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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

30 Mar 2022

The Certified washed arabica coffee stocks held against the New York Exchange have registered gradual increases over the past two weeks, which would be interpreted as a short-term bearish factor for the speculative sector of the markets. However, when evaluating the movement in these certified washed arabica stocks over the last eight months, it remains clear that there have been significant drawdowns in stocks. This has been underpinned by the heightened demand for drawdown in consumer market coffee stocks due to the challenges being experienced through the time, to ship coffees to consumer markets from producer countries. This dynamic has fuelled the relatively firm speculative sentiment within the futures markets that has been observed during the first quarter of this year.

The Certified washed arabica coffee stocks registered 1,112,566 bags yesterday, marginally higher than the lowest level of 980,562 bags reported in February this year. The certified washed arabica coffee stock levels is a factor that is being monitored by the speculative and fund sector participants within the coffee futures markets. One might anticipate that should shipment congestion begin to ease during the course of this year, as the Covid-19 related pandemic easing of restrictions, to encourage easier transit, along with greater consistency in individual country policies, opening up vast sectors of these economies, that so long as there are no unforeseen climatic problems coming to the fore in the cooler winter southern hemisphere months to come, that this may potentially see some degree of consolidation within the coffee markets, to possibly limit the prevailing and somewhat volatile speculative sentiment and direction, in the months to come.

The Brazil Real currency has shown a degree of muscle against the US Dollar over the two weeks and has strengthened by 7.99% against the US Dollar during this time. A stronger Brazil Real traditionally discourages export selling from Brazil’s coffee producers, which could see a continued degree of internal price resistance and a reticence of producers to sell coffee at current market levels.

The May 2022 to May 2022 contract arbitrage between the London and New York markets widened yesterday to register this at 119.31 usc/Lb. This equates to 55.31% price discount for the London Robusta coffee market.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 10,105 bags yesterday, to register these stocks at 1,112,566 bags, with 95.21% of these certified stocks being held in Europe at a total of 1,059,232 bags and the remaining 4.79% being held in the USA at a total 53,334. Of this, a total 563,426 bags, or 50.64% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 40.67% of these certified coffees, originating from Honduras. There were meanwhile a 4,018 bags increase to the number of bags pending grading to the exchange; to register 28,593 bags pending grading on the day.

The Certified Robusta coffee stocks held against the London exchange have been reported to increase by 2,833 bags over the week of trade leading up to Monday 28th. March to see these stocks registered at 1,625,000 bags, on the day.

It was a softer day on the commodity markets yesterday, with the leading in influence Oil market lower as potential de-escalation in the conflict between Russia and Ukraine provided directional support to the markets. The Cocoa and New York Arabica Coffee markets ended the day on a positive note, while the Sugar, London Robusta Coffee, Corn, Soybean, Wheat, Oil, Gold, Silver, Palladium and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.310 Sterling, at 1.111 the Euro and with the US Dollar buying 4.756 Brazil Real.

The New York market started the day yesterday trading on a modest softer note, while the London market started the day yesterday trading on a modest near to par firmer note, both markets would oscillate around par for the remainder of the early morning session before attracting some degree of support to trend in a firmer direction. As the afternoon progressed both the New York and London markets under light volumes of trade would hit a ceiling for the day, putting a cap on the day’s gains. This saw the markets drop back from the highs of the early afternoon session to trade in modest firmer territory to the close. The New York market maintained some of the earlier gains of the day to settle on a firmer note, while the London market dropped back to settle on a modest softer note at the close.

The London market ended the day on a modest near to par negative note with 75% of the earlier losses of the day intact, while the New York market ended the day on a positive note with 40.35% of the earlier gains of the day intact. This mixed but overall, firmer close might inspire some degree of consolidation and support for the markets, albeit that the New York market dropped back from the early highs of the day. One might think that the markets are due for a steady start to early trade today, against the prices set yesterday, as follows:


MAY 2125 – 15                                           MAY 215.70 + 1.15
JUL 2115 – 9                                               JUL 215.80 + 1.10
SEP 2103 – 6                                               SEP 215.30 + 1.10
NOV 2094 – 5                                             DEC 213.80 + 1.05
JAN 2084 – 6                                              MAR 212.10 + 1.05
MAR 2081 – 6                                            MAY 210.80 + 1.10
MAY 2081 – 6                                            JUL 208.55 + 1.10
JUL 2083 – 6                                              SEP 205.80 + 1.20