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

Coffee Market Report

20 Jan 2022

The Brazil Real currency has shown a degree of muscle against the US Dollar in recent days and has strengthened by 3.97% against the US Dollar in the last two weeks. A stronger Brazil Real traditionally discourages export selling from Brazil’s coffee producers, which could see a continued degree of internal price resistance, slower selling activity, which could manifest in a degree of continued buoyancy, within the coffee futures markets, should this trend continue.

The March 2022 to March 2022 contract arbitrage between the London and New York markets widened yesterday to register this 143.53 usc/Lb. This equates to 58.72% 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 remain unchanged yesterday, to register these stocks at 1,387,468, with 95.64% of these certified stocks being held in Europe at a total of 1,327,002 bags and the remaining 4.36% being held in the USA at a total 60,466. Of this, a total 611,866 bags, or 44.10% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 48.27% of these certified coffees, originating from Honduras. There was meanwhile an 16,047 bags increase to the number of bags pending grading to the exchange; to register 37,538 bags pending grading on the day.

It was a firmer day on the commodity markets yesterday, with the US Dollar losing further ground against a basket of other currencies, although widespread gains in the commodity sector were kept in check as investors await further news on potential interest rate hikes. The Sugar, Coffee, Corn, Wheat, Soybean, Gold, Silver, Platinum, and Palladium markets ended the day on a firmer note, while the Cocoa market ended the day on a softer note.  The day starts with the U.S. Dollar trading at 1.362 Sterling, at 1.135 the Euro and with the US Dollar buying 5.438 Brazil Real.  

The New York market started the day yesterday trading on a modest softer note, while the London market started the day trading on a modest firmer note, both markets continued to oscillate around par for the remainder of the early morning session.   The New York market was seen to attract a degree of buying support in technical trade, whilst the London market followed suit. As the afternoon progressed the New York market started 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 turn positive, gaining momentum throughout the session.  The New York market driven by technical sentiment, continued to trigger speculative buy stops along the way before hitting a ceiling late in the day, to limit the gains and see the market settle near to the highs of the day on a firmer note at the close.

The London market ended the day on a positive note with 93.75% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note with 89.81% of the earlier gains of the day intact. This firmer close with the New York market 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.     

MAR    2225 + 30                                               MAR   244.45 + 4.85
MAY   2191 + 27                                              MAY      244.45 + 4.95
JUL   2181 + 27                                                  JUL       243.40 + 4.90
SEP  2179 + 27                                                    SEP      242.25 + 4.75
NOV  2178 + 27                                                   DEC      240.50 + 4.60
JAN  2178 + 29                                                   MAR     239.50 + 4.50
MAR   2179 + 34                                                 MAY     238.45 + 4.30
MAY 2173 + 34                                           JUL       236.75 + 4.00