Coffee Market Report

07 Jan 2022 | News

The current Brazil July 2021 to June 2022 biennially bearing smaller coffee crop, that has been put at a median of 53.50 million bags production, is forecast to reach a level of around 33 million bags of a combination arabica and robusta coffee exports over the twelve-month seasonal year, boosted by a conservatively estimated 5.50 5.50 million bags of carry over inventory from the record 2020/21 coffee year.  Brazil’s domestic coffee consumption, is estimated to be around 22 million bags, would indicate that the country should have an estimated 4 million bags of carry over coffee stocks into the next 2022/23 biennially bearing larger harvest. 

The current biennially bearing smaller production that has come from the Brazil coffee seasonal year July 2021 to June 2022, has thus far, from July to November reflected smaller month on month exports when compared to the previous biennially bearing lower crop year, reported exports at a cumulative total of 12.61 million bags, in the first five months of the country’s coffee year.   When comparing the export performance against the last biennial bearing lower Brazil export year in 2019, at 14.67 million bags over the same five months of the year.  The current lower export figures additionally reflecting the worldwide shipment congestion, which has had a significant impact on supply from this primary producer and exporter of agricultural and other commodities as well as finished goods, to consumer markets. 

The estimates for the coming Brazil 2022/23 crop which was impacted by an estimated 8% to 10% of total crop potential, following the frost occurrences midyear 2021, are coming to the fore, with the initial forecasts from the analysts Safras & Mercado at 63 million bags. The indication therefore that the 2022/23 biennial bearing Brazil crop, supported by carry over inventory of an estimated 4 million bags carryover from 2021/22, could reach a combined total of around 67.00 million bags.  One would anticipate that so long as there is no future, unforeseen climatic challenges to hinder the potential of the developing 2022/23 coffee crop, ahead of mid-year harvest, indications are for adequate coffee availability and supply potential from this leading coffee producer country to fuel consumer markets into the first half of 2023.  There are still some months ahead meanwhile, for the July 2022 to June 2023 Brazil coffee crop to start to come to the markets, as the crop develops toward harvest.  

There remains meanwhile, the question of the impact of pandemic related restrictions of movement and trade, upon global coffee consumption, where these reports and impacts take time to filter to the market.  There continues to be signs that the out of home sector in many developing coffee consumer nations, hotel, restaurant and catering sectors likewise impacted by low international tourism, have been hard hit.  These ‘new’ coffee markets have contributed toward the largest percentage of year-on-year growth in international coffee consumption in percentage terms, whereas more developed coffee consumer markets moved toward stagnation or marginal increases over the same time.  In contrast through the initial uncertainty created by the pandemic, established coffee consumer nations such countries in north west continent Europe and Scandinavia, are reported to have seen a coffee consumption steady to some extent, the restricted, low, out of home coffee consumption, balanced to some extent with increased in-home coffee consumption.  This, in some contrast however, to early reports pointing toward lower consumption as a result of pandemic related restrictions in out of home coffee, café culture consumer markets, such as the Mediterranean countries. 

The March 2022 to March 2022 contract arbitrage between the London and New York markets widened yesterday to register this 127.06 usc/Lb. This equates to 54.84% 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 decrease by 15,386 bags yesterday, to register these stocks at 1,516,417, with 95.98% of these certified stocks being held in Europe at a total of 1,455,401 bags and the remaining 4.02% being held in the USA at a total 61,016.  Of this, a total 683,647 bags, or 45.08% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 47.88% of these certified coffees, originating from Honduras.  There was meanwhile no change to the number of bags pending grading to the exchange; to register 0 bags pending grading on the day.

It was a softer day on the commodity markets yesterday, as the commodity market basket was pressured by signs that the US Federal Reserve would soon be increasing interest rates.  The Corn markets ended the day on a firmer note, while the Sugar, Cocoa, Coffee, Soybean, Wheat, Gold, Silver, Platinum and Palladium markets ended the day on a softer note.  The day starts with the U.S. Dollar trading at 1.354 Sterling, at 1.130 the Euro and with the US Dollar buying 5.683 Brazil Real.   

The New York and London markets started the day yesterday trading on a modest near to par firmer note, both markets in weighed by early selling pressure were set on a softer path from the morning session.  The markets continued to trade on a softer note into the late morning session, under further selling pressure within the limited volume of trade environment. 

As the afternoon progressed the New York and London markets continued to trend modestly softer before coming under pressure from long liquidation selling activity to accentuate the losses for the day’s trade. The markets would rebound late in the day to recover most of the losses of the earlier sessions. This would see the New York market settle near to unchanged on a modest softer note at the close, while the London market settled on a likewise softer note at the close.  

The London market ended the day on a negative note and with 53.85% of the losses of the day intact, while the New York market ended the day on a likewise near to unchanged negative note and with 1.19% of the losses of the day intact. This near to unchanged close for the markets does little to indicate direction, albeit that both the New York and the London markets recovered most of the losses from the day’s session. One might think that the markets are due for a steady start to early trade today, against the prices set yesterday, as follows:        

   

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

MAR      2307 – 14                                               MAR      231.70 – 0.05

MAY      2255 – 15                                             MAY       231.85 + 0.05

JUL        2242 – 14                                              JUL        231.55 + 0.20

SEP       2238 – 14                                              SEP        231.20 + 0.35

NOV       2235 – 14                                                 DEC       230.15 + 0.35

JAN       2230 – 14                                                MAR      229.70 + 0.30

MAR      2223 – 14                                                MAY      229.30 + 0.35

MAY      2216 – 14                                   JUL      228.65 + 0.35