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

Coffee Market Report

27 May 2020

The respected U.S. Department of Agriculture Global Agricultural Network USDA have reported their forecast for the exclusively arabica coffee crop from Honduras for the present October 2019 to September 2020 coffee year, to reach an overall 5,597,000 bags, or 25.5% lower than the previous coffee production year in October 2018 to September 2019 production that is reported at 7,513,000 bags.

The same report has forecast the new crop to come from Honduras for the forthcoming October 2020 to September 2021 coffee year, at an anticipated 9% increase on that of the previous coffee production year citing supportive government programs. One such program initiated in April, called ‘Coffee Bonus” through which the government provide fertilizer to around 91,000 small and medium sized coffee producers. These small and medium coffee farmers represent 84% of Honduras’s total coffee production. Weather has meanwhile, been conducive to coffee development and this new crop that is due to start harvest toward the end of the year, is forecast to come in at 6.13 million bags. Of this new crop to come, the forecast is that Honduras will export 5.58 million bags. Local consumption is considered to be growing from a low base, the sector made up of a combination of imported soluble products as well as local and imported roast and ground coffee products forecast by the USDA to be in the region of 369,000 bags in the 2020/2021 coffee year.

The Ugandan Coffee Development Authority UCDA have reported that their country’s coffee exports for the month of April were 54,330 bags or 17.78% higher than the same month last year, at a total of 359,973 bags. This has contributed to the country’s cumulative coffee exports for the first seven months of the present October 2019 to September 2020 coffee year to have been 490,554 bags or 20.12% higher than the same period in the previous coffee year, at a total of 2,928,490 bags. By comparing quantity of coffee exported by type in April this year compared to the same month of last Coffee Year, Robusta increased in quantity by 19.78% to total 262,676 bags, Similarly, Arabica exports also registered a increase in quantity of 12,68% to total 97,297 bags. The increase in exports has been attributed to the increased production on account of fruition of the newly planted coffee.

The weather news from Uganda has come to the fore meanwhile, with the rain season underway, excessive rains have been reported in many areas of the country, to include the Western coffee growing areas, with reports of excessive and heavy rains causing mudslides in the area. These incessant heavy rains have resulted in many areas around the lake basin, including the capital city Kampala to flood. Uganda shares the largest lake in Africa, Lake Victoria, with neighbouring countries Kenya and Tanzania, which countries are similarly affected by the rise in the lake waters, that is reported to have risen to its highest recorded level since 1964.

The July to July contracts arbitrage between the London and New York markets broadened yesterday; to register this at 50.35 usc/Lb. This equates to 47.91% 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 3,979 bags yesterday; to register these stocks at 1,786,326 bags, with 90.9% of these certified stocks being held in Europe at a total of 1,623,288 bags and the remaining 9.1% being held in the USA at a total of 163,088. There was a smaller in number 1,721 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 7,706 bags.

The commodity markets were firmer in trade yesterday, to see the overall macro commodity index taking a positive sideways track for the day. The Sugar and Coffee markets ended the day on a positive note, while the Cocoa market remained unchanged on the day. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 1.0321% higher; to see this index registered at 356.3397. The day starts with the U.S. Dollar steady, trading at 1.232 to Sterling, at 1.095 to the Euro and with the US Dollar buying 5.345 Brazilian Real.

The London and New York markets started the day yesterday trading on modest positive note, both markets continued on a positive track into the early afternoon trade. As the afternoon progressed both markets hit a ceiling to limit the gains for the day. The London and New York markets both settled on respective positive notes for the day.

The London market ended the day on a modest positive note and with 57.14% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note 42.86% of the earlier gains of the day intact. This positive close might inspire some degree of confidence to possibly set the markets for a hesitant steady start to early trade today, against the prices set on Friday, as follows:

LONDON ROBUSTA US$/MT                                    NEW YORK ARABICA USc/Lb. 

JUL    1207 + 12                                                                  JUL    105.10 + 1.50
SEP    1228 + 14                                                                  SEP   106.65 + 1.45
NOV   1247 + 15                                                                 DEC   108.75 + 1.40
JAN    1267 + 14                                                                  MAR  110.85 + 1.45
MAR   1287 + 14                                                                 MAY  112.00 + 1.50
MAY 1308 + 13                                                       JUL 113.25 + 1.55
JUL    1327 + 13                                                                   SEP    114.40 + 1.55
SEP 1343 + 13                                                         DEC 115.90 + 1.45