Coffee Market Report

23 Jun 2022 | News

The Certified washed arabica coffee stocks held against the New York Exchange have continued to register further drawdowns over the course of the past three months, and there has been a significant drawdown in these generally aged, washed arabica coffee certified stocks over the past year. As of 22 June 2021, the certified washed arabica stocks held against the New York exchange registered at 2,168,547 bags, which is some 55% higher than the levels held against the exchange today. This gradual decline in the level of certified stocks over the past twelve months has been underpinned by the lack of access to coffees in producer countries, due to the still ongoing logistical challenges, in combination with a drawdown of privately held consumer market coffee stocks, in line with demand while the challenges experienced through the time, to ship coffees to consumer markets from producer countries has had an impact.  It follows that the apparent shortfall in production and lack of washed coffee availability from Colombia and Central America in this seasonal year, has likewise increased consumer market demand for the limited available coffees being held in private warehouses.  

The Certified washed arabica coffee stocks registered 975,821 bags yesterday, the lowest point since January 2000. 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, as these reports are often viewed as indicators of supply and demand. The question remains whether there is likely to be new registrations to come from new crop coffees from the biennially bearing larger Brazil semi-washed arabica harvest that is currently underway, ahead of the new crops to start to come to the fore in the latter half of the year, from the lower growing areas from Central America and Mexico.  This latter coffee more likely to be allocated directly into private sales, with the New York exchange arabica certified stocks generally viewed to be a last home for producers within the context of the prevailing unattractive exchange differentials, and for consumer roasters, with storage in main northern hemisphere consumer markets, a stop gap for access to discount and for the most part, aged coffees. 

Weather conditions in Brazil meanwhile have been reported to be cool and dry, with temperatures prevailing in the mid to low teens in degrees Celsius over the course of the next week. This would be considered to be conducive and normal weather conditions for this time of the seasonal year, whilst the new Brazil Arabica Crop continues to harvest.

The September 2022 to September 2022 contract arbitrage between the London and New York markets widened yesterday to register this at 140.56 usc/Lb. This equates to 59.46% 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 6,080 bags yesterday, to register these stocks at 975,821 bags, with 95.40% of these certified stocks being held in Europe at a total of 930,907 bags and the remaining 4.60% being held in the USA at a total 45,149.  Of this, a total 462,592 bags, or 47.41% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 43.16% of these certified coffees, originating from Honduras.  There was meanwhile no change to the number of bags pending grading to the exchange; to register 2,600 bags pending grading on the day.

It was a mixed but overall softer day on the commodity markets yesterday, while the US Dollar lost further ground against a basket of other currencies yesterday, offset by the firm stance of the US Federal Reserve on monetary policy as an instrument to curb inflation with the leading in influence Oil markets lower on the day. The Coffee, Corn and Gold markets ended the day on a firmer note, while the Sugar, Cocoa, Soybean, Silver, Platinum and Pallidum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.225 Sterling, at 1.057 the Euro and with the US Dollar buying 5.195 Brazil Real.

The New York markets started the day yesterday trading on a modest softer note to the south of par, while the London market started the day yesterday trading on a firmer note. Both the New York and the London markets would quickly gain momentum to see the New York market trend in a firmer direction, setting the tone for the remainder of the day’s trade. The London market followed suit to also trend in firmer direction making gains early in the day. As the afternoon progressed, both the New York and the London markets continued to trend firmer, buoyed by some degree of buying support which saw buy stops trigger along the way to accentuate the gains for the day. During the late afternoon session, the markets encountered a brief period of resistance to drop back from the earlier in the day highs, however support soon followed, and the markets trended firmer towards the close. This saw both the New York and the London markets settle on firmer notes at the close respectively. 

The London market ended the day on positive note with 60% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note with 85.26% of the earlier gains of the day intact. This follow through firmer close for the markets might indicate some degree of momentum and direction to possibly set the markets 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.                                                                                                                                                 

SEP      2113 + 12                                    SEP      236.40 + 4.05

NOV     2099 + 8                                    DEC     234.85 + 3.85

JAN      2079 + 6                                      MAR     232.85 + 3.75

MAR     2066 + 4                                     MAY     231.20 + 3.65

MAY     2056 + 3                                    JUL      229.40 + 3.65

JUL      2053 + 3                                   SEP     227.30 + 3.60

SEP     2045 + 3                                   DEC     225.35 + 3.45

NOV     2041 + 3                                   MAR    223.05 + 3.45