The Lab

Royal NY Market Watch: January C Market Coffee

By: Andrew Blyth & Tom McLaughlin

Looking for the latest insight into how the C Coffee Market is trending? Our team of traders have been glued to the screen daily so they can keep you in the loop and offer responsible purchasing decisions.

C MARKET COFFEE

JANUARY C MARKET COFFEE UPDATE

The “C” market has not been a friend to Importers and Roasters for many months now but still, we remain glued to the screen daily so we can keep you in the loop and offer responsible purchasing decisions. Coffee prices, as measured by the ICE March’22 “C” futures contract, have begun the new year with the same volatility we saw in 2021. After trading to 6 week lows of 2.2055 on the first trading day of 2022 (Jan 3), prices have once again spiked higher. They reached a high of 2.4490 on Jan 12th and the contract high remains at $2.5235… for now. The obvious silver lining to this sustained rally is that it allows more time for our global network of producing partners to sell coffee at these higher levels supporting their investment in quality.

WHY IS THE C MARKET UP?

The reasons for the market remaining near contract highs are nothing new. Monthly export data from 2 of the largest coffee producing nations has caused short term concern of coffee shortages. Colombia reported Dec ’21 coffee exports declined -9.2% y/y. Brazil monthly export numbers since its last harvest have averaged declines of 25% y/y. As a result of declining monthly exports, inventories of coffee stocks* in importing countries have decreased as well. ICE certified arabica coffee warehouse stocks, which peaked on June 30, 2021 at 2,189,155 bags, registered at 1,432,556 bags on Jan 12, 2022. Most of this decline of 750,000 bags have been coffees from Brazil and Honduras. These coffees represent a cheaper alternative for roasters than current spot prices, and it’s coffee that’s available in a domestic warehouse rather than fighting the Global logistics crisis impacting all of us.

To that point, global logistical shipping issues remain front and center, not just for coffee, but for virtually all commodities and supplies. This sustained situation has undoubtably helped to keep prices elevated.

WHERE WILL THE C MARKET GO FROM HERE?

But not all is doom and gloom. This week an agricultural research and analytics firm, HedgePoint Global Markets, projected Brazil’s upcoming 2022/23 coffee crop will recover to 68.5 mln bags (2nd largest ever), which would generate a coffee surplus of 6.2 mln bags. This is the 3rd company in the last couple of months to estimate this upcoming crop at 63.5 mln bags or more. (ECOM and Rabobank were the others).

We certainly do not know where prices will be 3-6 months from now, but we can expect coffee price volatility to remain elevated.

For now, fresh coffee is arriving into our warehouses every day. What hasn’t been impacted in this market crisis is quality so call or email us to talk about the beans that are right for you. If you have any questions about the market or coffee availability, we are here to help.

Talk soon,

The RNY Trading team  

*What are certified stocks? It basically a pool of green coffee stored around the world that acts as a “reserve” for the Coffee market. Think OPEC for Oil or Fort Knox for Gold.

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