Coffee Market Report

15 Jun 2022 | News

The respected U.S. Department of Agriculture Global Agricultural Network USDA have reported that following the previous 2021 coffee harvest in Tanzania that was assessed to have been 3.71% higher than the previous 2020 coffee year. They forecast a 250,000 bags or 17.86% drop in production for the forthcoming July 2022 to June 2023 coffee year which is forecast to come in at 1,150,000 bags. This new crop to be made up of 625,000 bags of arabica coffees and 525,000 bags of robusta coffees. Furthermore, and with domestic consumption estimated at a modest 75,000 bags, this will leave most of the coffee production available export to consumer markets, with Japan and Italy proving to be the dominant export markets for Tanzanian coffees, followed by the U.S.A.

The July 2022 to July 2022 contract arbitrage between the London and New York markets widened yesterday to register this at 134.55 usc/Lb. This equates to 59.29% 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.

Tomorrow is the catholic Corpus Christi holiday for some catholic dominated countries and including Brazil, which shall likely encourage many within the country to take a bridge day follow on holiday on Friday and an extended long weekend. The weather across the Brazil coffee belt is meanwhile indicated to remain cool and dry. Forecasts are mostly for low temperatures to be somewhere in the lower teens in degrees Celsius.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to remain unchanged yesterday, to register these stocks at 1,012,750 bags, with 95.44% of these certified stocks being held in Europe at a total of 966,541 bags and the remaining 4.56% being held in the USA at a total 46,209.  Of this, a total 498,951 bags, or 49.27% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 41.59% of these certified coffees, originating from Honduras.  There was meanwhile no change to the number of bags pending grading to the exchange; to register 11,049 bags pending grading on the day.

It was a follow through softer day on the commodity markets yesterday, with the US Dollar continued on a firmer path against a basket of other currencies. Macroeconomic directional sentiment is for the moment being influenced by the prevailing US Federal Reserve policy meetings and potential outcomes this week. The New York Arabica Coffee and Palladium markets ended the day on a firmer note, while the Oil, London Robusta Coffee, Sugar, Cocoa, Corn, Soybean, Wheat, Gold, Silver and Platinum markets ended the day on a softer note.  The day starts with the U.S. Dollar trading at 1.199 Sterling, at 1.043 the Euro and with the US Dollar buying 5.117 Brazil Real.

The New York market started the day yesterday trading near to par on a modest softer note while the London market started the day trading on a modest firmer note, both markets would continue to oscillate around par for the remainder of the morning session before a firmer trend was seen to start building in New York. As the afternoon progressed the New York market buoyed by buying support saw the momentum increase to hit a ceiling for the day. This momentum carried into the early afternoon as buy stops were triggered to accentuate the gains for the day. The late afternoon session saw the New York market retreat from the earlier seen highs and trend back towards par, with the market settling on a firmer note at the close albeit away from the earlier highs of the day. The London market continued to trade to either side of par for the remainder of the day before settling on a modest near to unchanged softer note at the close.

The London market ended the day a modest near to unchanged 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 61.02% of the earlier gains of the day intact. This mixed but overall firmer close for the markets might inspire some confidence and direction to possibly indicate a degree of consolidation, which one might think will see the markets 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      2037 – 2                                     JUL       226.95 + 3.60

SEP      2053 – 2                                     SEP      226.90 + 3.45

NOV     2050 – 2                                     DEC     226.35 + 3.30

JAN      2041 – 2                                      MAR     225.10 + 3.05

MAR     2035 – 3                                     MAY     223.75 + 3.00

MAY     2030 – 3                                    JUL      221.95 + 2.95

JUL      2027 – 3                                   SEP     219.80 + 2.90

SEP     2020 – 3                                   DEC     217.80 + 2.80