Coffee Market Report

by | 10 Sep 2021

The analysts Safras & Mercado have reported that Brazil coffee farmers have already sold around 60% of the estimated total production of 56.50 million bags from this current Brazil Coffee crop.  The pace of sales at this time across a 5-year average is reported to be around 48%, thus illustrating that current crop sales are picking up pace over and above that of the recorded five-year average.  This selling activity has been assisted to a degree by higher value seen in the New York Coffee Terminal Market, as well as the fact that this coffee year is seen to be an off year in the biennially bearing crop rotation of the Brazil Coffee crop. 

The weather conditions within Brazil meanwhile have been reported to have remained, for the most part, hot and dry throughout the main Arabica growing regions. Light sporadic showers are forecast for this weekend in the states of Parana, Sao Paulo and South of Minas. Adequate  rains have fallen in the Conilon producing areas between the North of Espirito Santo and the South of Bahia this week. 

The U.S. Governments National Weather Service’s Climate Prediction Centre is now on La Niña watch, there has been a transition from the earlier in the year El Niño Southern Oscillation (ENSO) neutral outlook, to forecast that there is now a 70-80% chance for a La Niña phenomenon to develop during the last quarter of this year.   The La Niña weather phenomenon historically brings with it excessive rains for the Pacific Rim countries and in terms of coffee, having an impact upon the climatic conditions within Colombia, Indonesia and Peru, while it can also influence dry conditions for the arabica coffee districts in Southeast Brazil.  Should this La Niña phenomenon continue to develop and come into play, with which the relative strength can only be determined during the course of the next few months., aside from concerns over excessive rain damage for the coffee crops in Colombia, Peru and Indonesia, it would bring forth concerns over the threat of drought damage for the next 2022 Brazil crop, which may as the time nears for the onset of spring and summer rains in Brazil, to set the flowering and next crop potential for 2022, become a factor that shall be closely watched by the market. 

The November-to-December contract arbitrage between the London and New York markets narrowed yesterday to register this at 94.46 usc/Lb. This equates to 50.39% 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 remain unchanged yesterday, to register these stocks at 2,162,122 bags, with 94.26% of these certified stocks being held in Europe at a total of 2,037,963 bags and the remaining 5.74% being held in the USA at a total 124,159 bags.  Of this, a total 1,152,510 bags, or 53.31% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 39.12% of these certified coffees, originating from Honduras.  There was meanwhile a larger in number 1,797 bags decrease to the number of bags pending grading to the exchange; to register no pending grading stocks. 

It was a softer day on the commodity markets yesterday, the US Dollar slipped back marginally against a basket of other currencies, although there is renewed speculation that the US Federal Reserve may be tapering its economic support policies in the near future, this as the European Central Bank started slowing its bond buying during the course of this week.   The Gold and Silver markets ended the day on a positive note, while the Sugar, Cocoa, Coffee, Corn, Soybean, Wheat, Platinum and Palladium markets ended the day on a softer note.  The day starts with the U.S. Dollar trading at 1.385 Sterling, at 1.183 the Euro and with the US Dollar buying 5.198 Brazil Real.  

The New York and London markets started the day yesterday trading on a modest close to par firmer note. The markets continued to oscillate around par before attracting some degree of selling pressure to see the markets set on a softer path for the remainder for the morning session. The markets hesitantly traded south of par before coming under severe selling pressure during the early afternoon session, pressured by long liquidation selling to accentuate the losses for the day’s trade. The markets rebounded from the lows of the day to recover some of the earlier in the day losses late in the day, to see both the New York and London markets settle on a negative note at the close. 

The London market ended the day yesterday on a negative note and with 52.83 of the losses of the day intact, while the New York market ended the day yesterday on a likewise negative note and with 42.64% of the losses of the day intact. This softer close does, albeit that the markets rebounded from the lows of the day, does little to indicate direction and one might think that the markets are due for little better than a hesitant start to early trade today, against the prices set yesterday, as follows:        

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

NOV     2050 – 28                                                DEC     187.45 – 2.75

JAN      2038 – 11                                               MAR     190.20 – 2.70

MAR    1978 – 7                                                  MAY     191.20 – 2.65

MAY     1969 – 8                                                   JUL      191.85 – 2.60

JUL      1965 – 5                                                  SEP     192.35 – 2.60

SEP      1964 – 4                                                  DEC     193.00 – 2.65

NOV     1968 – 3                                                  MAR    193.55 – 2.70

JAN     1978 – 3                                                  MAY     193.95 – 2.65