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

Coffee Market Report

02 Jun 2022

The National Coffee Institute of Honduras (IHCAFE) have reported preliminary data that the country’s coffee exports for the month of May were 191,849 bags or 23.02% lower than the same month last year, at a total of 641,605 bags. This they say has contributed to the cumulative coffee exports for first eight months of the October 2021 to September 2022 coffee year to be 378,531 bags or 9.58% lower than the same period in the previous coffee year, at a total of 3,571,605 bags. Export figures from this washed arabica producer country had initially reported month on month increases over the first five months of the current coffee year however, there the indications that Honduras will not produce the expected 6 million bags for the October 2021 to September 2022 coffee year., suggest that supply to consumer markets will begin to taper off during the months to come.

The National Coffee Institute of Costa Rica (ICAFE) have reported that the country’s coffee exports for the month of May were 35.44% lower than the same month last year, at a total of 103,184 bags. This they say has contributed to the cumulative coffee exports for the first eight months of the current October 2021 to September 2022 coffee year to be 10% lower than the same period in the previous coffee year, at a total of 628,786 bags.

The Ivory Coast have reported that their provisional coffee exports for the month of April were 5,217 bags or 15.81% lower than the same month last year, at a total of 27,767 bags. This has contributed to their country’s cumulative coffee exports for the first seven months of the October 2021 to September 2022 coffee year to be 288,366 bags or 66.49% lower than the same period last year, at a total of 145,300 bags. This modest in comparison export performance is perhaps related to internal dynamics rather than an indication of problems with the new crop, which has been forecast in excess of 1.40 million bags.

Weather conditions meanwhile within Brazil have been reported to be dry for the first half of this week, with scattered rains expected in the Southern areas over the course of the coming days. Temperatures are expected to remain cool, in the mid to high single digits in degrees Celsius.

The July 2022 to July 2022 contract arbitrage between the London and New York markets widened yesterday to register this at 142.56 usc/Lb. This equates to 59.54% price discount for the London Robusta coffee market. This wide arbitrage may be viewed by price sensitive roasters as an attractive alternative discount for robusta against the comparatively higher value arabica coffee.

Today sees the UK celebrate their Spring Bank Holiday and with tomorrow the Platinum Jubilee Bank Holiday, this shall see the London Robusta Market closed until Monday 6th June, leaving the New York market to trade solo for the next two days.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 16,619 bags yesterday, to register these stocks at 1,043,879 bags, with 95.57% of these certified stocks being held in Europe at a total of 997,670 bags and the remaining 4.43% being held in the USA at a total 46,209. Of this, a total 525,170 bags, or 50.31% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 40.82% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register 7,800 bags pending grading on the day.

It was a mixed but overall firmer day on the commodity markets yesterday, with investors taking direction amid concerns of advancing inflation primarily due to the rise in fuel costs, however a buoyant US Dollar capped gains for the day. The Coffee, Cocoa, Sugar, Soybean, Gold, Silver, Palladium and Platinum markets ended the day on a positive note, while the Corn and Wheat markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.248 Sterling, at 1.066 the Euro and with the US Dollar buying 4.815 Brazil Real.

The New York and London markets started the day trading on a modest near to par firmer note, the markets would continue to oscillate around par for the remainder of the early morning session. A firmer trend built as activity increased in New York. The arrival of the America’s at the start of their business day pushed New York higher, triggering further buy stops along the way to accentuate the gains for the day. This assisted to trigger speculative short covering which saw the New York market gain ground quickly throughout the afternoon session. The late afternoon session saw the London market follow suit, albeit in a more sedate manner. The New York market continued on its upward momentum path before being capped briefly very late in the day. This saw the New York market settle near to the highs of the day on a very firm note, while the London market followed to also settle on a firmer note at the close.

The London market ended the day on a positive note with 81.08% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note with 87.23% of the earlier gains of the day intact. This very firmer close, with the markets continuing to make gains throughout the day and to settle near to the highs of the day, is likely to provide some degree of direction and momentum and one might think that the markets might be pressured for a follow through steady start to early trade today, against the prices set yesterday, as follows:

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

JUL 2136 + 30                                          JUL 239.45 + 8.20
SEP 2139 + 29                                          SEP 239.40 + 7.95
NOV 2128 + 28                                        DEC 238.45 + 7.65
JAN 2112 + 26                                         MAR 236.55 + 7.55
MAR 2106 + 26                                       MAY 234.50 + 7.45
MAY 2099 + 26                                       JUL 232.05 + 7.30
JUL 2095 + 26                                         SEP 229.35 + 7.15
SEP 2087 + 26                                         DEC 226.90 + 7.10