Coffee Market Report

09 Jun 2022 | News

The Brazilian National Statistics Agency IBGE, with the new crop harvest due to begin shortly in the Arabica growing regions has come forth with a revised estimate for the coming July 2022 to June 2023 Brazil coffee crop, to revise their forecast for the new biennially bearing 22/23 coffee crop lower by 3.70%, to total 52.80 million bags. The IBGE has likewise revised their estimate for the 2022 arabica coffee crop down by 5.90% to total 35.20 million bags and conversely increased their estimate for the new Conilon robusta crop which has already started to harvest, up by 0.80% to total 17.60 million bags.  The IBGE is traditionally very conservative in terms of their figures and are usually considered to be between 5% and 10% below reality.  The forecast would therefore be seen to be at the lower end of independent local and international surveys, the majority of these forecasting an estimated Arabica at a median of 40 million bags and Conilon Robusta 2021 crop in the region of a median 23.50 million bags.   

It would be considered very early days for forecasters to start pegging their estimates for the next 2023/24 Brazil coffee production potential, though some independent analysts are already projecting, and with the use of crop prediction models, as well as data remote sensoring, Taka Insights, have come forth with their forecast for a potential arabica coffee production at 40.68 million bags, which would be considered a relatively limited crop increase, albeit that the Brazil 2023/24 will be a cyclical lower bearing crop year.  This crop has yet to set flower following the current harvest of the Brazil arabica 2022/23 coffee crop that is currently underway, and thus, some months ahead for independent forecaster projections that are likely to continue to come to the fore more frequently, in correlation with the weather conditions and timing of the spring rains to come to the expansive Brazil coffee growing areas, to set this future crop’s flowering through the fourth quarter of 2022. 

The July 2022 to July 2022 contract arbitrage between the London and New York markets narrowed yesterday to register this at 136.37 usc/Lb. This equates to 58.82% price discount for the London Robusta coffee market. This wide arbitrage may 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 3,880 bags yesterday, to register these stocks at 1,021,800 bags, with 95.48% of these certified stocks being held in Europe at a total of 975,591 bags and the remaining 4.52% being held in the USA at a total 46,209.  Of this, a total 508,001 bags, or 49.72% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 41.22% of these certified coffees, originating from Honduras.  There was meanwhile a 2,600 bag decrease to the number of bags pending grading to the exchange; to register no bags pending grading on the day.

It was a mixed day on the commodity yesterday, as investors look for direction over news that the US Federal Reserve will more than likely look to hike interest rates further, in an attempt to curb inflation. The Corn, Soybean, Wheat and Gold markets ended the day on a firmer note, while the Coffee, Cocoa, Sugar, Silver, Palladium and Platinum markets ended the day on a softer note.  The day starts with the U.S. Dollar trading at 1.253 Sterling, at 1.073 the Euro and with the US Dollar buying 4.899 Brazil Real.

The New York market started the day yesterday trading on a modest firmer note, while the London market started the day trading to the south of par on a modest near to unchanged softer note. The early morning session would see both the New York and the London markets drop back to take a softer stance; this was quickly reversed when the markets bounced off the early morning lows to trend firmer for the remainder of the of the morning session. As the afternoon progressed the New York market continued on a firmer path before being capped to limit the gains and see the market drop back from the highs of the day. The London market traded to the south of par for the remainder of the session before hitting a floor to limit the losses for the day and see the market rebound and settle on a modest near to unchanged note at the close. The New York market dropped back to likewise settle on a near to unchanged modest softer note at the close.  

The London market ended the day a negative note with 23.53% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note with 13.04% of the earlier losses of the day intact. This modest softer close for the markets, with both the New York and the London markets recovering from the lows of the day might indicate some degree of consolidation, to possibly set the markets for a follow through hesitant steady start to early trade today, against the prices set yesterday, as follows:  

   

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

JUL      2105 – 4                                     JUL       231.85 – 0.30

SEP      2117 – 4                                     SEP      232.00 – 0.35

NOV     2106 – 6                                     DEC     231.50 – 0.20

JAN      2092 – 7                                      MAR     230.40 + 0.20

MAR     2084 – 8                                     MAY     229.20 + 0.65

MAY     2080 – 8                                    JUL      227.40 + 0.85

JUL      2077 – 8                                   SEP     225.00 + 0.90

SEP     2070 – 8                                   DEC     222.75 + 0.95