at a total 85,092 bags. Of this, a total 1,027,764 bags, or 53.81% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 40.63% of these certified coffees, originating from Honduras. There was meanwhile a decrease of 1,921 bags to the number of bags pending grading to the exchange; to register 42,158 bags pending grading on the day.

It was a softer day on the commodity markets yesterday, the leading in influence Oil markets traded lower on the day while the US Dollar lost ground against a basket of other commodities. It was a positive close for Cocoa and London Robusta Coffee markets, while the Sugar, New York Arabica Coffee, Corn, Wheat, Soybean, Gold, Silver, Platinum and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.380 Sterling, at 1.163 the Euro and with the US Dollar buying 5.659 Brazil Real.

The New York market started the day yesterday trading on a modest softer note, while the London market stated the day yesterday trading on a modest close to par firmer note. Both the New York and the London markets would attract buying support early to see the markets trend firmer into the late morning session. As the afternoon progressed the markets were seen to hit a ceiling limiting the gains for the day, this saw both the New York and the London markets set on a softer path for the remainder of the session, the New York market dropped back to hit a low for the day but encountered resistance and recovered to settle on a softer note, while the London market rallied late in the day to settle on a modest near to unchanged note at the close.

The London market ended the day on a modest close to par positive note and with 22.22% of the gains of the day intact, while the New York market ended the day on a negative note and with 56.25% of the losses of the day intact. This mixed but overall softer close does little to inspire confidence, albeit that the New York market recovered from the lows of the day one might expect little better than a hesitant steady start to early trade today, against the prices set yesterday, as follows:

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

JAN 2135 + 4                                                          DEC 203.30 – 2.25
MAR 2095 + 2                                                        MAR 206.15 – 2.20
MAY 2068 + 4                                                        MAY 207.00 – 2.30
JUL 2063 + 4                                                          JUL 207.50 – 2.25
SEP 2067 + 4                                                         SEP 207.65 – 2.30
NOV 2070 + 5                                                        DEC 207.70 – 2.30
JAN 2078 + 6                                                         MAR 207.80 – 2.30
MAR 2076 + 6                                                       MAY 208.00 – 2.30