Coffee Market Report April 03 2020

The International Coffee Organisation ICO have reported that the global coffee exports for the month of February were 2.59% higher than the same month last year, at a total of 11.11 million bags, This they say, has contributed to the cumulative global coffee exports for the first five months of the present October 2019 to September 2020 coffee year to be 3.4% lower than the same period in the previous coffee year, at a total of 50.97 million bags.   

The same ICO report has estimated that global coffee consumption will rise by 0.7% for this present October 2019 to September 2020 coffee year to 169.34 million bags, which is marginally above what they estimate to be the coffee supply for this coffee year. With Global coffee production expected to fall by 0.8% to 168.86 million bags, the ICO has maintained its projected deficit of 480,000 for the October 2019 to September 2020 coffee year, however with the ever changing and developing Global Covid-19 pandemic these forecasts may change, with impacts on supply and demand, the situation is fluid and being monitored.  

There have been reports coming forth on a daily basis from countries the world over, affected in one way or another by the arrival of and in reaction to, Coronavirus Covid-19. From a logistical aspect, the disruptions in origin countries, and depending on the stringency of the lockdown or social distancing, or travel ban measures that are put into place, is incurring delays and disruptions to movement of consignments are more likely than not.  

In some countries, India being one, the country is in day 10 of lockdown with April 9th, the target date for opening their borders.  This has had immediate impact upon logistics with border closures prohibiting exports and within time sensitive agricultural harvests, the tea industry being one, certain to be affected by loss of leaf and overall crop output as tea estates are unable to pluck leaf, which cannot be recovered.  A similar situation playing out in other countries and producer sectors where time sensitive horticulture and international flower export industries to name a few, are immediately impacted by the lack of air transport to get to consumer markets.     

In the coffee markets meanwhile, the latest news to come from largest robusta producer and exporter, Vietnam, is that the country has just implemented lockdown measures from 1st April, for a period of 15 days. Reports from the interior are that these measures are related to societal restrictions and social distancing which will impact day to day business and citizens, it would appear meanwhile that logistical services and therefore, coffee deliveries to port and exports will continue to flow to consumer markets.  

The July to July contracts arbitrage between the London and New York markets broadened yesterday; to register this at 64.73 usc/Lb.  This equates to 53.63% 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 275 bags yesterday; to register these stocks at 1,947,460 bags, with 90.4% of these certified stocks being held in Europe at a total of 1,760,178 bags and the remaining 9.6% being held in the USA at a total of 187,282 bags.  There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 44,653 bags. 

The commodity markets were positive in trade yesterday, to see overall macro commodity index taking an upwards track for the day. The Cocoa, Coffee and Sugar markets ended the day on a positive note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 1.2859% higher; to see this index registered at 333.9738.   The day starts with the U.S. Dollar steady and showing some degree of buoyancy, trading at 1.237 to Sterling, at 1.083 to the Euro and with the US Dollar buying 5.256 Brazilian Real.    

The London and New York market started the day yesterday trading close to par on a modest positive note, both markets attracted buying support to move onto a positive track for the early afternoon trade. As the afternoon progressed both the London and the New York markets attracted further buying support to move deeper into positive territory, only to hit a ceiling late in the days trade and fall back off the highs of the day to settle on a positive note for the close.  

The London market ended the day on a positive note and with 93.75% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 82.72% of the earlier gains of the day intact.  This positive close might assist towards some degree of confidence and to set the markets for a follow through steady start for early trade today, against the prices set yesterday, as follows:  

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

JUL    1234 + 30                                                                       JUL    120.70 + 3.35 

SEP    1256 + 31                                                                      SEP   121.70 + 3.40  

NOV   1274 + 30                                                                       DEC   122.90 + 3.55 

JAN    1293 + 33                                                                       MAR  124.00 + 3.55 

MAR   1307 + 33                                                                      MAY  124.90 + 3.55 

MAY   1323 + 31                                                                    JUL    125.65 + 3.50 

JUL    1342 + 30                                                                       SEP    126.55 + 3.55 

SEP   1361 + 29                                                    DEC  127.95 + 3.50