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

Coffee Market Report

23 Feb 2022

The weather conditions within Brazil meanwhile have reported a continuation of rainfall across the Brazil coffee belt during the month of February, albeit that the severity of the rainfall is starting to wane. This, following good rains during December and January, the ground water retention levels are seen to be sufficient and with the good rains the first half of February, there remain no serious concerns over the cherry development for the forthcoming new biennially bearing larger 2022 Brazil coffee crop.

The Brazil Real currency has shown a degree of muscle against the US Dollar in recent days and has strengthened by 3.38% 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 reports from Vietnam indicate that with the financial pressures of the week-long Tet New Year holidays are easing and that farmers are likewise showing some degree of internal market price resistance in anticipation of what they see to be potential higher prices to come. There is meanwhile news of surging Covid-19 infection rates within the country, which is contributing to a degree of uncertainty as to the governing authority’s possible future regulatory reaction.

The May 2022 to May 2022 contract arbitrage between the London and New York markets widened yesterday to register this 144.74 usc/Lb. This equates to 58.54% 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 12,465 bags yesterday, to register these stocks at 999,019 bags, with 94.27% of these certified stocks being held in Europe at a total of 941,780 bags and the remaining 5.73% being held in the USA at a total 57,239. Of this, a total 368,316 bags, or 36.87% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 52.94% of these certified coffees, originating from Honduras. There was meanwhile 3,645 bags decrease to the number of bags pending grading to the exchange; to register 87,205 bags pending grading on the day.

It was a mixed day on the commodity markets yesterday, the leading in influence Oil markets ended the day on a firmer note, the rise of geopolitical tensions and developments in Russia and Ukraine, continue to impact sentiment and influence direction in the commodities basket. The Sugar, Cocoa, Coffee, Corn, Soybean, Wheat, Silver and Platinum markets ended the day on a firmer note, while the Gold and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.359 Sterling, at 1.133 the Euro and with the US Dollar buying 5.058 Brazil Real.

The New York and London markets started the day yesterday trading on a modest near to unhanged softer note, both markets were seen to oscillate around par for the remainder of the morning session before coming under severe selling pressure which saw the market take a softer stance into the late morning session. As the afternoon progressed both the New York and the London markets would be seen to hit a floor for the day, thus limiting the losses for the session. This reversed the trend and saw the buyers return to the floor.

The New York market was seen to trend firmer into the late afternoon session before capping gains and settling on a firmer note at the close, while the London market followed suit to also settle on a firmer note at the close.

The London market ended the day on a positive note with 86.67% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note with 37.31% of the earlier gains of the day intact. This firmer close, albeit that the New York market dropped back from 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.

MAY 2260 + 26                                         MAY 247.25 + 1.25
JUL 2238 + 22                                           JUL 246.00 + 1.30
SEP 2227 + 23                                           SEP 244.50 + 1.35
NOV 2224 + 24                                         DEC 241.70 + 1.50
JAN 2222 + 24                                          MAR 239.00 + 1.55
MAR 2220 + 24                                        MAY 237.00 + 1.50
MAY 2220 + 24                                         JUL 234.25 + 1.30
JUL 2221 + 24                                           SEP 231.25 + 1.25