Coffee Market Report April 15 2020
The Vietnam Customs Authority have reported that Vietnam’s coffee exports for the month of March are down by 2.2% from the previous month, to total 2,833,017 bags. This number proving to be substantially above the 2.5 million bags that had been initially forecast for the month’s coffee exports.
The report also states that for the first three months of 2020 Vietnam coffee exports are 0.3% higher than the same period last year at a total of 8,154,333 bags, while the report well illustrates the negative effects of the prevailing soft coffee terminal markets, in that the value of Vietnam coffee exports for the first three months of 2020 are 1.5% lower than the same period last year, at a total of approximately 835 million US dollars.
The International Coffee Organisation (ICO) has released the first issue of its new economic publication, the ICO: Coffee Break Series No 1. The report analyses the impact of COVID-19 on the demand side of the coffee sector. The report has stated that “The COVID-19 pandemic is likely to have a profound impact on the global coffee sector, including production, consumption, and international trade,” The ICO conducted a quantitative analysis study to identify the relationship between GDP growth and coffee consumption, providing an estimate of the demand-side shock resulting from the COVID-19 pandemic. The analysis is based on a sample of the top 20 coffee consuming countries, which represent 71% of global demand, covering the period 1990-2018.
The results show that a one percentage point drop in GDP growth is associated with a reduction in the growth of global demand for coffee of 0.95%, or 1.6 million 60-kilogram bags. This study explores the correlation between a global recession and coffee demand, that should an anticipated global economic recession prove deep enough, could see global coffee consumption annual growth stagnate or even decline when compared to a more traditional trend that has reported growth in coffee demand steadily increasing year on year at a rate of between 2% to 3% per annum on average based on the figures that are reported across the top 71% of coffee consuming countries.
The overall average annual growth in global coffee consumption has been assisted by higher, in some countries, double digit percentages of annual coffee consumption growth originating largely from relatively new coffee consuming countries for a number of years. These new coffee consumer countries can often be more vulnerable to recessionary economic conditions, whereas traditional coffee consumer countries, mainly in the northern hemisphere are generally less vulnerable and these economies are broadly slower to react to economic recessionary pressures. Thus, in coffee consumption terms such countries have been reporting year on year increases in coffee consumption but at a more conservative rate of growth, at around 1% to 2% per annum, as the traditional coffee filter pot has steadily been replaced by more efficient, less wastage and growing in popularity, single serve options.
The July to July contracts arbitrage between the London and New York markets narrowed yesterday; to register this at 64.28 usc/Lb. This equates to 54.31% 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 2,140 bags on yesterday; to register these stocks at 1,901,183 bags, with 90.6% of these certified stocks being held in Europe at a total of 1,721,676 bags and the remaining 9.4% being held in the USA at a total of 179,507 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 26,608 bags.
The Certified Robusta coffee stocks held against the London exchange have been reported to decrease by 26,500 bags over the weeks of trade leading up to Monday 13th. April, to see these stocks registered at 2,352,167 bags, on the day.
The commodity markets were mostly sideways in trade yesterday against some degree of weakness being shown by the U.S. Dollar, to see the overall macro commodity index taking a sideways track for the day. Gold prices fell yesterday to stabilise after reaching a seven-year record high in the previous session, this after fears of a global economic recession limited its losses. The Sugar, Coffee, Cocoa and Oil markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.1029% lower; to see this index registered at 340.4150. The day starts with the U.S. Dollar steady, trading at 1.259 to Sterling, at 1.096 to the Euro and with the US Dollar buying 5.162 Brazilian Real.
The New York and London market started the day trading on a negative note, both markets retained this soft stance into the early afternoon trade. As the afternoon progressed the London market continued to drop deeper into negative territory, while the New York market attracted buying support to move in a positive track, this was short lived as the New York market hit a ceiling and dropped back to settle on a negative note for the day with the London market following suit.
The London market ended the day on a negative and with 81.82% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note and with 54.88% of the earlier losses of the day intact. This softer close provides little reason for confidence, but with the Brazil Real relatively steady and showing a small degree of buoyancy it might indicate subdued selling activity out of the leading producer, to assist towards a possible steady start for early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
JUL 1192 – 27 JUL 118.35 – 2.25
SEP 1210 – 22 SEP 119.55 – 2.20
NOV 1228 – 20 DEC 121.05 – 2.20
JAN 1246 – 20 MAR 122.50 – 1.95
MAR 1262 – 21 MAY 123.40 – 1.95
MAY 1281 – 18 JUL 124.20 – 2.00
JUL 1299 – 18 SEP 124.95 – 2.10
SEP 1322 – 16 DEC 126.20 – 2.25