Coffee Market Report

by | 31 Aug 2021

The latest Commitment of Traders report from the New York arabica coffee market has seen the shorter term in nature Managed Money fund sector of this market cut their net long position within this market by 1.83% over the week of trade leading up to Tuesday 24th. August; to register a new net long position 35,482 lots. Meanwhile the longer term in nature Index Fund sector of this market cut their net long position within the market by 1.73%, to register a net long position of 60,964 Lots on the day.

Over the same week, the Non-Commercial Speculative sector of this market raise their net long position within the market by 0.49% to register a new net long position 30,644 lots, which is the equivalent of 8,687,438 bags. This net long position has most likely been marginally increased following the period of firmer trade that has since followed.  

The weather conditions within the two largest coffee producer countries are in focus at this time of year, as the onset of spring and summer rains during the last quarter of the year will assist to set the flowering for the next 2022 Brazil crop to come. Market players will be keeping a close eye on the Brazil weather conditions as weather forecasters are presenting models for warmer dry weather over the next few days across the Brazil coffee growing regions. In Vietnam meanwhile, the cessation of the rains will soon be required to assist this largest robusta producer to begin their October 2021 to September 2022 coffee year for the coming harvest to take place with minimal disruption.  The weather forecasters predict seasonal rainfall to continue over the next weeks, seasonally normal conditions at this time of year.  

The prevalence of logistical and shipping corridor challenges across the globe, continue to disrupt movement of goods and exports, with Asian and Far East routes to the West, particularly problematic. This, along with the challenges of limited equipment and stalled shipments, with exporters in various origin countries competing for resources to meet both container shipment demand as well as the associated rising freight costs.

The November-to-December contract arbitrage between the London and New York markets widened yesterday to register this at 108.36 usc/Lb. This equates to 54.21% price discount for the London Robusta coffee market.  This wide arbitrage will likely be viewed by price sensitive roasters as an attractive alternative discount for robusta against the comparatively higher value arabica coffee.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 885 bags yesterday, to register these stocks at 2,166,886 bags, with 94.15% of these certified stocks being held in Europe at a total of 2,040,127 bags and the remaining 5.85% being held in the USA at a total 126,759 bags.  Of this, a total 1,153,510 bags, or 53.23% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 39.26% of these certified coffees, originating from Honduras.  There was meanwhile a larger in number 2,682 bags decrease to the number of bags pending grading to the exchange; to register these pending grading stocks at 2,281 bags. 

It was a softer day on the commodity markets yesterday, as  the US Dollar gained further ground against a basket of other currencies.  A stronger US Dollar is seen to be a bearish factor for many of the US Dollar based commodity markets when trading in other currencies.   The Sugar, Cocoa, Coffee and Palladium markets ended the day on a positive note, while the Cocoa, Wheat, Corn, Soybean, Gold, Silver and Platinum markets ended the day on a softer note.  The day starts with the U.S. Dollar trading at 1.378 Sterling, at 1.182 the Euro and with the US Dollar buying 5.184 Brazil Real.   

The New York market trading solo for the day yesterday, with the London market closed for a bank holiday. The New York market started the day yesterday trading on a firmer note. The market continued to trade in positive territory for the remainder of the morning session. As the afternoon progressed the New York market started to add more value and with buy stops triggered along the way, accentuating the gains for the day. The market would hit a ceiling late in the day to marginally limit the gains for the day, but to see the market settle on a very firm note at the close. 

The London market ended the day on Friday on a positive note and with 47.06% of the gains of the day intact, while the New York market ended the day yesterday on a likewise positive note and with 96.25% of the gains of the day intact. This follow through very firmer close for the New York market might inspire a degree of confidence, with the market settling near to the highs of the day, one might think that the markets are due for a follow through steady start to early trade today, against the prices set in New York yesterday and in London on Friday, as follows:      

LONDON ROBUSTA US$/MT                            NEW YORK USC/LB.  

Close 27/08/2021                                              Close 30/08/2021                                                                                        

NOV     2018 + 24                                                DEC     199.90 + 7.70

JAN      1983 + 26                                                MAR     202.40 + 7.65

MAR    1947 + 16                                                MAY     203.40 + 7.60

MAY     1943 + 13                                                 JUL      203.95 + 7.50

JUL      1927 + 10                                                SEP     204.35 + 7.40

SEP      1927 + 12                                                DEC     204.95 + 7.30

NOV     1921 + 14                                               MAR    205.50 + 7.30

JAN     1942 + 14                                                MAY     205.90 + 7.30