Coffee Market Report May 06 2020

The International Coffee Organisation ICO have reported that the global coffee exports for the month of March were 3.7% lower than the same month last year, at a total of 11.06 million bags, This they say, has contributed to the cumulative global coffee exports for the first six months of the present October 2019 to September 2020 coffee year to be 3.9% lower than the same period in the previous coffee year, at a total of 61.96 million bags.   

The same ICO report has estimated that global coffee consumption will rise by 0.5% for this present October 2019 to September 2020 coffee year 166.06 to million bags, which is below above what they estimate to be the coffee supply for this coffee year. With Global coffee production expected to fall by 1.8% to 168.01 million bags, the ICO has projected a surplus of 1.95 million bags for the October 2019 to September 2020 coffee year, this change in the Global Coffee outlook to project a global coffee surplus can be attributed to the impact of the Covid-19 pandemic.  Many countries having suspended non-essential activities seen to have had a negative impact upon out of home consumption, with social distancing measures, out of home restaurant, coffee shop, business travel, hotel stays and tourism suspended.  Additionally, large sectors of commerce and industry in many economies are restricted, adding to the pressures of potential loss of earnings contributing toward the view of overall lower out of home coffee demand.  

There are reports meanwhile within the retail supermarket sector within developed coffee consumer nations to indicate an uptake of coffee product sales, supported to a comparatively small extent by online access points, a modest degree of counteraction to the overall dismal situation within coffee consumer markets hit by enforced or voluntary or necessary suspension of operation and trade.  Within the context of a wide variation of individual country socioeconomic approaches and internationally, the longer-term humanitarian impact in reaction to the coronavirus Covid-19 pandemic, foreseeable impacts on global coffee demand in traditional and developed coffee consumer countries is likely to remain steady at best.  The larger percentage of year on year coffee consumption growth, has primarily been supported by the advent of new and developing coffee consumer markets.  In general terms, the economies of these newly developing coffee consumer countries tend to have less supportive socioeconomic structures in place and from an economic perspective, are often more vulnerable to recessionary impacts, such that could be an inevitable outcome of the prevailing pandemic. 

The National Coffee Growers Federation in Colombia have reported that the country’s coffee production for the month of April was 287,000 bags or 27.83% lower than the same month last year, at a total of 744,000 bags.   This has contributed to the countries cumulative production for the first seven months of the present October 2019 to September 2020 coffee year to be 140,000 bags or 1.75% higher than the same period in the previous coffee year, at a total of 8,156,000 bags. These productions numbers are reported by the Federation to have dropped due to restrictions put in place as part of the nationwide efforts to combat the spread of the Covid-19 virus. 

The National Coffee Growers Federation in Colombia have also reported that the country’s coffee exports for the month of April were 280,000 bags or 32.11% lower than the same month last year, at a total of 592,000 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 be 670,000 bags or 8.63% lower than the same period in the previous coffee year, at a total of 7,091,000 bags. These exports numbers are similarly reported, to have registered a decline due to restrictions put in place as part of the nationwide efforts to combat the spread of the Covid-19 virus. 

The July to July contracts arbitrage between the London and New York markets broadened yesterday; to register this at 56.22 usc/Lb.  This equates to 50.81% 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 12,024 bags yesterday; to register these stocks at 1,806,789 bags, with 90.7% of these certified stocks being held in Europe at a total of 1,637,902 bags and the remaining 9.3% being held in the USA at a total of 168,887.  There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 25,515 bags.

The commodity markets were firmer in trade yesterday, to see the overall macro commodity index taking a positive track for the day. The Sugar and Coffee market ended the day on a positive note, While the Cocoa market ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 1.7924% higher; to see this index registered at 344.7021.   The day starts with the U.S. Dollar steady, trading at 1.243 to Sterling, at 1.084 to the Euro and with the US Dollar buying 5.578 Brazilian Real.     

The London and New York markets started the day trading close to par on a modest negative note, both markets maintained this soft stance into the early afternoon trade. As the afternoon progressed the New York market attracted buying support to move onto a positive track for the afternoons trade, the New Market buoyed by a weaker Brazil Real gained momentum late in the day’s trade to close on a positive note, while the London market followed suit in a more sedate manner to also close on a positive note. 

The London market ended the day on a positive note and with 16.66% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note and with 92% of the earlier gains of the day intact. This positive close and with the Brazil Real still trading soft to the US Dollar one might think the markets are due for 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    1200 + 3                                                                    JUL    110.65 + 3.45

SEP    1221 + 3                                                                    SEP   111.85 + 3.40

NOV   1241 + 3                                                                     DEC   113.85 + 3.55

JAN    1261 + 4                                                                     MAR  115.75 + 3.50 

MAR   1278 + 3                                                                     MAY  116.95 + 3.50 

MAY   1296 + 4                                                   JUL   118.15 + 3.50

JUL     1314 + 5                                                                     SEP    119.25 + 3.45

SEP    1335 + 6                                                   DEC  120.65 + 3.30