“Happy Froth of July”
• Arabica September futures closed down on Thursday bringing an end to a four-day rally, over the course of which prices reached one-month highs of 104.55 cts/lb
• Origin selling, mainly from Brazil was noticed as the BRL weakened to 5.50 against the US dollar, as well as a steadily weakening Sep/Dec spread which moved to pre-pandemic levels. There were forecasts of a cooler front drifting into Brazil’s coffee belt earlier in the week although temperatures remained over 5 degrees and are forecast to continue above levels for any threat of frost.
• The US economy created jobs at a record pace in June as more restaurants and bars reopened; nonfarm payrolls surged by 4.8 million over the month, the most since the government started keeping records in 1939. Although, several cafes re-opened across the country, the resurgence of Covid cases in parts of the USA is slowing scheduled reopening.
• Escalating Covid cases have also been reported in coffee producing countries such as Peru, India, Mexico, Costa Rica, Honduras and Guatemala resulting in a scale back or pause in the easing of restrictions and re-openings, with some states and cities implementing lockdowns once again. At this stage there is no significantly remarkable impact or damage to coffee activities with the exception of a slowdown in harvest in Peru and Honduran logistics.
• Current weather conditions in Vietnam’s coffee growing regions are very favorable for the development of the 2020/21 crop while farmers report to have completed their first round of fertilizer application.
• Uganda’s Coffee exports for the month of May reached 341k bags for Robusta and 97k bags for Arabica, higher by 27% and 29% compared to May 2019 respectively. The increase in exports is attributed to the larger crops this season, exporters drawing down stocks and roaster front loading during the Covid lockdowns. The impact of Covid on Uganda’s coffee production is yet to be quantified while lockdowns are relaxed, and trucks are able to travel to rural areas to procure coffee.
• ICE certified arabica stocks are currently 1.656 mio bags, while Robusta certs continue to fall over the week to 11,629 lots.
• We estimate the spec. fund positioning in arabica is currently net 28k lots short, while in Robusta is net 40k lots short.
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