Coffee Market Report

by | 16 Oct 2020

The Green Coffee Association of the U.S.A. have announced that the country’s port warehouse stocks decreased by 343,271 bags or 5.09% during the month of September, to register these stocks at 6,402,065 bags at the end of the month.  Of this total, 70,585 bags were registered in the U.S. Certified coffee stock warehouses at the time of reporting. The overall Green Coffee stocks reported, do not include the in-transit bulk container coffees or the onsite roaster inventories, which with an approximate combined U.S.A. and Canadian weekly consumption that is supported by these stocks of approximately 595,000 bags per week, would conservatively have been at least 1.2 million bags.  

This marks the second consecutive month that has seen a major draw down of the U.S Green Coffee Stocks and this also marks the largest monthly draw down of the U.S Green Coffee Stocks since February this year. The current levels of coffee stocks, which include the certified coffee stocks that are held in certified warehouses and registered to the New York exchange, are still viewed to be relatively high, when compared to a historic low registered in 2011 of 4 million bags. 

Thus, if one is to consider the additional unreported stocks that are being held in private inventories at the end of month, this would equate to more than eleven weeks of roasting activity, which most would consider to be a very safe reserve.  Especially so ahead of the approaching new Colombia, Mexican and Central American crops to come, along with the Vietnam crop that will soon begin harvesting, as well as the ongoing surge in new crop deliveries from Brazil.    

The question meanwhile, of the overall impact that Covid19 related lockdowns has had across this expansive U.S.A. and Canadian coffee consumer bloc, on annualised coffee consumption, is yet to become apparent. Though following similar market trends in other northern hemisphere developed coffee consumer markets, there could be some degree of uptake in retail supermarket and online sales to provide coffee consumption support, albeit that the arrival of the pandemic and resultant restrictions which are still ongoing, a lack of social interaction, mobility, tourism, has already had a devastating impact across the hotel, restaurant, café outlet and catering industries.  With it, the related out-of-home quality coffee consumption that these industries would normally present. 

The January 2021 to December 2020 contract arbitrage between the London and New York markets narrowed yesterday; to register this at 51.17 usc/Lb.  This equates to 46.73% price discount for the London Robusta coffee market.      

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 8,872 bags yesterday to register these stocks at 1,116,042 bags, with 93.70% of these certified stocks being held in Europe at a total of 1,045,457 bags and the remaining 6.30% being held in the USA at a total 70,585 bags.  There was meanwhile a smaller in number 497 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 34,560 bags.  

It was a modest firm day overall on the commodity markets yesterday, to see the overall macro commodity index taking something of a sideways track for the day. The London Robusta Coffee market ended the day on a positive note, while the Sugar, Cocoa and New York Arabica Coffee markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.2574% higher; to see this index registered at 419.6873.   The day starts with the U.S. Dollar steady, trading at 1.289 Sterling, at 1.171 the Euro and with the US Dollar buying 5.612 Brazilian Real.

The London and New York markets started the day yesterday trading on a close to par modest positive note, this was short lived as both markets soon came under a degree of selling pressure to see the markets trend softer for the remainder of the morning session. As the afternoon progressed both markets hit a price floor to limit the losses for the day and see the markets bounce off these lows and recover to a degree. The London and New York markets buoyed by buying support late in the afternoon session rallied to accentuate the gains of the day, selling activity increased and the markets tracked lower to see the London market settle on a positive note for the day, while the New York market settled on a modest soft note for the day.

The London market ended the day with on a positive note with 50% of the earlier gains of the day intact, while the New York market ended the day on a modest negative note with 3.23% of the earlier losses of the day intact. This mixed close does little to indicate direction, albeit with the New York market recovering all but some of the earlier losses of the day, one might think the markets are due for little better than a hesitant steady start to early trade today, against the prices set yesterday, as follows:  

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

NOV   1264 + 14                                                                DEC    109.50 – 0.10 

JAN    1286 + 10                                                                MAR   112.10 – 0.10 

MAR   1295 + 9                                                                   MAY   113.60 – 0.10

MAY   1310 + 10                                                                  JUL     114.90 – 0.20

JUL     1327 + 9                                                                    SEP    116.10 – 0.25 

SEP    1345 + 9                                                                    DEC   117.80 – 0.30

NOV   1363 + 8                                                                    MAR   119.35 – 0.45

JAN    1379 + 8                                                                     MAY   120.25 – 0.55