Coffee Market Report

10 Jun 2022 | News

The respected U.S. Department of Agriculture Global Agricultural Network USDA have forecast that the new July 2022 to June 2023 Brazil coffee crop shall be 14.21% larger than the July 2021 to June 2022 crop due to the biennial bearing nature of the Brazil crop, and the coming year being considered an up cycle year.  The USDA has forecast this new crop, which harvest is underway, to come in at a total of 64.30 million bags.   This forecast is in line with many other independent surveyors, and is related to 14.01% increase in primarily natural process arabica coffee production for the coming July 2022 to June 2023 crop year to an estimated total 41.50 million bags and a 5.07% increase in conilon robusta coffee production, to total 22.80 million bags. 

The USDA forecast further anticipates that Brazil will export 17.53% or 5.83 million bags more than the previous July 2021 to June 2022 year, to project that Brazil exports for the July 2022 to June 2023 coffee year will reach a total of 39.05 million bags.  This number is less than the record 45.68 million bags exported by Brazil during the July 2020 to June 2021 coffee marketing year, the previous up cycle year, which produced a record 72 million bags.  The outlook for the new 2022/23 crop may be considered to be positive overall, so long as the conducive weather continues, harvest is currently underway in the expansive arabica areas. 

The analysts Safras & Mercado have reported than an estimated 24% of the new Brazil coffee crop has already been harvested.  Based on their forecast for a new crop of 61.10 million bags, the report would indicate that so far approximately 14.50 million bags of the new crop coffee is harvested.  The coffee made up of around 8 million bags of conilon robusta coffee, which starts harvest earlier in the seasonal year, and approximately 6.50 million bags of arabica coffee estimated to be harvested thus far.  

The Coffee Exporters Association in Brazil Cecafé has reported that the country’s green coffee exports for the month of May were 5.90% higher than the same month last year, to total 2.53 million bags, this number made up of 2.41 million bags of arabica coffee up by 15.60% from the same month last year and 121,100 bags of Conilon robusta coffee down 60.10% from the same month last year. 

The Coffee Exporters Association in Brazil, Cecafé have also reported the cumulative exports of green coffee for the first eleven months of the current July 2021 to June 2022 Brazil coffee year, to be 14.40% lower, overall, when compared to the same time in the previous coffee year, at a total of 29.96 million bags. These figures are reported versus the Brazil bumper crop, that is estimated to have come in at a record 72 million bags in the July 2020 to June 2021 coffee year. When comparing the export performance from Brazil against the last, similar lower Brazil export year in 2019, the export performance is 13.94% lower against the same month in May 2020 and 10.48% lower, for the cumulative eleven months of the 2019/20 lower bearing cycle. 

The U.S. Governments National Weather Service’s Climate Prediction Centre have revised their forecast to report that following the La Niña climatic conditions that have developed, there is subsequently, a 58% chance for a La Niña phenomenon weather pattern to continue through August to October 2022. This refreshed forecast indicating that the weather phenomenon may start to wane towards the latter part of the year. 

The July 2022 to July 2022 contract arbitrage between the London and New York markets widened yesterday to register this at 139.71 usc/Lb. This equates to 59.54% 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 920 bags yesterday, to register these stocks at 1,020,880 bags, with 95.47% of these certified stocks being held in Europe at a total of 974,671 bags and the remaining 4.53% being held in the USA at a total 46,209.  Of this, a total 507,081 bags, or 49.67% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 41.26% of these certified coffees, originating from Honduras.  There was meanwhile a 11,049 bag increase to the number of bags pending grading to the exchange; to register 11,049 bags pending grading on the day.

It was a mixed but overall softer day on the commodity yesterday, with the US Dollar showing some degree of buoyancy against a basket of other currencies, the largest consumer U.S.A., anticipated to release consumer price data later today, to possibly provide some speculative guidance on the future stance the US Federal Reserve may take on inflation. The New York Arabica Coffee, Sugar, Corn and Soybean markets ended the day on a firmer note, while the London Robusta Coffee, Cocoa, Wheat, Gold, Silver, Palladium and Platinum markets ended the day on a softer note.  The day starts with the U.S. Dollar trading at 1.250 Sterling, at 1.063 the Euro and with the US Dollar buying 4.904 Brazil Real.

The New York and London markets started the day yesterday trading on a modest firmer note, both markets would continue to oscillate around par for the remainder of the early morning session. The New York market was seen to trend a firmer direction with some degree of support seeing speculative buy stops triggered early in the day. The London market dropped back from the early morning highs to be set on a softer path for the remainder of the morning session. As the afternoon progressed, the New York market continued to trend firmer, this saw the London market follow suit with the further weight being added in New York to reverse the trend and attract some degree of buying support. The late afternoon session saw the New York market hit a ceiling to limit the gains for the day and see the market drop back to settle on a firmer note at the close, while the London market dropped back late in the day to settle on a modest near to unchanged softer note at the close. 

The London market ended the day a negative note with 28.57% of the earlier losses of the day intact, while the New York market ended the day on a positive note with 72.73% of the earlier gains of the day intact. This mixed but mostly firmer close for the markets might assist to provide some direction, and with first notice day on the prompt month in New York approaching, on the 22nd June, one might think that the markets are possibly set for a follow through steady start to early trade today, against the prices set yesterday, as follows:               

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

JUL      2093 – 12                                    JUL       234.65 + 2.80

SEP      2108 – 9                                     SEP      234.80 + 2.80

NOV     2101 – 5                                     DEC     234.10 + 2.60

JAN      2090 – 2                                      MAR     232.90 + 2.50

MAR     2083 – 1                                     MAY     231.60 + 2.40

MAY     2079 – 1                                    JUL      229.70 + 2.30

JUL      2075 – 2                                   SEP     227.25 + 2.25

SEP     2067 – 3                                   DEC     225.00 + 2.25