Coffee Market Report

by | 09 Oct 2020

The U.S. Governments National Weather Service’s Climate Prediction Centre have reviewed their forecast to project that there is an 85% chance for a La Niña phenomenon to develop later this year.  La Niña being a weather phenomenon, which traditionally brings with it the potential for wet weather for the Pacific Rim countries and in terms of coffee, having an impact upon the climatic conditions within Colombia, Indonesia and Peru.  It can also influence dry conditions for the arabica coffee districts in South Eastern Brazil, as well as East Africa coffee producing countries.  The question of timing and proliferation of the forecasted La Niña that would historically become more pronounced in December through to February, and whether and when this will manifest, has been raised and the potential for excessive rains to come to Colombia, Peru, Indonesia, so too concerns over the potential to bring drier weather to the main arabica producing areas in Brazil in the coming months.  

The weather in Brazil is meanwhile reported to be mostly on track, although reports do indicate that rainfall has been lower on average through September, as have the temperatures within the main arabica coffee belt recorded slightly warmer than the average for the month.  The arabica coffee districts in Minas Gerais have received sufficient starting spring and summers rains to trigger the first round of flowering, and additional rain is forecasted to come across the vast Brazil coffee growing areas in the fortnight, to set the developing crop for the Brazil July 2021 to June 2022 coffee year, which is a biennially bearing lower crop to come. 

Vietnam is poised for the start of their new crop harvest, and reports are coming through that the harvest could be slightly delayed this year due to slower than usual maturation as the wet season rainfall continues. The seasonal rains would ordinarily ebb around mid-October, to allow early harvesting producers to adequately patio dry their harvested coffee cherries.  An extension to the wet season could see the harvest get underway with a few weeks delay, and coffees to start to flow from the interior around December, slightly later than what would be considered normal.  With mixed forecasts coming to the fore in terms of the size of this new crop, most forecasts still look towards another large crop for the world’s largest Robusta producing country, forecast at around 30 million bags. The forecasts are made up of approximately 29 million bags of Robusta coffee and 1 million bags of Arabica Coffee.

The November to December contract arbitrage between the London and New York markets broadened yesterday; to register this at 53.51 usc/Lb.  This equates to 48.54% price discount for the London Robusta coffee market.     

The Certified washed Arabica coffee stocks held against the New York exchange were seen increase by 461 bags yesterday to register these stocks at 1,098,459 bags, with 93.60% of these certified stocks being held in Europe at a total of 1,028,061 bags and the remaining 6.40% being held in the USA at a total of  70,398 bags.  There was meanwhile a smaller in number 400 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 39,259 bags.  

It was a firmer day overall on the commodity markets yesterday, to see the overall macro commodity index taking something of a positive track for the day. The Sugar, Cocoa and Coffee markets ended the day on a positive note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.3229% higher; to see this index registered at 417.2033.   The day starts with the U.S. Dollar steady, trading at 1.295 Sterling, at 1.177 the Euro and with the US Dollar buying 5.600 Brazilian Real.

Both the New York and London markets started the day yesterday trading on a positive note, both markets came under a degree of volatility early in the day to see the markets oscillate both north and south of par. As the afternoon progressed both the New York and London markets fell back to trade in softer territory before attracting buying support late in the day, the markets hit a ceiling only to drop back and limit the gains for the day before settling on a modest positive note in both the London and the New York markets.

The London market ended the day with on a positive note with 35.71% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note with 25.50% of the earlier gains of the day intact. This positive close might inspire some degree of confidence to possibly set the markets for a steady start to early trade today, against the prices set yesterday, as follows:  

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

NOV   1251 + 5                                                                        DEC    110.25 + 0.65 

JAN    1271 + 5                                                                       MAR   112.55 + 0.75 

MAR   1286 + 5                                                                       MAY   114.05 + 0.65

MAY   1303 + 4                                                                       JUL     115.55 + 0.60

JUL     1320 + 4                                                                      SEP     116.90 + 0.65 

SEP    1339 + 5                                                                      DEC    118.55 + 0.65

NOV   1357 + 5                                                                       MAR   120.15 + 0.60

JAN    1373 + 4                                                                        MAY   121.35 + 0.60