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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

12 Nov 2021

The International Coffee Organisation ICO have reported that the global coffee exports for the month of September were 4.88% lower than the same month in the previous year, at a total of 10.07 million bags. This they say, has contributed to the cumulative global coffee exports for the October 2020 to September 2021 coffee year to be 1.23% higher than the same period in the previous year, at a total of 128.93 million bags. The cumulative increase in exports over the twelve-month period, fuelled by Brazil which contributed 32.54% of the total exports to consumer markets.

There was a decline in exports from Asia as the largest robusta producer, Vietnam, registered a 7.50% decline in exports, when compared to the same twelve months of the previous coffee year. This, balanced in part by increased exports from India, which registered a 12.00% increase year on year. Within the ICO report, cumulative global exports for the seasonal coffee year October 2020 to September 2021 are seen to have increased by 2.20% year on year from Africa to a total 13.95 million bags, this fuelled by a large increase in exports from Uganda, Tanzania and Kenya respectively.

The ICO report similarly includes within the total global exports, the cumulative export figures, from Mexico and the traditional washed arabica Central American bloc; Costa Rica, Guatemala, Honduras, Nicaragua and El Salvador, to report that the October 2020 to September 2021 coffee year cumulative exports posted an increase of 5.10% to a total 16.80 million bags. Exports from Honduras, the region's largest producer grew by 6.70%, while exports from Nicaragua fell by 4.50%.

The International Coffee Organisation ICO have come forth to marginally revise their forecast for global consumption for the current October 2020 to September 2021 coffee year, by 0.07% lower, from their previous forecast, this is a marginal revision while the organisation foresees that the easing of international Covid-19 related lockdowns and restrictions, and the subsequent economic recovery that is anticipated to come may lead to growth in world coffee consumption. The forecast for global consumption for the reporting period, is for an estimated 167.15 million bags in the twelve-month cycle.

The ICO has reported that against an estimated global coffee supply of 169.64 million bags, global coffee consumption is estimated at approximately 167.15 million bags, the global coffee markets is indicated to have a very marginal coffee year surplus of 2.46 million bags heading in the October 2020 to September 2021 coffee year. These figures exclude carryover stocks in producer and consumer countries and with this 2020/21 coffee year now complete, the current October 2021 to September 2022 coffee year has begun and harvests in primary coffee producer and exporting countries are underway, to include the largest robusta producer, Vietnam, as well as combined quality washed arabica coffee producer bloc Colombia, Central America, Mexico and Peru. This, while the markets continue to focus their attentions to the development of the Brazil crop to supply 2022/23 coffee potential for production and consumption demand forecasts, to come.

The U.S. Governments National Weather Service’s Climate Prediction Centre have updated their forecast to report on the La Niña climatic phenomenon, to predict a 90% chance for a La Niña weather pattern to continue through to February 2022. The report likewise suggests that the presence of the La Niña influence may start to dissipate by May 2022 whereupon the weather patterns are predicted to return to more neutral territory.

The December 2021 to January 2022 contract arbitrage between the New York and London markets widened yesterday to register this at 106.94 usc/Lb. This equates to 50.71% 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 13,790 bags yesterday, to register these stocks at 1,798,415 bags, with 95.96% of these certified stocks being held in Europe at a total of 1,725,838 bags and the remaining 4.04% being held in the USA at a total 72,577 bags. Of this, a total 929,299 bags, or 51.67% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 42.37% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register 4,292 bags pending grading on the day.

It was a mixed day on the commodity markets yesterday, as mixed economic data signals registered a stronger US Dollar, as the market continued to absorb the latest round of inflation date, influenced by supply chain disruptions around the world which continue to hamper the movement of goods. The Sugar, Cocoa, Coffee, Corn, Soybean and Wheat ended the day on a firmer note, while the Gold, Silver, Platinum and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.336 Sterling, at 1.144 the Euro and with the US Dollar buying 5.399 Brazil Real.

The New York market started the day yesterday trading on a modest near to par firmer note while the London market started the day yesterday trading on a modest near to par softer note, both markets continued to oscillate around par for the remainder of the early morning session before attracting a degree of buying support to see the markets trend firmer into the afternoon session. The afternoon session saw the New York market start to add more value and quickly trigger buy stops along the way to accentuate 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, triggering speculative buy stops along the way. The momentum of the markets was carried through through to the end of the day where the markets hit a ceiling to limit the gains of the day, to settle near to highs of the late afternoon session.

The London market ended the day on a firmer note and with 90.59% of the gains of the day intact, while the New York market ended the day on a likewise positive note and with 80.23% of the earlier gains of the day intact. This firmer close with the markets gaining momentum late in the day and settling near to the highs of the day might inspire some degree of follow through confidence to possibly set the markets for a steady start to early trade today, against the prices set yesterday, as follows:

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

JAN 2292 + 77                                                        DEC 210.90 + 6.90
MAR 2227 + 62                                                      MAR 213.30 + 6.60
MAY 2199 + 58                                                      MAY 213.95 + 6.40
JUL 2192 + 55                                                        JUL 214.20 + 6.35
SEP 2185 + 54                                                        SEP 214.35 + 6.35
NOV 2185 + 52                                                      DEC 214.65 + 6.35
JAN 2192 + 52                                                        MAR 215.00 + 6.35
MAR 2190 + 52                                                      MAY 215.25 + 6.35