Coffee Market Report May 21 2020

The respected United States Department of Agriculture USDA Global Agricultural Information Network have revised their estimate for the October 2019 to September 2020 Mexican coffee crop production, lower by 17.78% at a total 3,700,000 bags.   This revised figure is made up from the production of 3,145,000 bags of arabica coffee and 555,000 bags of robusta coffee. The report further anticipates green coffee exports from this primarily washed arabica producer to reach 1,740,000 bags in the October 2019 to September 2020 coffee year.  

In the same report, the USDA estimate a lower crop to come in the October 2020 to September 2021 year, citing low international prices as a primary reason for the lack of affordability and incentive on the part of the primarily small holding growers, as a hindrance to coffee expansion.  The USDA report estimates the coming years production at 3,900,000 bags of which they foresee at 1,750,000 bags of green coffee exports to coffee consumer markets. 

There is the ability of Mexican coffee industries to import coffees to supplement local coffees for processing and it is estimated that the total coffee supply for the next October 2020 to September 2021 coffee year, shall be approximately 5,875,000 bags, of this total approximately 2,700,000 bags is forecast to be consumed locally.  This along with green coffee exports, will be supplemented by value added roast and ground exports of the equivalent of 230,000 bags and 1,050,000 bags of soluble coffee exports in the coming October 2020 to September 2021 coffee year. 

Trade within Vietnam, the largest robusta producer and exporter to consumer markets, is subdued this week as the internal market registered increased price resistance on the part of producers, who are in general sufficiently financed to be able to hold back further sales of their October 2019 to September 2020 coffee crop, in the hope of better value to come.  The National Centre for Hydro-Meteorological Forecasting in Vietnam has indicated that the Central Highlands, Vietnam's largest coffee-producing region, will receive a lower rainfall than is the average for the month of May, although this is not anticipated to be cause for concern at this early stage of new crop coffee development.  While, at this time Indonesia is concentrating on the harvest of their April 2020 to March 2021 mainly robusta coffee crop, with this new crop estimated to come in at over 9 million bags, to allow this producer to continue to fuel their own strong domestic demand as well as to supply over 6 million bags from this harvest to coffee consumer markets in the months to come. 

Today is an Ascension Day public holiday for many European countries and likely in terms of physical trade and significant coffee consumer market share, to be a somewhat muted business day. 

The July to July contracts arbitrage between the London and New York markets narrowed yesterday; to register this at 52.80 usc/Lb.  This equates to 49.50% price discount for the London Robusta coffee market.    

The Certified washed Arabica coffee stocks held against the New York exchange were decrease by 3,362 bags yesterday; to register these stocks at 1,790,593 bags, with 90.8% of these certified stocks being held in Europe at a total of 1,625,612 bags and the remaining 9.2% being held in the USA at a total of 164,961.  There was a 3,525 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 4,775 bags.  

The Certified Robusta coffee stocks held against the London exchange have been reported to decrease by 22,667 bags over the weeks of trade leading up to Monday 18th May, to see these stocks registered at 2,170,167 bags, on the day. 

The commodity markets were firmer in trade yesterday, to see the overall macro commodity index taking a firm sideways track for the day. The Sugar and London Robusta Coffee markets ended the day on a positive note, while the Cocoa and New York Arabica Coffee markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.5990% higher; to see this index registered at 357.4306.   The day starts with the U.S. Dollar steady, trading at 1.219 to Sterling, at 1.096 to the Euro and with the US Dollar buying 5.693 Brazilian Real.   

The London and New York markets started the day yesterday trading on a modest soft note, both markets maintained this softer stance into the early afternoon trade. As the afternoon progressed the New York market started to gain momentum to trade on a modest positive note for the day only to hit a ceiling and drop off the highs of the day to settle on a negative note, while the London market gained support early in the afternoon trade to continue on a modest positive track for much of the afternoon trade. 

The London market ended the day on a modest positive note and with 28.58% of the earlier gains of the day intact, while the New York market ended the day on a negative note 80% of the earlier losses of the day intact. This mixed close does little to indicate direction and one might expect the markets are due 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    1186 + 2                                                                     JUL    106.65 – 1.40

SEP    1209 + 3                                                                     SEP   107.05 – 1.35

NOV   1229 + 3                                                                     DEC   108.95 – 1.25

JAN    1249 + 3                                                                      MAR  110.80 – 1.25 

MAR   1271 + 5                                                                     MAY  111.80 – 1.25 

MAY   1293 + 7                                                    JUL   112.85 – 1.25

JUL     1315 + 9                                                                      SEP    113.90 – 1.20

SEP    1331 + 8                                                    DEC  115.35 – 1.10