As the year draws to a close, the futures markets remain relatively subdued and trade in muted volumes. This while physical business is limited within largest coffee producer and exporter to consumer markets, Brazil, most participants observing annual festivities, and even ahead of this week, the internal market has been somewhat stalled as producers are reticent sellers, while exporters look to take cover for their earlier forward commitments. This, while the logistical congestion, lack of equipment, space constraints and escalating freight costs in a high demand setting, has affected many export commodities from this country, coffee exports included.
The global shipping constraints that have escalated over many months, brought about as a consequence of international pandemic related restrictions, continues to cause disruption to supply chains the world over, with no specific signs that this might improve within the first quarter of the year to come.
Harvesting is almost complete in the lower lying areas of Central America and Mexico; these qualities do have some potential to fill any foreseeable short-term tightness in supply, as long as shipment export conditions from these countries are more conducive than other significant coffee producer nations, and supplies from Brazil, India, Vietnam, Indonesia, continue to present restricted shipment possibilities.
The largest northern hemisphere coffee consumer markets are similarly sidelined, with many players taking the short week to be away from their desks. With new crop coffees starting to flow and – give or take the varied logistical challenges being experienced across the globe – the commercial industry does have a certain degree of flexibility within the basket of coffee qualities available. The coffee industry within consumer markets meanwhile, remain restricted by fierce competition on the retail shelf, to maintain and increase market share. Across the international spectrum of commercial roaster industry there has been some conservative indications of coffee retail price increases on the horizon. This is likely to have to come from one or the other market leaders and is always a potentially expensive marketing risk, to take the first step and trust that the rest of the market will follow.
The March 2022 to March 2022 contract arbitrage between the London and New York markets narrowed yesterday to register this at 121.26 usc/Lb. This equates to 52.96% 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 1,541,074 bags, with 95.99% of these certified stocks being held in Europe at a total of 1,479,408 bags and the remaining 4.01% being held in the USA at a total 61,666 bags. Of this, a total 701,957 bags, or 45.55% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 47.44% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register 6,700 bags pending grading on the day.
It was a mixed day on the commodity markets yesterday, under very thin volumes of trade across the commodity sector as whole ahead of the New Year Holiday. The Cocoa, London Robusta Coffee, Gold, Silver and Palladium markets ended the day on a firmer note, while the Sugar, New York Arabica Coffee, Wheat, Corn, Soybean and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.346 Sterling, at 1.131 the Euro and with the US Dollar buying 5.573 Brazil Real.
The New York market started the day yesterday trading on a modest near to par firmer note, while the London market started the day yesterday trading on a near to par negative note both markets continued to oscillate around par for the remainder of the early morning session. The New York market was seen to drop back and attract a degree of selling pressure to see the market set on a softer path for the remainder of the morning session, the London market followed suit also trending softer for the morning session.
As the afternoon progressed both the New York and London markets started to gain momentum trending positive into the late afternoon session, this was short lived as the markets quickly hit a ceiling limiting the gains for the day. The New York market dropped back to settle near to unchanged for the day, while the London market followed suit albeit in a more sedate manner to settle on a near to unchanged firmer note at the close.
The London market shall be closed for the day on Monday, 3rd January 2022, with the New York market trading solo for a shortened day of trade.
The London market ended the day on a positive note and with 45% of the gains of the day intact, while the New York market ended the day on a modest near to unchanged note and with 1.85% of the losses of the day intact. This modest close, with both markets settling near to unchanged for the day does little to indicate direction, with muted trade volumes ahead of the New Year holiday one might expect 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.
MAR 2373 + 9 MAR 228.90 – 0.05
MAY 2312 + 8 MAY 228.95 – 0.15
JUL 2293 + 10 JUL 228.35 – 0.30
SEP 2286 + 10 SEP 227.60 – 0.40
NOV 2284 + 10 DEC 226.05 – 0.35
JAN 2279 + 7 MAR 225.40 – 0.30
MAR 2272 + 6 MAY 224.75 – 0.20
MAY 2265 + 6 JUL 223.90 Unch