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

 

I. & M. Smith (Pty) Ltd.

Coffee Market Report

17 Jan 2022

The Ugandan Coffee Development Authority UCDA have reported that their country’s coffee exports for the month of December were 117,551 bags or 28.03% higher than the same month last year, at a total of 536,889 bags. Uganda Robusta exports registered a 21.79% increase when compared to the same month last year, to total 452,588 bags and Arabica exports registered a likewise increase by 76.69% to a total 84,301 bags exported in December this year. The UCDA likewise report that the cumulative exports for the first three months of the current October 2021 to September 2022 coffee year to be 269,768 bags or 21.11% higher than the same period in the previous year, at a total of 1,547,409 bags

There are less than three weeks ahead, for the Lunar New Year and the traditional weeklong shut down of the Vietnam market for the country’s Tet holidays. The internal market is comparatively quiet for the time of year, and selling has slowed as fairly well financed producers resist further sales of new crop coffees into the market, despite the approaching, traditionally cash hungry, new year celebrations. Exporters in Vietnam continue to struggle with a backlog of export coffee stored in warehouses in port city Ho Chi Minh and upcountry, due to the ongoing international shipping congestion, these exporters unassisted by the prevailing inverted value as is reflected in the London futures market.

The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector increase their net long position by 12.01% within the market over the week of trade leading up to Tuesday 11th. January 2022: to register a net long position of 43,029 lots, which is the equivalent of 12,198,531 bags. This net long position has most likely been little changed following the period of mixed but overall sideways trade that has since followed.

The latest Commitment of Traders report from the London Robusta coffee market has seen the Speculative Managed Money Sector of this market cut their net long position by 10.30% within the market over the week of trade leading up to Tuesday 11th. January 2022: to register a new net long position of 44,559 Lots which is the equivalent of 7,426,500 bags.  This net long position has most likely been decreased following the period of overall softer trade that has since followed.

Today is a national holiday in the U.S.A. in observance of Martin Luther King Day, thus this market will be off the field of play for the day, which is likely to set the London market for something of a dull and low volume day of trade.

The March 2022 to March 2022 contract arbitrage between the London and New York markets widened on Friday to register this 138.59 usc/Lb. This equates to 57.83% 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 3,302 bags on Friday, to register these stocks at 1,409,014, with 95.69% of these certified stocks being held in Europe at a total of 1,348,223 bags and the remaining 4.31% being held in the USA at a total 60,791. Of this, a total 633,412 bags, or 44.95% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 47.55% of these certified coffees, originating from Honduras. There was meanwhile 511 bags decrease to the number of bags pending grading to the exchange; to register 9,709 bags pending grading on the day.

It was a softer day on the commodity markets on Friday, as the US Dollar strengthened amid speculation that the USA Federal Reserve quantitive easing policies continue to unravel, while economists continue to point toward the prospects of USA interest rate hikes to come this year. The New York Arabica Coffee, Cocoa, Sugar and Corn markets ended the day on a firmer note, while the London Robusta Coffee, Wheat, Soybean, Gold, Silver, Platinum and Palladium markets ended the day on a negative note. The day starts with the U.S. Dollar trading at 1.367 Sterling, at 1.142 the Euro and with the US Dollar buying 5.534 Brazil Real.

The New York and London markets started the day on Friday trading on modest near to par softer note. Both markets continued to oscillate around par for the remainder of the early morning session before attracting a small degree of support to see the markets trend firmer into the later morning session.   As the afternoon progressed the New York and London markets were seen to attract a degree of selling pressure, which saw the markets drop back from the earlier highs and set on a softer path for the early afternoon session.  

The early afternoon session saw both the London and the New York markets hit a floor for the day, limiting the losses. The markets bounced off the lows and trended towards par. This saw the New York market attract a degree of support late in the day to see the market close on a firmer note, while the London market settled on a near to unchanged modest softer note at the close.

The London market ended the day on a modest close to par negative note and with 25% of the losses of the day intact, while the New York market ended the day on a positive note and with 82.81% of the gains of the day intact. The New York market is closed today, and one might suspect that the London market shall be due for a slow and steady start for early trade today, against the prices set on Friday, as follows:      

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

MAR    2228 – 9                                                MAR   239.65 + 2.65
MAY   2194 – 8                                              MAY      239.55 + 2.60
JUL   2185 – 7                                                   JUL       238.65 + 2.60
SEP  2181 – 8                                                    SEP      237.60 + 2.45
NOV  2177 – 10                                                  DEC      236.00 + 2.40
JAN  2174 – 10                                                  MAR     235.10 + 2.30
MAR   2168 – 9                                                  MAY     234.20 + 2.25
MAY 2162 – 8                                           JUL 232.65 + 2.00