Coffee Market Report

by | 13 Nov 2020

The U.S. Governments National Weather Service’s Climate Prediction Centre have reviewed their forecast to project that there is now a 95% 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 December 2020 to January 2021 contract arbitrage between the New York and London markets widened yesterday: to register this at 46.01 usc/Lb.  This equates to 41.79% price discount for the London Robusta coffee market.  

The Certified washed Arabica coffee stocks held against the New York exchange was seen to decrease by 30 bags yesterday, to register these stocks at 1,192,586 bags, with 93.7% of these certified stocks being held in Europe at a total of 1,117,850 bags and the remaining 6.3% being held in the USA at a total 74,736 bags.  There was meanwhile a smaller in number 5,962 bags increase to the number of bags pending grading for this exchange; to register these pending grading stocks at 70,801 bags.  

It was a neutral day overall on the commodity markets yesterday, to see the overall macro commodity index taking something of a sideways track for the day. The Sugar and Coffee markets ended the day on a positive note, while the Cocoa market ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is related to 17 markets is 0.0952% lower; to see this index registered 422.8606.  The day starts with the U.S. Dollar, trading at 1.313 Sterling, at 1.180 the Euro and with the US Dollar buying 5.458 Real.

The New York and London markets started the day yesterday trading to a modestly positive side of par and with both markets taking a positive track, into the early afternoon trade. As the afternoon progressed both markets started to pick up support, to add some value before the New York market fell back off the highs of the early afternoon trade. The New York market recovered to a degree to see the markets trend positive for the remainder of the afternoon trade. Both markets continued on a positive track to see the markets settle near to the highs of the day.  

The London market ended the day on a positive note with 76.92% while the New York market ended the day on a likewise positive note with 62.5%.This firmer close might inspire some degree of confidence to possibly set the markets for a hesitant steady start to early trade today, against the prices set yesterday, as follows:  

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

JAN   1413 + 20                                                       DEC   110.10 + 1.00

MAR   1421 + 15                                                                MAR   112.95 + 1.00

MAY   1432 + 13                                                                  MAY   114.80 + 1.00

JUL    1446 + 11                                                                 JUL     116.45 + 1.00

SEP    1462 + 10                                                                  SEP     118.00 + 1.05

NOV   1479 + 10                                                                  DEC    120.00 + 1.20

JAN    1495 + 10                                                                 MAR   121.70 + 1.20

MAR   1511 + 9                                                                     MAY     122.65 + 1.20