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

Coffee Market Report

01 Mar 2022

The latest Commitment of Traders report from the New York arabica coffee market has seen the shorter term in nature Managed Money fund sector of this market cut their net long position within this market by 4.71% over the week of trade leading up to Tuesday 22nd. February; to register a new net long position 57,749 Lots.  Meanwhile the longer term in nature Index Fund sector of this market marginally raise their net long position within the market by 0.12%, to register a net long position of 45,225 Lots on the day. 

Over the same week, the Non-Commercial Speculative sector cut their net long position by 5.42% within the market over the week of trade leading up to Tuesday 22nd. February: to register a net long position of 50,392 lots, which is the equivalent of 14,285,909 bags. This net long position has most likely been marginally decreased following the period of overall, softer sideways trade that has since followed.

The National Coffee Institute of Honduras (IHCAFE) have reported preliminary data that the country’s coffee exports for the month of January were 57,390 bags or 12.33% higher than the same month last year, at a total of 522,865 bags. This they say has contributed to the cumulative coffee exports for first four months of the October 2021 to September 2022 coffee year to be 259,781 bags or 34.92% higher than the same period in the previous coffee year, at a total of 1,003,680 bags. This increase in coffee exports reflected for the month of January likely due to the past year's lockdown environment, as well as Hurricanes Eta and Iota which caused catastrophic infrastructural damage during the months of October and November last year, effects of which were reflected in the slow movement of coffee within the interior, into the beginning of 2021.

The National Coffee Institute of Honduras (IHCAFE) have revised their estimate down by 12.80% to report that preliminary data forecasts that during the current October 2021 to September 2022 coffee year, the country is expected to export 5,074,622 bags, or 13.60% less than the previous coffee year. the report attributes the drop in export numbers to the prevalence of the coffee rust disease that many farmers are feeling the impact of.

The May 2022 to May 2022 contract arbitrage between the London and New York markets narrowed yesterday to register this 138.10 usc/Lb. This equates to 59.30% 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 increase by 960 bags yesterday, to register these stocks at 989,389 bags, with 94.21% of these certified stocks being held in Europe at a total of 932,150 bags and the remaining 5.79% being held in the USA at a total 57,239. Of this, a total 393,916 bags, or 38.81% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 50.18% of these certified coffees, originating from Honduras. There was meanwhile 23,014 bags increase to the number of bags pending grading to the exchange; to register 85,135 bags pending grading on the day.

It was a firmer day on the commodity markets yesterday, with the latest round of economic sanctions announced and tensions escalating, there remains a degree of uncertainty across markets and within the greater commodity basket. The Sugar, Corn, Wheat, Soybean, Gold, Silver and Palladium market ended the day on a firmer note, while the Cocoa, Coffee and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.341 Sterling, at 1.118 the Euro and with the US Dollar buying 5.160 Brazil Real.

The New York and London markets started the day yesterday trading on a modest near to par firmer note. Both markets quickly attracted a degree of selling pressure to see the markets trend in a softer direction for the remainder of the morning session. As the afternoon progressed the New York and London markets would hesitantly trade to the south of par before coming under severe selling pressure during the early afternoon session, pressured by long liquidation selling to accentuate the losses for the day’s trade.

The late afternoon session saw both the New York and London markets continued to trend in a negative direction before hitting a floor to limit the losses for the day, late in the day. This saw the New York and London markets both settle on a softer note near to the lows of the day at the close.

The London market ended the day on a negative note with 90.72% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note with 92% of the earlier losses of the day intact. This very soft close for the markets, with both the New York and the London markets settling near t the lows of the day does little to indicate direction and under the current uncertain geopolitical circumstances one might think that the markets are due for little better than a hesitant start to early trade today, against the prices set yesterday, as follows:

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

MAY 2090 – 88                                        MAY 232.90 – 5.75
JUL 2071 – 86                                          JUL 231.55 – 5.65
SEP 2069 – 83                                          SEP 230.05 – 5.60
NOV 2068 – 82                                        DEC 227.90 – 5.65
JAN 2068 – 82                                         MAR 225.70 – 5.55
MAR 2066 – 82                                        MAY 223.95 – 5.35
MAY 2066 – 82                                        JUL 221.55 – 4.95
JUL 2067 – 82                                         SEP 218.75 – 4.70