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

Coffee Market Report

04 Jul 2022

The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector decrease their net long position by 16.28% within the market over the week of trade leading to Tuesday 28th. June 2022: to register a net long position of 19,914 lots, which is the equivalent of 5,645,531 bags. This net long position has most likely been decreased further following the period of mixed but overall sideways softer trade that has since followed.

The latest Commitment of Traders report from the London Robusta coffee market has seen the Speculative Managed Money Sector of this decrease their net long position by 22.30% within the market over the week of trade leading up to Tuesday 28th. June 2022: to register a new net long position of 16,762 Lots which is the equivalent of 2,798,667 bags.  This net long position has most likely been decreased further following the period of overall softer trade that has since followed.

The Brazil government have reported preliminary data that illustrates the country’s green coffee exports for the month of June were 3.77% higher than the same month last year, at a total of 3.02 million bags. The official breakdown of coffee exports by description for June will soon be released and can be anticipated to illustrate this figure more accurately.

The National Coffee Institute of Honduras (IHCAFE) have reported preliminary data that the country’s coffee exports for the month of June were 127,155 bags or 16.26% lower than the same month last year, at a total of 654,996 bags. This they say has contributed to the cumulative coffee exports for first nine months of the October 2021 to September 2022 coffee year to be 145,685 bags or 3.08% lower than the same period in the previous coffee year, at a total of 4,226,601 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 has begun to taper off, ahead of the new crop harvest to come later in the seasonal year.

The National Coffee Institute of Costa Rica (ICAFE) have reported that the country’s coffee exports for the month of June were 9.64% lower than the same month last year, at a total of 146,581 bags. This they say has contributed to the cumulative coffee exports for the first nine 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 772,521 bags.

Tropical storm Bonnie made landfall along the Nicaragua/Costa Rica coastline on Friday night. This marking the second names storm of the Atlantic hurricane season that traditionally runs from June to November each year. Bonnie gained strength as it approached the coastline and was seen to bring with it strong winds and heavy rains. The sustained strength of this latest hurricane as it moves over Central America, will be closely monitored.

The September 2022 to September 2022 contract arbitrage between the London and New York markets narrowed on Friday to register this at 133.66 usc/Lb. This equates to 59.50% 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 active and influential U.S.A. based markets are closed for the day today, in observation of the country's Independence Day holiday. One might anticipate that with the U.S.A. markets not trading today, could bring with it a relatively subdued day of trade for the London coffee market that is trading solo for the day.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 32,847 bags on Friday, to register these stocks at 854,584 bags, with 94.56% of these certified stocks being held in Europe at a total of 808,085 bags and the remaining 4.44% being held in the USA at a total 46,499 Of this, a total 364,798 bags, or 42.69% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 46.67% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register 9,920 bags pending grading on the day.

It was an overall softer day on the commodity markets on Friday, the US Dollar gained ground against a basket of other currencies, a bearish factor for many commodities traded in other currencies. The Palladium market ended the day on a firmer note, while the Cocoa, Coffee, Corn, Sugar, Soybean, Wheat, Gold, Silver and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.210 Sterling, at 1.043 the Euro and with the US Dollar buying 5.330 Brazil Real.

The New York and London markets started the day on Friday trading on a softer note, the markets quickly gained some degree of momentum to trend in a firmer direction for the remainder of the morning session. This saw both the New York and London markets climb to hit a ceiling early in the day. As the afternoon progressed the markets would be seen to encounter a degree of resistance to drop back from the morning highs and see the market trend in a softer direction for the remainder of the day. The later afternoon session saw some degree of long liquidation pressure on the markets to push both the New York and the London markets lower. The markets were seen to settle on a softer note, near to the lows of the day at the close.

The London market ended the day on negative note with 84.34% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note with 83.85% of the earlier losses of the day intact. This softer close for the markets does little to inspire confidence and with both the New York and the London markets settling near to the lows of the day and with the London market trading solo for the day, one might think that the market might be due for a hesitant start to early trade today, against the prices set on Friday, as follows:

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

SEP 2006 – 27                                            SEP 224.65 – 5.45
NOV 2006 – 25                                          DEC 221.50 – 5.55
JAN 2002 – 21                                           MAR 218.70 – 5.45
MAR 1999 – 18                                         MAY 216.95 – 5.45
MAY 1996 – 16                                          JUL 215.35 – 5.35
JUL 1994 – 15                                           SEP 213.75 – 5.20
SEP 1993 – 13                                            DEC 212.20 – 5.10
NOV 1992 – 12                                          MAR 210.20 – 4.90