The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector cut their net long position by 1.51% within the market over the week of trade leading up to Tuesday 16th. February: to register a net long position of 19,454 which is the equivalent of 5,515,123. This net long position has most likely been marginally decreased, following the period of firmer trade that has since followed.
The February rains over the main coffee districts in Brazil are reported to be fair for most districts, with more rains forecast for the rest of the month. The forecasts for the new arabica coffee crop from Brazil this year would indicate a new crop that shall be as much as 15 million bags lower than last year’s record bumper crop, but with the new conilon robusta coffee crop forecast to be approximately 2 million bags higher than last year’s likewise, bumper crop. This indicating something in the order of a fourteen million bags dip in Brazil coffee production this year, but with the probability of significant volumes of carryover arabica coffee stocks into the start of the new crop harvest.
The traditional washed quality arabica producer Colombia has reported that the countries cumulative coffee production for the first four months of the present October 2020 to September 2021 coffee year to be 179,000 bags or 3.19% lower than the same period in the previous coffee year, at a total of 5,426,000 bags. With this current crop forecast to be similar to the previous year to be around 14.20 million bags. Colombia have also reported exports of 4,714,000 bags for the first four months of the current October 2020 to September 2021 coffee year, with these figures in line with the previous year’s total exports of around 13.1 million bags.
The traditional washed quality arabica producer bloc Mexico and Central America which are now in the fifth month of the current crop year, have recorded a cumulative 7 million bags production and 5.5 million bags of exports in the first four months of this October 2020 to September 2021 coffee year. This, with the consistently low prices relative to the New York arabica market, has led to reduced inputs in these higher cost of production washed arabica producer countries as well as reduced picking rounds during harvest leading to a lower overall quality component of coffees delivered in the interior. These producers have completed their harvests for the October 2020 to September 2021 coffee year, with most well sold. The coffee flow from the interior is reported to be comparatively slow from the largest Central American producer, Honduras subsequent to the internal humanitarian and infrastructural disaster caused by two hurricanes passing through the country late last year. There is a likelihood that this washed arabica quality producer bloc Mexico and Central America will register a cumulative dip in production of close to 300,000 bags for the current October 2020 to September 2021 seasonal coffee year, with the official reports still to come to the market in the weeks to come.
The fine washed arabica producer Peru, will start to come to the market from their new coffee crop that is due to start harvesting in April 2021 for exports to flow to the markets from their new April 2021 to March 2022 seasonal coffee year, with this new crop forecast to be somewhere in the region of 3.3 million bags, or 10% lower than the previous coffee year.
The short-term upward momentum seen of late, may nevertheless still be considered relatively soft reference prices that are being traded within the coffee terminal markets. There remains a degree of internal market price resistance within most of the producer countries. This is tending to inflate the asking price differentials relative to the values of the coffee terminal markets, for both arabica and robusta coffees.
The May to May contract arbitrage between the London and New York markets widened on Friday: to register this at 67.06 usc/Lb. This equates to 51.92% 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 2,550 bags on Friday, to register these stocks at 1,733,624 bags, with 94.5% of these certified stocks being held in Europe at a total of 1,638,786 bags and the remaining 5.5% being held in the USA at a total 94,838 bags. There was meanwhile a larger in number 15,541 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 71,190 bags.
It was a neutral day overall on the commodity markets on Friday, to see the overall macro commodity index taking something of a sideways track for the day. The Sugar and Cocoa markets ended the day on a positive note, while the Coffee markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.40% higher; to see this index registered 498.37. The day starts with the U.S. Dollar, trading at 1.402 Sterling, at 1.212 the Euro and with the US Dollar buying 5.382 Real.
The New York and London markets started the day on Friday trading close to par on a modest firmer note, both markets soon attracted buying support to see the markets set on a firmer path for the remainder of the morning session. As the afternoon progressed both the New York and the London markets dropped back from the highs of the day to see the market set on a softer path for the afternoon session, the New York Market hit a floor to bounce back limiting the losses for the afternoon session, while the London market continued on a softer path to see the market settle near to the lows for the day.
The London market ended the day on a modest negative note with 90% of the earlier losses of the day intact, while the New York market ended the day on a likewise modest negative note with 10% of the earlier losses of the day intact. This softer close, albeit that the New York market recovered from the earlier in the day losses, does little to indicate direction and one might think that the markets are due for little better than a hesitant steady start for early trade today, against the prices set on Friday, as follows:
LONDON ROBUSTA US$/MT NEW YORK ARABICA USc/Lb.
MAR 1343 – 9 MAR 127.50 – 0.10
MAY 1369 – 11 MAY 129.15 – 0.15
JUL 1383 – 11 JUL 131.00 – 0.20
SEP 1397 – 12 SEP 132.80 – 0.15
NOV 1412 – 12 DEC 134.70 – 0.10
JAN 1425 – 12 MAR 136.15 – 0.05
MAR 1442 – 12 MAY 136.75 – 0.05
MAY 1459 – 12 JUL 137.20 – 0.05