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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

25 Jul 2022

The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector cut their net long position by 20.18% within the market over the week of trade leading to Tuesday 19th. July 2022: to register a net long position of 13,524 lots, which is the equivalent of 3,833,994 bags. This net long position has most likely been decreased further following the period of mixed but overall 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 market increase their net short position within the market over the week of trade leading up to Tuesday 19th July: to register a new net short sold position of 1,021 Lots, which is the equivalent of 170,167 bags. This new net short position has most likely been extended further, following the period of softer trade has since followed.

The analysts Safras & Mercado have reported than an estimated total 66% of the new Brazil coffee crop has already been harvested. Based on their forecast for a new crop of 61.10 million bags, the report would indicate that so far approximately 40.33 million bags of the new crop coffee has been harvested. The pace of harvest at this time across a 5-year average is reported to be around 73%, noting that the that current crop harvest is slightly delayed when compared to that of the recorded five-year average.

Weather conditions within Brazil have been conducive as the harvest continues, with weather forecasters predicting that conditions are to remain warm and dry in the days to come. With the concerns over cooler winter weather on the wane along with the mainstream northern hemisphere coffee consumer markets in their slower summer holiday season, the speculative sector remains firmly in the driving seat contributing to the somewhat volatile commodity markets at present.

The September 2022 to September 2022 contract arbitrage between the London and New York markets narrowed on Friday to register this at 117.71 usc/Lb. This equates to 56.95% 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 7,090 bags on Friday, to register these stocks at 705,727 bags, with 92.05% of these certified stocks being held in Europe at a total of 649,628 bags and the remaining 7.95% being held in the USA at a total 56,099 Of this, a total 249,000 bags, or 35.28% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 52.45% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register 0 bags pending grading on the day.

It was a softer day on the commodity markets on Friday, with the US Dollar strengthening against a basket of other currencies, a stronger Dollar is seen to be a bearish factor for many commodities traded on other currencies. The Soybean, Gold and Palladium markets ended the day on a positive note, the Platinum market remained unchanged on the day, while the Coffee, Cocoa, Sugar, Wheat, Corn, Silver and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.19 Sterling, at 1.021 the Euro and with the US Dollar buying 5.498 Brazil Real.

The New York market started the day on Friday trading on a firmer note, while the London market started the day trading on a modest 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 been seen to stage a brief recovery trending towards par, this was however short lived as the markets came under severe selling pressure during the early afternoon session, this as the markets were pressured by long liquidation selling to accentuate the losses for the day’s trade. The Brazil Real continued to lose ground against the US Dollar as the day drew to a close. Late in the day saw both the New York and London markets continue to trend in a negative direction. The New York market settled near to the lows of the day, while the London market recovered some of the earlier losses of the day to settle on a likewise softer note at the close.

The London market ended the day on a negative note with 64.10% of the earlier losses of the day intact, while the New York market ended the day on a likewise very negative note with 88.41% of the earlier losses of the day intact. This soft close for the markets, does little to indicate direction and with the markets settling near to the lows of the day, one might think that the markets are due for little better than a hesitant start to early trade today, against the prices set on Friday, as follows:

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

SEP 1962 – 25                                                                SEP 206.70 – 9.15
NOV 1960 – 24                                                              DEC 202.65 – 9.10
JAN 1944 – 24                                                               MAR 198.80 – 9.00
MAR 1927 – 27                                                             MAY 196.40 – 8.95
MAY 1922 – 27                                                             JUL 194.60 – 8.75
JUL 1918 – 27                                                               SEP  192.90 – 8.70
SEP 1914 – 27                                                               DEC 191.20 – 8.60
NOV 1913 – 27                                                             MAR 189.15 – 8.60