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I. & M. Smith (Pty) Ltd.

Coffee Market Report

10 Jun 2020

The respected U.S. Department of Agriculture Global Agricultural Network USDA have reported their forecast for the exclusively arabica coffee crop from Ethiopia for the new October 2020 to September 2021 coffee crop year shall be 0.70% higher than the previous October 2019 to September 2020 crop, at a total of 7.5 million bags. The Ethiopian farmers will also continue to benefit from the improved agricultural extension services offered by the Ethiopian Government and various NGO’s supporting coffee production and marketing within the predominantly small-scale producing coffee community of Ethiopia.

Of this new crop, the forecast is that Ethiopia will export 6.40% or 250,000 bags more than the previous marketing year at a total of 4.15 million bags of green coffee. The domestic consumption for Ethiopia over the October 2019 to September 2020 coffee year is estimated to be 1.65% or 53,000 bags lower than the October 2018 to September 2019 coffee year at a total of 3.14 million bags, while the report suggests that the forecast reduction in local consumption could be attributed to the social distancing practices put in place due to the COVID-19 pandemic. The USDA outlook for domestic consumption in Ethiopia for the coming October 2020 to September 2021 coffee year is premised on the assumption that the easing of Covid-19 restrictions could see local domestic consumption register a degree of recovery, at an estimated 3.4 million bags.

The September to September contracts arbitrage between the London and New York markets narrowed yesterday; to register this at 43.14 usc/Lb. This equates to 43.27% 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 6,965 bags yesterday; to register these stocks at 1,733,968 bags, with 91.1% of these certified stocks being held in Europe at a total of 1,580,431 bags and the remaining 8.9% being held in the USA at a total of 153,537. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 24,489 bags.

The Certified Robusta coffee stocks held against the London exchange have been reported to decrease by 34,833 bags over the weeks of trade leading up to Monday 8th. June, to see these stocks registered at 2,046,667 bags, on the day.

The commodity markets were slightly firmer in trade yesterday, 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 0.229% higher; to see this index registered at 365.361. The day starts with the U.S. Dollar steady, trading at 1.277 to Sterling, at 1.136 to the Euro and with the US Dollar buying 4.899 Brazilian Real.

The London and New York markets started the day yesterday trading on modest close to par positive note, this was short lived as the markets quickly started to attract selling pressure to move into negative territory for the early afternoon trade. As the afternoon progressed both markets continued on this softer track to see both the London and New York markets close on a negative note for the day.

The London market ended the day on a negative note and with 82.86% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 66.67% of the earlier losses of the day intact. This softer close does little to indicate direction and one might think the markets are due for little better than a hesitant steady start to early trade today, against the prices set yesterday, as follows:

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

JUL 1221 – 29                                                                   JUL 97.80 – 1.10
SEP 1247 – 16                                                                   SEP 99.70 – 1.00
NOV 1266 – 12                                                                 DEC 101.85 – 1.05
JAN 1285 – 10                                                                  MAR 104.10 – 1.05
MAR 1305 – 8                                                                  MAY 105.55 – 1.05
MAY 1326 – 8                                                                  JUL 106.95 – 1.05
JUL 1347 – 9                                                                    SEP 108.20 – 1.05
SEP 1361 – 8                                                                    DEC 109.95 – 1.05