Coffee Market Report May 22 2020

The respected United States Department of Agriculture USDA Global Agricultural Information Network have revised their estimate for the October 2019 to September 2020 Indian coffee crop production, lower by 2% at a total 4,890,000 bags.   This revised figure is made up from the production of 1,330,000 bags of arabica coffee and 3,560,000 bags of robusta coffee. The report further anticipates green coffee exports from this primarily Robusta producing country to reach 3,600,000 bags in the October 2019 to September 2020 coffee year.  

In the same report, the USDA estimate a higher crop to come in the October 2020 to September 2021 year, citing Improvement in yields for both Arabica and Robusta is expected due to the availability of adequate moisture and good rainfall. The USDA estimates October 2020 to September 2021 yields for Arabica at 468 kilograms, per hectare, three percent higher than last year, but four percent lower than the five-year average. The yields for Robusta are estimated at 1,004 kilograms per hectare, eight percent higher than last year, but three percent lower than the five-year average.  The report also estimates the coming years production at 5,310,000 bags of which they foresee at 3,300,000 bags of green coffee exports to coffee consumer markets. 

The USDA estimates the October 2020 to September 2021 Indian domestic coffee consumption to decline by nearly 3 percent to 1,150,000 bags. This is largely driven by the expected slowdown in sales experienced by the hospitality (hotels, restaurants, catering) and institutional (corporate offices, airports) sector in the coming year as a result of COVID-19 outbreak. 

The Report also indicates that it is anticipated the out of home consumption will see a decline as the hospitality and restaurant sector slowly get back to opening, managing with limited staff, and complying with new social distancing norms. The in-home consumption of coffee, an important driver of demand is expected to rise with the increased demand for instant coffee (soluble coffee). Estimated soluble coffee consumption at 720,000 bags, six percent higher than last year as more consumers are expected to remain at home due to stricter social distancing regulations and norms. 

The July to July contracts arbitrage between the London and New York markets narrowed yesterday; to register this at 50.83 usc/Lb.  This equates to 48.53% price discount for the London Robusta coffee market.     

The Certified washed Arabica coffee stocks held against the New York exchange were decrease by 288 bags yesterday; to register these stocks at 1,790,305 bags, with 90.8% of these certified stocks being held in Europe at a total of 1,625,344 bags and the remaining 9.2% being held in the USA at a total of 164,961.  There was a larger in number 1,210 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 5,985 bags.  

The commodity markets were softer in trade yesterday, to see the overall macro commodity index taking a soft sideways track for the day. The London Robusta Coffee market ended the day on a positive note, while the Sugar, 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 1.0911% lower; to see this index registered at 353.5307.   The day starts with the U.S. Dollar steady, trading at 1.221 to Sterling, at 1.092 to the Euro and with the US Dollar buying 5.553 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 followed suit only to gain support late in the in the afternoon trade, to close on a positive note for the day. 

The London market ended the day on a modest positive note and with 50% of the earlier gains of the day intact, while the New York market ended the day on a negative note 62.07% 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    1189 + 3                                                                     JUL    104.75 – 0.90

SEP    1212 + 3                                                                     SEP   106.30 – 0.75

NOV   1233 + 4                                                                     DEC   108.40 – 0.55

JAN    1254 + 5                                                                      MAR  110.35 – 0.45 

MAR   1277 + 6                                                                     MAY  111.35 – 0.45 

MAY   1300 + 7                                                    JUL   112.45 – 0.40

JUL     1324 + 9                                                                      SEP    113.55 – 0.35

SEP    1340 + 9                                                    DEC  115.05 – 0.30