Coffee Market Report

by | 02 Oct 2020

The National Coffee Institute of Honduras (IHCAFE) have reported that the country’s coffee exports for the month of September were 45.17% lower than the same month last year, at a total of 136,492 bags. This they say has contributed to the cumulative coffee exports for the October 2019 to September 2020 coffee year to be 19.22% lower than the same period in the previous coffee year, at a total of 5,504,000 bags.  The Honduras National Coffee Institute IHCAFE has reported that during the October 2020 to September 2021 coffee year exports could potentially climb by around 14% to 6.28 million bags, this in comparison to the 5.50 million bags that were exported by Honduras this October 2019 to September 2020 season.  

As the previous coffee year winds up and the new October 2020 to September 2021 coffee year begins, independent forecasters are presenting a less optimistic forecast for the new global washed arabica coffee crop to come.  Weather has been generally conducive overall, though the concern remains the relatively low income to producers that is linked to the sustained low values presented in the New York arabica futures market and for many washed arabica producer countries, this will be the fourth coffee year of continued low coffee prices.  There has been a resultant lack of resources ahead of the crop harvest for adequate inputs, as well as a lack of affordability on the part of producers to pay for labour that comes with washed arabica process of selective ripe coffee cherry picking during harvest time.  There have been some concerns raised around the additional challenge that Covid-19 movement restrictions present, and whether this might be a contributory factor in the months to come. The general industry forecasts are therefore and not only for Honduras but for a number of high cost washed arabica producer countries across Latin America, Africa and Asia for this coming October 2020 to September 2021 crop year, is for a prospectively lower overall production to come from the washed arabica sector in the coming coffee year. 

With the harvest finalised in Brazil, the focus in the markets has turned to the onset of the spring and summer rainfall to support the flowering for the next Brazil July 2021 to June 2020 biennial lower bearing crop to come.  This is still early days but has contributed toward the recent volatility seen in the coffee futures markets, as the speculative investor sector search for indicators to guide their participatory direction.  Sporadic rainfall has been present across the arabica coffee districts in Minas Gerais and flowering is reported.  There are follow-on rain showers forecast to come to the vast areas of the Brazil coffee belt around second week of October, a factor that has likely dampened speculative confidence in the short term. 

There are reports meanwhile that internal coffee trade in Vietnam remains muted, with much of the past crop coffees sold and the weather ahead of the new crop to come conducive thus far, and so long as the seasonal rains abate in usual time for the main harvesting and drying processes to continue without disruption, there is no fresh fundamental news forthcoming from this largest robusta producer.  This new crop October 2020 to September 2021 harvest traditionally set to start in October and peak through mid-November, with this new crop to come forecast to be in the same region of overall output as this year, and the median estimate from independent industry is for this new crop to come in around 30 million bags.

The November to December contract arbitrage between the London and New York markets narrowed yesterday; to register this at 48.63 usc/Lb.  This equates to 45.43% price discount for the London Robusta coffee market.     

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 925 bags yesterday to register these stocks at 1,098,464 bags, with 93.70% of these certified stocks being held in Europe at a total of 1,028,526 bags and the remaining 6.30% being held in the USA at a total of  69,938 bags.  There was meanwhile a larger in number 4,950 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 12,636 bags.  

It was a softer day overall on the commodity markets yesterday, to see the overall macro commodity index taking something of a soft sideways track for the day. The Sugar market ended the day on a positive note, while the Coffee and Cocoa markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.4992% lower; to see this index registered at 409.5775.   The day starts with the U.S. Dollar steady, trading at 1.288 Sterling, at 1.173 the Euro and with the US Dollar buying 5.643 Brazilian Real.

The New York market started the day yesterday trading on a modest positive note, while the London market started the day yesterday trading on a modest soft note in fair opening volumes.  The highs tested early in the day met with active selling activity and both markets reflected a greater degree of selling pressure early in the session.  Both markets tracked softer toward the mid morning session. As the afternoon progressed the New York and London markets extended their losses for the day, the London market bounced back off the lows of the day to settle on a soft note for the day, but with only one third of the losses of the day intact, while the New York market continued the lower momentum in the late afternoon and settled near to the lows of the day.

The London market ended the day with on a negative note with 36.95% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note with 85.71% of the earlier losses of the day intact. This soft and lacklustre close does little to indicate direction and one might think, with the Brazil Real remaining softer to the US Dollar the markets are due for little better than a hesitant steady start to early trade today, against the prices set on yesterday, as follows:  

LONDON ROBUSTA US$/MT                                       NEW YORK ARABICA USc/Lb.                                               

NOV   1288 – 17                                                                         DEC    107.05 – 3.90 

JAN    1315 – 16                                                                        MAR   109.20 – 3.50 

MAR   1332 – 16                                                                        MAY   110.65– 3.45

MAY   1350 – 15                                                                         JUL    112.10 – 3.40

JUL     1365 – 15                                                                        SEP     113.40 – 3.25 

SEP    1381 – 15                                                                        DEC    114.70 – 3.00

NOV   1397 – 15                                                                         MAR   115.95 – 2.85

JAN    1415 – 15                                                                          MAY   116.90 – 2.85