Coffee Market Report

by | 19 Oct 2020

The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative increase their net long position by 0.02% within the market over the week of trade leading up to Tuesday 13th. October: to register a new net long position of 20,303 Lots which is the equivalent of 5,755,811 bags.  This net long position has most likely been very marginally increased, following the period of mixed but overall softer trade that has since followed.

The weather across the Brazil coffee belt meanwhile, has registered a week of sporadic rains between the main growing regions of Parana, Minas Gerais and Espirito Santo, with weather forecasters foreseeing wet weather and cooler temperatures to come to the main coffee growing areas towards the back end of this week.  This is forecast to bring more useful rains for these areas, to assist flowering of the new Brazil 2021 coffee crop to come. 

The analysts Safras & Mercado have reported that Brazil coffee farmers have already sold around 64% of the organisations estimated total production of 68 million bags from this current July 2020 to June 2021 coffee crop as at October 13th.  The pace of sales at this time across a 5-year average is reported to be around 53% and thus, illustrating that the pace of current crop sales that are above that of the recorded five year average, assisted to a degree by the weaker overall Brazil Real currency in relation to the US Dollar, boosting returns, in local Brazil Real terms, against the exchange rate to the US Dollar. 

The January 2021 to December 2020 contract arbitrage between the London and New York markets narrowed on Friday; to register this at 48.42 usc/Lb.  This equates to 45.15% price discount for the London Robusta coffee market.  

The Certified washed Arabica coffee stocks held against the New York exchange registered an increase by 3,881 bags on Friday to register these stocks at 1,119,923 bags, with 93.70% of these certified stocks being held in Europe at a total of 1,049,613 bags and the remaining 6.30% being held in the USA at a total 70,310 bags.  There was meanwhile a smaller in number 2,894 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 37,454 bags.  

It was a modest soft day overall on the commodity markets on Friday, to see the overall macro commodity index taking something of a sideways track for the day. The Sugar, Cocoa and London Robusta Coffee market ended the day on a positive note, while the 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 0.1520% lower; to see this index registered at 419.0495.   The day starts with the U.S. Dollar steady, trading at 1.293 Sterling, at 1.171 the Euro and with the US Dollar buying 5.645 Brazilian Real.

The London and New York markets started the day on Friday trading on a modest positive note, both markets continued on this modest positive track for much of the early morning trade. As the afternoon progressed both the London and the New York market came under some degree of selling pressure which saw the markets drop back off the highs of the day, the New York market continued on this softer track to see the market close on a softer note for the day, while the London market rallied late in the day but was seen to hit a ceiling and drop back off the highs of the day settling on a modest positive note for the day.

The London market ended the day with on a positive note with 42.31% of the earlier gains of the day intact, while the New York market ended the day on a negative note with 84.91% of the earlier losses of the day intact. This mixed close does little to indicate direction and one might think the markets are due for little better than a hesitant steady start to early trade today, against the prices set on Friday, as follows:

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

NOV   1273 + 9                                                                DEC    107.25 – 2.25 

JAN    1297 + 11                                                             MAR   110.00 – 2.10

MAR   1306 + 11                                                              MAY  111.40 – 2.20

MAY   1320 + 10                                                                JUL    112.70 – 2.20

JUL     1337 + 10                                                               SEP    113.85 – 2.25 

SEP    1355 + 10                                                               DEC   115.45 – 2.35

NOV   1373 + 10                                                               MAR   117.00 – 2.35

JAN    1389 + 10                                                                MAY   118.05 – 2.30