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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

25 Nov 2021

The respected U.S. Department of Agriculture Global Agricultural Network USDA have revised their forecast for the October 2021 to September 2022 primarily Robusta coffee producing country of Vietnam upwards by 0.89% from their earlier in the year estimate, to now total 31.11 million bags. This they say shall be 7.26% larger than the previous October 2020 to September 2021 crop. This crop they foresee, to be made up from 30.05 million bags Robusta coffee, up 6.97% from the previous coffee year and 1.10 million bags of Arabica coffee, up 15.79% from the previous coffee year. Added to this they foresee that carryover stocks from the previous October 2020 to September 2021 coffee year shall add 3.81 million bags of coffee, to confirm that there has been continued good supply into the October 2021 to September 2022 coffee year, which is shortly due to reach peak harvest.

Of this new October 2021 to September 2022 crop, the forecast is that Vietnam will export 4.47% or 980,000 bags of green coffee more than the previous October 2020 to September 2021 coffee year, at a total of 22.90 million bags. The report refers to the widespread Covid-19 outbreaks during the July-September 2021 period which resulted in lockdowns and restrictions on inter-provincial movement leading to difficulties in the transport of goods, all effecting exports from the world’s largest Robusta producing nation. This coupled with the global logistical constraints, including significantly higher fright costs, lack of shipping equipment and port congestions all contributed to lower export figures from Vietnam over the October 2020 to September 2021 crop year. The USDA report notes that freight rates from Vietnam have increases five to six times over the past year and all indications are that container and vessel scarcity will likely continue into and beyond the first quarter of 2022.

Today is Thanksgiving in the USA, which shall see the New York market closed for the day. Thus, one can expect little excitement for the London market trading solo for the day.

The January 2022 to March 2022 contract arbitrage between the London and New York markets widened yesterday to register this at 140.99 usc/Lb. This equates to 57.68% 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 1,350 bags yesterday, to register these stocks at 1,680,887 bags, with 95.76% of these certified stocks being held in Europe at a total of 1,609,617 bags and the remaining 4.24% being held in the USA at a total 71,270 bags. Of this, a total 845,600 bags, or 50.31% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 43.52% of these certified coffees, originating from Honduras. There was meanwhile an increase of 4,175 bags to the number of bags pending grading to the exchange; to register 76,594 bags pending grading on the day.

It was a softer day on the commodity markets yesterday, as newly released positive US Jobs data reinforced the recent gains in the US Dollar. The New York Arabica Coffee and Platinum markets ended the day on a firmer note, while the Sugar, Cocoa, London Robusta Coffee, Corn, Wheat, Soybean, Gold, Silver, and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.334 Sterling, at 1.121 the Euro and with the US Dollar buying 5.606 Brazil Real.

The London and New York markets started the day yesterday trading on a softer note, the markets oscillated either side of par for the remainder of the early morning session, before taking a softer stance into the early afternoon trade. As the afternoon progressed the New York market would hit a floor for the day limiting the losses, to see both the New York and the London buoyed by technical support, gain momentum into the later afternoon session.

The New York and London markets continued on a firmer path late in day, this saw the markets hit a ceiling limiting the gains for the day, this resistance late in the day saw both the New York and the London markets drop back from the highs. The New York market settled on a firmer note at the close, while the London market continued on a softer path to which saw the market settle on a modest softer note at the close.

The London market ended the day on a negative note and with 76.19% of the losses of the day intact, while the New York market ended the day on a positive note and with 39.02% of the gains of the day intact. This mixed but overall firmer close, might inspire some degree of follow through confidence albeit in a subdued manner with the London Robusta market trading solo for the day, one might think the market is due for a hesitant steady start to early trade today, against the prices set yesterday, as follows:

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

JAN 2281 – 16                                                         MAR 244.45 + 2.40
MAR 2222 – 12                                                       MAY 244.10 + 2.55
MAY 2192 – 9                                                         JUL 243.40 + 2.30
JUL 2187 – 9                                                           SEP 242.70 + 2.05
SEP 2182 – 8                                                           DEC 243.00 + 2.05
NOV 2184 – 7                                                         MAR 243.30 + 2.05
JAN 2192 – 8                                                          MAY 243.35 + 2.10
MAR 2190 – 8                                                        JUL 243.35 + 2.20