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

Coffee Market Report

30 Jun 2022

It has been mostly dry over the main coffee districts in Brazil, what would be considered seasonally normal for this time of year, as the harvest of the biennially bearing larger 2023 Brazil coffee crop continues in the arabica areas, weather conditions are forecast to remain cool and dry for the duration of the next week. Forecasts are mostly for low temperatures to be somewhere in the lower teens in degrees Celsius.

Historically the most threatening time for cold weather risk in the Brazil coffee districts has been at times of clear nights around the time of the full moon, if accompanied by a cold front. With the next full moon due on the 13th. July. Thus, one may expect that this will bring with it a market supportive debate over the threat of colder weather, something that many market players will keep a keen eye on over the coming weeks.

Yesterday saw the New York market make considerable gains, climbing over 4% during the day’s trade and with the New York market due to close on Monday next week for the U.S.A. Independence Day holiday, one might think that many players are likely to take tomorrow off for an extended long weekend, a factor that may contribute to further activity, today prior to the long weekend.

The September 2022 to September 2022 contract arbitrage between the London and New York markets widened yesterday to register this at 135.31 usc/Lb. This equates to 59.28% 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.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 5,055 bags yesterday, to register these stocks at 926,536 bags, with 95.15% of these certified stocks being held in Europe at a total of 881,622 bags and the remaining 4.85% being held in the USA at a total 44,914 Of this, a total 415,157 bags, or 44.81% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 45.29% of these certified coffees, originating from Honduras. There was meanwhile a 3,200 bags increase to the number of bags pending grading to the exchange; to register 11,880 bags pending grading on the day.

It was a mixed day on the commodity markets yesterday, with investors looking for direction as the Central Banks continue to make aggressive monetary policy moves. The Sugar, Coffee, Soybean, Palladium and Platinum markets ended the day on a firmer note, while the Cocoa, Corn, Wheat, Gold and Silver markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.213 Sterling, at 1.046 the Euro and with the US Dollar buying 5.182 Brazil Real. The Brazil Real firmed by 1.71% against the US Dollar yesterday, a factor that may contribute to a withdrawal of selling activity in the market, perhaps providing short term speculative support.

The New York and London markets started the day yesterday trading on a modest near to par softer note. The markets continued to oscillate around par for the remainder of the early morning session. The markets started to trend in a firmer direction as the activity increased in New York. The arrival of the America’s at the start of their business day saw the New York market rally and push higher, triggering buy stops along the way to quickly accentuate the gains for the day. The London market followed suit, to likewise see support build and the market trend firmer. The late afternoon session saw the markets continue with upward momentum before being capped 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 suit albeit in a more sedate manner to also settle on a firmer note at the close.

The London market ended the day on positive note with 65.31% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note with 84.33% of the earlier gains of the day intact. This very firmer close, with the markets settling 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.

SEP 2049 + 32                                            SEP 228.25 + 10.50
NOV 2044 + 29                                          DEC 225.35 + 9.70
JAN 2032 + 22                                           MAR 222.55 + 9.05
MAR 2024 + 16                                         MAY 220.90 + 8.80
MAY 2019 + 12                                         JUL 219.40 + 8.65
JUL 2017 + 11                                           SEP 217.75 + 8.45
SEP 2014 + 12                                           DEC 216.15 + 8.40
NOV 2012 + 11                                         MAR 214.10 + 8.30