Coffee Market Report

20 Jun 2022 | News

The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector decrease their net long position by 19.36% within the market over the week of trade leading to Tuesday 14th. June 2022:  to register a net long position of 20,658 lots, which is the equivalent of 5,856,451 bags. This net long position has most likely been little changed following the period of mixed but overall marginally softer trade that has since followed. 

The latest Commitment of Traders report from the London Robusta coffee market has seen the Speculative Managed Money Sector of this decrease their net long position by 18.27% within the market over the week of trade leading up to Tuesday 14th. June 2022: to register a new net long position of 22,278 Lots which is the equivalent of 3,713,000 bags.  This net long position has most likely been little changed following the period of mixed but overall sideways trade that has since followed.

The respected U.S. Department of Agriculture Global Agricultural Network USDA have forecast that the next October 2022 to September 2023 Vietnam coffee crop that is due to start being harvested later this year, will be 2.06% smaller than the current October 2021 to September 2022 crop, to total 30.93 million bags. This crop they foresee, to be made up from 29.83 million bags Robusta coffee and 1.10 million bags of Arabica coffee. In addition, there is an estimated carryover stock from the present coffee year to potentially add 5.60 million bags from this largest robusta producer of coffee, to confirm continued good supply into the next October 2022 to September 2023 coffee year. 

Of this new October 2022 to September 2023 crop, the forecast is that Vietnam will export 2.08% or 500,000 bags less than the current October 2021 to September 2022 coffee year, at a total of 23.50 million bags of green coffee. This figure although slightly lower than the current coffee year, reflects a 6.62% increase from the 20/21 coffee year, as global demand steadies. 

The seasonal rains within the Vietnam Central Highlands coffee growing regions are arrived earlier than expected. The USDA have reported that this early onset of the seasonal rains has been supportive in the development phase of the 2022/23 coffee crop. According to the Vietnam Meteorological and Hydrological Administration’s forecasts, there is a 50-60% chance that the La Niña phenomenon will continue through the next quarter, before waning to transition to ENSO (El Niño–Southern Oscillation) neutral conditions. This weather pattern led to wetter than normal conditions during the first four months of 2022, and therefore higher than average precipitation in many parts of the country, including the major coffee growing areas.

The July 2022 to July 2022 contract arbitrage between the London and New York markets narrowed on Friday to register this at 133.98 usc/Lb. This equates to 58.86% 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 New York arabica coffee market shall be closed today for the Juneteenth Federal Holiday celebrated on the 19th June but observed today.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 6,970 bags on Friday, to register these stocks at 991,657 bags, with 95.47% of these certified stocks being held in Europe at a total of 946,743 bags and the remaining 4.53% being held in the USA at a total 44,914.  Of this, a total 478,428 bags, or 48.25% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 42.47% of these certified coffees, originating from Honduras.  There was meanwhile a 5,200 bags decrease to the number of bags pending grading to the exchange; to register 5,849 bags pending grading on the day.

For the first time in nearly twenty years, a significant volume of Arabica coffee is being shipped from European based ICE futures exchange warehouses to the United States. It is highly unusual for commonly used arabica coffees to be shipped from one consuming origin to another, drawing coffee out of the ICE exchange stockpiles rather than that of private commercial stock could also be interpreted as a short-term bearish factor for the speculative sector of the markets. This most recent development has been underpinned by the heightened demand and drawdown in consumer market coffee stocks due to the challenges being experienced through the time, to ship coffees to consumer markets from producer countries as well as the most recent apparent shortfall that has come from the key washed arabica producer bloc of Colombia and Central America. News has filtered to the market that the coffee flow has not been what was initially forecast ahead of the harvests, which has seen little to no coffee moving from these key producer countries. With the cost of moving certified coffee stocks from Europe to the USA proving to be more attractive than what is on offer on the spot market. 

The Certified washed arabica coffee stocks registered 991,657 bags on Friday, marginally higher than the lowest level of 980,562 bags reported in February this year. The certified washed arabica coffee stock levels is a factor that is being monitored by the speculative and fund sector participants within the coffee futures markets. 

It was a softer day on the commodity markets on Friday, with the US Dollar strengthening further against a basket of other currencies which is seen to be a bearish factor for many of the US Dollar based commodity markets, this on the back of the sharpest interest rate hike since 1994 announced by the US Federal Reserve on Friday. The Sugar and Cocoa markets ended the day on a firmer note, while the Oil, Coffee, Corn, 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 1.224 Sterling, at 1.052 the Euro and with the US Dollar buying 5.153 Brazil Real.

The New York and London markets started the day on Friday trading to the north of par on a modest firmer note, both markets would quickly gain momentum to trend in a firmer direction.  This early morning support was carried through to the late morning session where the markets were seen to hit a ceiling, limiting the gains for the day. As the afternoon progressed both the New York and London markets were seen to drop back from the morning highs and trend in a softer direction.  The late afternoon session would see the markets continue to project in a softer direction. The markets rebounded from the lows of the day during the late afternoon trade to see the New York market recover some of the earlier losses of the day to settle on a softer note at the close, while the London market followed suit, to also recover some of the earlier losses of the day and settle on a modest softer note at the close.

The London market ended the day a negative note with 78.79% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note with 83.50% of the earlier losses of the day intact. This softer close for the markets does little to inspire confidence, albeit that the markets recovered some of the earlier losses of the day, one might think that the London market trading solo for the day is due for a hesitant start to early trade, against the price set on Friday, as follows:   

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

JUL      2065 – 26                                    JUL       227.65 – 4.30

SEP      2079 – 25                                    SEP      227.40 – 4.40

NOV     2074 – 23                                   DEC     226.30 – 4.45

JAN      2059 – 22                                    MAR     224.60 – 4.50

MAR     2049 – 22                                   MAY     223.15 – 4.40

MAY     2044 – 22                                  JUL      221.45 – 4.20

JUL      2041 – 22                                  SEP     219.45 – 4.05

SEP     2035 – 22                                 DEC     217.60 – 3.95