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


I. & M. Smith (Pty) Ltd.

Coffee Market Report

01 Jun 2020
The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector cut their net long position within the market by 98.98% over the week of trade leading up to Tuesday 26th May; to register a new net long position of 47 Lots which is the equivalent of 13,324 bags. This net long position has most likely been dramatically decreased, following the period of 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 decrease their net short sold position within the market by 0.53% over the week of trade leading up to Tuesday 26th May; to register a short-sold position of 34,852 Lots.  This net short sold position is the equivalent of 5,808,667 bags and has most likely been little changed following the period of mixed but overall soft sideways trade that has since followed.

The harvest of the Brazil July 2020 to June 2021 arabica coffee crop is presently underway, with weather conditions conducive, as so too has the Government of Brazil issued a communication regarding the broad campaign on the guidelines for harvest protocols and citizen safety within the coronavirus pandemic conditions. The document stating that education and the teaching of the right information represent the best solution for all involved in the coffee value chain. This to mitigate the potential impacts of the pandemic, these topics include evaluating and identifying the at-risk groups, the forms of contagion and how good practices in personal hygiene, cleaning and maintenance of equipment and adequate social distancing between employees can attribute to preventing the further spread of the virus as well as decrease the risk of infection in rural areas, warehouses, industry and all invested parties across the entire value chain.

It has been some twenty-six years since the main coffee producing districts within South East Brazil have encountered any significant damaging frost event, and in the prevailing global warming conditions, unlikely. World weather is erratic however and whereas many within the industry and the speculative sectors of the coffee markets have never have encountered market reaction to an actual frost event, there is some awareness of the historical influence that cold front volatility can have upon the markets. This has the potential as the largest coffee producer heads into the main winter months, to bring a degree of volatility to the markets, through to end July.

The July to July contracts arbitrage between the London and New York markets narrowed on Friday; to register this at 43.27 usc/Lb. This equates to 44.93% 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 17,587 bags on Friday; to register these stocks at 1,760,608 bags, with 91% of these certified stocks being held in Europe at a total of 1,601,846 bags and the remaining 9% being held in the USA at a total of 158,762. There was a 12,100 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 18,085 bags.

The commodity markets were slightly firmer in trade on Friday, to see the overall macro commodity index taking a sideways track for the day. The Sugar and Cocoa markets ended the day on a positive note, while the Coffee markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.7581% higher; to see this index registered at 356.9831. The day starts with the U.S. Dollar steady, trading at 1.239 to Sterling, at 1.114 to the Euro and with the US Dollar buying 5.336 Brazilian Real.

The London and New York markets started the day on Friday trading on modest positive note, both markets continued on a positive track into the early afternoon trade. As the afternoon progressed both markets attracted selling pressure to limit the gains for the day and to move onto a negative track for the afternoon trade, both the London and New York markets continued to trade on this negative track to see the markets close on a very soft note for the day. The New York July Arabica prompt position meanwhile, touched a low that was last recorded, seven months ago.

The London market ended the day on a negative note and with 61.54% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note 86.15% of the earlier losses of the day intact. This very soft close does little to indicate direction, one might think the markets are possibly due for little better than a hesitant steady start to early trade today, against the prices set on Friday, as follows:


JUL 1169 – 8                                                      JUL 96.30 – 2.80
SEP 1189 – 10                                                    SEP 98.15 – 2.75
NOV 1209 – 11                                                   DEC 100.55 – 2.65
JAN 1227 – 13                                                    MAR 102.80 – 2.65
MAR 1245 – 17                                                  MAY 104.35 – 2.60
MAY 1266 – 18                                                  JUL 105.70 – 2.60
JUL 1386 – 20                                                    SEP 106.90 – 2.60
SEP 1303 – 22                                                    DEC 108.50 – 2.55