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Coffee Market Report October 2020

Welcome to DRWakefield’s October Market Report.

October 1st marks the start of the coffee year and is oft a time of reflection as producers and exporters alike review how much coffee has been produced and exported compared to previous years. Brazil’s slice of the pie continues to grow, as well as its impact on the wider industry.

We have all become accustomed to daily data analysis of Covid-19 figures and as we headed into the colder months of the year, many of the graphs we are constantly exposed to, were all tracking upwards. Covid-19 aside, much of the news was dominated by the US election on November 3rd. Biden and Trump debated, and it seems that cross-party political consensus on any topic is a relic of the past. Politics, not just in the US, is more divisive than ever, with political partisanship reinforcing societal divisions.

Talking of divisions, the Exeter Chiefs rugby team won the European Champions Cup for the first time, marking a historic double as they also claimed the Premiership title. The Six Nations rugby tournament was suspended in March due to Covid-19 and play commenced again in the middle of the month. France were in the uncomfortable position where winning their final game would ensure England came out as victors. It was a bittersweet victory for the French, as they beat Ireland 35-27, and then saw England crowned Six Nations champions.

This month we venture out to Colombia, El Salvador and Peru for the latest news and views

Source: Refinitiv

NYC Market

The market opened the first day of the month at 110.95 c/lb and lost 4.55 c/lb over the course of the day, closing at 106.40 c/lb. It then proceeded to track upwards for the next 10 days, and hit a month high of 113.55 on the 12th, but could not hold that level for long, closing the day at 109.15 c/lb. On the 15th we saw a 4.85 c/lb day range, with a close only marginally different from the from the opening. This precipitated a downtrend till a pullback on the 22nd, where the market closed at 106.70 c/lb. The 29th saw the month’s low of 102.95 c/lb and we closed October at 104.40 c/lb.

What did the COT show us over the course of the month? Well, we got the final COT of the month with the cut-off date of the 20th October and it confirmed that the speculators had reduced their exposure to coffee. The COT for cut-off date of the 29th September showed the funds were 25,645 net long. The following week they shaved off over 5000 lots, had broadly no change the next, and then shaved off another 4815 lots to close 15,488 lots long. They have maintained a net long position since the August 4th cut off COT and have not reached this low long level since August 11th. Tentative trading continues! Looks like the market thinks 100-110 c/lb is fair value for coffee right now.

The flow of semi washed Brazils to certified stocks started in earnest in October, and is expected to accelerate in November. In November Brazil is expected to overtake Peru and Mexico as the second largest origin represented at the board.

Source: Refinitiv

Let’s look at the market from a 3-month perspective. As you can see from your RSI 14-day chart, the market was overbought in the middle of September and this precipitated a sharp downtrend starting above 130 c/lb and falling to just below 115 c/lb in 7 days. For the last 6 weeks we’ve been in a 100-115 c/lb range and we look to trade sideways for the short term. Much talk surrounds whether or not we will hit the 1 USD level. Let’s hope not.


The 2020/21 harvest officially started in Vietnam, the world’s largest Robusta producer. However, this coffee will not hit exporters’ warehouse till mid/end of November according to many traders out there. While prices in Vietnam eased somewhat, differentials for Indonesian Robusta remained firm. The Robusta market closed the 1st day of the month at 1,288 $/mt and finished the month at 1,339 $/mt, representing an increase of 51 $/mt.


Source: Refinitiv


Rate predictions from the major banks for the next 2 months on all currency pairs are, unsurprisingly, very different. With so much uncertainty coming from so many angles, forecasting is indeed much trickier than it ever has been. One estimate we saw recently saw a range of 1.22-1.42 for GBP/USD, 1.02-1.18 for GBP/EUR, and 1.14-1.24 for EUR/USD. Brexit, Covid-19 and the actions of the US president over the next 2 months dominated the narrative.

The cable kicked off the month trading at 1.289 and although it surpassed the 1.31 level on the 21st, it closed the month only marginally stronger than how it started, at 1.292. This was not the case for GBP/EUR, which started the month at 1.099, and closed at 1.109. What happened in between?

After the initial loss in value across both currency pairs, the Pound rebounded and its recovery was stymied by concerning Coronavirus figures released over the first weekend of the month that were much worse than anticipated. However, Pound Sterling went on to gain strength against both the Euro and Dollar on the 8th as there was optimism regarding a favourable Brexit deal. It continued to strengthen with underlying expectations that there would be a good deal and it remained above the key 1.30 level. A strong tone in global equities provided net support to the £. It then entered a volatile stretch and plunged 2 days before the key summit on the 15th, then rising the day before, only to fall once again. The Dollar remained firm around the middle of the month as European Covid-19 infection rates rose and increased restrictions on movements saw people turn to the Greenback as a safe-haven.

However, on the 21st again Brexit considerations dominated and Sterling jumped to a 6-week high of 1.315 as a deal, which had seemed unlikely during the week prior, looked back on. On the 27th we saw a divergence with the £ losing against the Dollar, and gaining against the Euro, as news of a potential lockdown in France and Germany were looking likely and that there would be no stimulus package before the US election.

Source: Refinitiv


1 Euro bought you $1.173 at the start of October. It tracked upwards for the first 9 days of the month, nudging over 1.182 on October 9th. It then trended downwards to 1.171, before rising the next week to hit the month high of 1.186. However, negative data surrounding Coronavirus cases in Europe saw it lose value against the Dollar and slide to a month close of 1.163.

Big origins: Brazil, Colombia & Vietnam

The reduction in Brazilian imports continues to cause issues for availability of containers and spaces on ships, as the churn rate for import/export has dropped off following domestic demand. Many exporters are making pre bookings well in advance of when they typically would. This is the time of the year when everyone is looking at the weather across the key coffee producing regions to see if there is the right quantity of rainfall to produce a healthy new crop. Despite many regions receiving slightly less than they would like, weather has been overall favourable and is keeping people bullish with regard to the next crop’s size. The Brazilian Real (BRL) started the month at 5.61 against the Dollar and weakened to 5.75 on the last day.

Like the BRL in Brazil, the Colombian Peso finished the month weaker against the US Dollar. It started October at 3830 and finished at 3868. However, the percentage change was significantly lower when compared to how much value the BRL lost against the Dollar.

The General Statistics Office of Vietnam estimated that exports in October hit 1.5 million bags, which represents a year on year increase of 3%. This contrasts with the general sentiment put forward by many traders and exporters who, throughout the month, said business was slow. However, with the new crop picking slightly delayed, many people who were short on physical for new crop November shipments had to go into the market and buy current crop.

With the harvest right around the corner and new crop picking expected to commence during the first half of November, people are eager to see how much volume will come to market. At the end of the month Typhoon Molave slammed into the coast near Da Nang city on Wednesday 28th October. It lashed rains across Vietnam’s largest coffee belt in the Central Highlands but initial reports suggest the damage to the cherries is not as great as some had feared.

Origin focus


Antioquia, Narino, North Santander and Tolima were the victors in the fifth version of the FNC’s annual quality competition ‘Colombia, tierra de diversidad’. Due to Coronavrius restrictions, it was a different set up this year, but it did not stop it hitting a record number of entrants! Figures for September came out in October and production figures for September 2020 were 9% down against those for September 2019. Exports were 12% down. A 12-month perspective draws a different conclusion for production, but not for exports. October 1st marks the start of the coffee year and from October 2019 to September 2020, Colombia produced 14.1 million bags, 0.2 million more than the year prior. However, it was not the same story for exports. In the latest coffee year, 12.6 million bags were exported, representing a 6% drop on the previous year where 13.5 million bags were exported. One might think that this increase in supply could put downward pressure on pricing, but Excelso differentials have remained firm since they increased earlier in the year. When the differentials originally rose, people thought it was a temporary measure, but perhaps they are here to stay? Is their price increase part of the reason that exports have dropped as many large industrial roasters have reduced the % of Colombian coffee in their portfolios? Too early to tell.

In other news, the FNC launched its own radionovela called ‘Mi finca, mi hogar y tesoro’. This was driven by the fact that many farmers in rural areas use radio as their primary way of receiving news and the government and the FNC want to promote to producers topics related to security and health at work and also the prevention of child labour.

Weather modelling show that La Nina will be weak this year but will still have an impact. From October onwards we will see more humidity across the coffee growing regions and this favours the growth of La Roya. Luckily, many producers have varietals that are reasonably resistant to La Roya, planted as a result of the last big outbreak.

El Salvador

In general, the export of the 2019/20 El Salvador crop was delayed because of several contract cancellations due to the impact of COVID-19 around the world. Many contracts, although not cancelled, were pushed back a few months, which meant that producers had coffee parchment in their warehouses for much longer than they are accustomed to. This was not such a problem for the larger estates who have the space and facilities to safely store this volume of coffee, but it was indeed a challenge for many small producers and cooperatives. The drop off in demand has meant that several millers still have much coffee to be sold and exported.

The positive news is that the 2020/1 crop is slightly delayed, due to a prolonged rainfall that has forced cherry maturation to take longer. So there is still some time to find a home for the current crop coffee. Volume however, is expected to be significantly down on last crop. The Coffee growers association of El Salvador (Acafesal) announced at the end of August the fall could be as much as 58%, to 300,000 quintales of coffee, the lowest production figures on record. This is due to a resurgence of La Roya, the impact of Storm Amanda and Storm Cristobal, and a reduction in the application of fertilisers and other agricultural inputs. However, most people we speak to think a reduction of 10-20% is more realistic.

Producers and exporters face demand side uncertainty too, as it is still yet to be seen how markets and consuming countries will perform with the second wave of COVID-19. Only time will tell on that front! Forecasting is an even trickier thing to get right now we all have Covid-19 in the picture also. It’s reported that more producers are experimenting with new varieties and processing methods in a bid to add value to their coffee. Many are targeting the more stable, quality focussed speciality market in an attempt to bring some stability and certainty amidst the current situation.


At the start of 2020 Peru was preparing for the 2020/21 crop with no major challenges or concerns. However, after the initial few weeks reports came out indicating that there could be a drop-in production of between 10-20% when compared to the 2019/20 crop. Due to the persistently low-price climate and the resulting drop in income, many producers had not been able to adequately fertilise their plots and this affected yields. In March the state ordered a national quarantine because of Covid-19 and at the time it was thought this would not last long. Producers and exporters alike were optimistic. However, when cases started to spiral in April, people realised this could be a longer-term problem. Movement restrictions hampered the harvesting of coffee and many producers had to rely on family and friends to pick their cherries. In the end, through the strength of local community, the drop in harvested coffee was less than initially feared and by September most of the coffee had all been harvested. Another challenge of this crop was internal logistics. Once the coffee was picked, it was not easy to get it to the cooperative collection centres and the time lag between picking the coffee and delivering parchment to the collection centres grew.

In October, the talk of town was speculation. Many of the large exporters were (and still are) short and this fuelled a surge in local prices, hitting 520 soles per quintal of parchment coffee. The domestic market is standing firm at this level with many cooperatives offering it to their members as a minimum price. As a result, many cooperatives and exporters are losing money to complete their FOB contracts with foreign buyers. This is particularly felt by those exporting conventional grades and single certified grades like Utz and RFA. The good news is that the USD over the course of the year has depreciated against the Sol, which has helped exporters: now 1 USD buys 3.60 soles whereas in January it bought 3.30.

Thanks for reading and till next time coffee folk!