​Coffee and La Niña

Analysts Safras & Mercado have reported than an estimated 54% of the new Brazil coffee crop has already been harvested. With an estimated forecast for the new crop of 56.50 million bags, the report suggests that so far, around 30 million bags of the new crop have been harvested.

​This harvest is made up of around 16 million bags of conilon robusta coffee, and approximately 14 million bags of arabica coffee.

The U.S. National Weather Service’s Climate Prediction Centre has revised the earlier El Niño La Niña Southern Oscillation (ENSO) neutral outlook, and is now forecasting that there is a 66% chance for a La Niña phenomenon to develop later this year. The La Niña weather phenomenon historically brings with it excessive rains for the Pacific Rim countries. What does this mena for coffee? Excessive rains will have an impact upon the climatic conditions within Colombia, Indonesia and Peru, while it can also influence dry conditions for the arabica coffee districts in South East Brazil. If the La Niña phenomenon plays out, there will be concerns over excessive rain damage for the coffee crops in Colombia, Peru and Indonesia. It will also bring concerns about the threat of drought damage for the next 2022 Brazil crop.

The September-to-September contract arbitrage between the London and New York markets widened yesterday to register this at 74.82 usc/Lb. This equates to 49.14% price discount for the London Robusta coffee market. This wide arbitrage will likely be viewed by price sensitive roasters as an attractive alternative discount for robusta against the comparatively higher value arabica coffee.

It was a mixed day on the commodity markets yesterday, as we saw a stronger dollar pressuring the commodities. The Coffee markets ended the day on a positive note, while other commodities such as Sugar, Cocoa, Corn, Wheat, Soybean, Gold, Silver, Palladium and Platinum markets ended the day on a softer note.