Good day. Welcome to DRWakefield’s Weekly Coffee Market Report!
This report touches upon the Arabica and Robusta coffee futures market, currency pairings and news from origin. See our Market Report Terms page for clarity on any terminology in the coffee market report below.
Live Market Data
Coffee Market Report 30/12/2024
This report covers the period from Monday 23rd December to Friday 27th December and was written by Henry Clifford.
Coffee Market
The market opened at 325 c/lb and although Christmas was surely on everybody’s minds, so was the all time high of the week prior, where the market hit 348.35 c/lb! In real terms if you adjust previous highs for inflation this nominal figure would not be the all time real high, but real figures do not capture the imagination and many people were wondering, would we break out through the psychological 350 c/lb figure? That same thought around 300 c/lb was only happening 1 month earlier and look where we are now.
Although there was an 8.9 c/lb daily trading range on Monday, it settled at 327.25 c/lb and despite its best efforts to test 320 c/lb on Christmas Eve, it was not to be and on Boxing Day and the 27th, it trended downwards, settling the festive week out at 322.65 c/lb, a few cents lower than how we began.
COT & Certified Stocks
↓ Non-commercials reduced their Net long position by 1,091 lots to 38,156 lots Net Long.
↓ Commercials reduced their Net Short positions from by 1,303 lots to 91,364 lots Net Short.
Origin
Many people will have been wondering if they would get a White Christmas this year, but what has been happening with weather at origin?
Summer in Brazil began on the 21st of December and will last until March the 20th. With ocean temperatures above average, climate models indicate a high likelihood of rainfall exceeding historical patterns across all coffee-producing regions throughout the season.
Excess rainfall has also been a problem in Central America and Colombia. We have noticed this has impacted Honduras in particular, where the harvest has been delayed by up to 6 weeks and we are already hearing of quality issues and loss of volume due to fallen cherries.
Forecasts suggest Vietnam may also experience unseasonably heavy rains possibly hampering the current harvest.
Currency & Macro Outlook
We had a break from rate cuts and now turn our attention to the next Central Bank meeting at the end of January when the FED next meet. Federal Reserve officials, after a recent rate cut, suggest cautious reductions next year, balancing inflation progress and economic risks. This could mean gradual easing, but nothing is certain with Jay Powell.
Figures in the UK are as gloomy as the recent grey weather. Revised ONS data revealed no growth in UK economic output for Q3, down from a preliminary 0.1% GDP increase initially reported for the July to September period. The Lloyds Bank Business Barometer fell to 39% in December, its lowest of 2024 but above the 29% long-term average.
That said, Pound Sterling has been relatively stable, hovering around the 1.255 mark.
EUR/USD was not as robust and slipped under the 1.04 mark at the beginning of the week but closed the week at 1.042. Trump weighs heavily on the currency pair and his calls for the EU to reduce its trade surplus with the US have many people pondering parity. That’s it for this week, Happy New Year and see you in 2025!
Coffee Market Report 23/12/2024
This report covers the period from Monday 16th December to Friday 20th December and was written by Dave Rabbich.
Coffee Market
The NY C market opened the week at 317.00 c/lb and sure enough on Monday we saw the continuation of the seemingly unstoppable rise. Tuesday was an inside trading day with a ‘relatively’ small daily range of only about 10 c/lb. Despite peeking into the heights over 340 c/b on Thursday the day closed lower, and Friday followed suit, seeing out the week at 325.00 c/lb.
The fact that the market is still solidly staying in the 320’s shows that there is some serious belief in the bulls. A number of bearish factors should be weighing it down but don’t seem to be causing much of an effect. The dollar index rose last week, briefly touching above 1.08. A stronger dollar always encourages export selling which should help to bring the market down. As well as this, the long awaited results of the EUDR vote were announced with the decision to delay the implementation for a year. This delay will allow non-EUDR certified coffees into Europe meaning that any supply issues concerning roasters and importers should at least for the time being, be abated. I imagined that this would have had a significant downward pull on the market but it appears not to.
However, weather in Brazil is still proving sub adequate and many organisations are still lowering their estates for the 2025/26 crop. Volcafe have predicted a global deficit of 8.5 million bags which would make it the 5th consecutive year of deficits. This has been forecast despite supposed increases in production for Colombia and Indonesia according to the USDA.
In general exporters are somewhat hesitant as a result of the extreme volatility in the market and differentials, and buyers at destination are looking for nearby shipments and not committing to longer buying strings in the hope of more favourable market conditions in the future. Whether that tactic pays off for them, only time will tell.
COT & Certified Stocks
↓ Non-commercials increased their net long to 38,156 futures lots.
↑ Commercials reduced their net short to -91,364 futures lots.
Origin
Vietnam is in full harvest swing now and the numbers are looking like it will be export between 1.6 and 2 million bags in December. This is considerably lower than the 4Y average of 2.9 m bags. The reason cited for this decrease has been the heavy rains causing flooding, slowing down harvest and causing delays at ports. The forecast for the remainder of Vietnam is drier.
Vietnam has just launched the Database System for Forest and Coffee Growing Areas. This comes as origin countries are searching for ways to comply with the upcoming EUDR regulations set by the European Union. Particularly southern Europe is a major buyer of Vietnamese Robusta so falling to comply with these upcoming changes could cause major repercussions for Vietnam coffee farmers.
Currency & Macro Outlook
The Dollar Index nearly reached a two year high on Friday last week but just fell short as political uncertainly caused some nerves as the US government faced the potential of a shut down if Congress did not pass a stop-gap spending bill. In addition, US personal spending and reports were weaker than forecasted. The FED cut interest rates on Wednesday by 25 basis points which caused stocks to take a bit of a dive. Over the week GBP lost value against the greenback and slide to 1.247, levels last seen in May 2024.
Coffee Market Report 16/12/2024
This report covers the period from Monday 9th December to Friday 13th December, and was written by Jack Ravenscroft
Coffee Market
Volcafe vs. Neumann: the Brazil crop forecast battle…
Arabica futures rallied to all time highs on Tuesday reaching 348.35 cts/lb, over 20 points up from Monday’s open. The markets were fuelled by a revised crop report from Volcafe, as they reduced their Brazil arabica forecast for 25/26 by almost 30% (!!!) to 34.4 million bags. The trade house cited the drought during the 24/25 development phase as the core reason, leading to high levels of blossom failure.
On Wednesday, Neumann published a contradictory report estimating closer to 40 million bags, with the caveat that it is too early for a truly accurate estimate. This news saw another volatile swing to the downside, with KCH25 closing at 320.20 cts/lb, down from the 327.00 cts/lb week open.
These sharp intraday corrections are becoming increasingly normal in the New York coffee market. The sustained bull run is extremely susceptible to both fundamental and speculative news as it is increasingly unclear as to what factors have already been priced in.
On the bearish side, certified stocks continue to rise. Rumours of full warehouses in the EU make logical sense as roasters frontloaded their purchasing in preparation for the EUDR regulation that has since been postponed. Brazil exports continue to rise despite reports of low origin inventory.
On the bullish side, weather woes continue to support a pessimistic Brazil crop outlook for 2025/26 as well as causing harvest complications across Central and South America. Recent flooding and low exports in Vietnam continue to support high robusta levels. Geopolitical and macro volatility leave commodities open to price shocks.
The London robusta market experienced an equally choppy week. The weekly high of $5,556 was eventually wiped out with the market closing at $5,209, just $76 above the market open of $5,133. Despite both markets sitting close to record highs, the arbitrage between arabica and robusta has moved back towards historical norms of 150% having been close to parity a few months ago. Could this see roasters surge back into the robusta markets to cover their short physical positions?
COT & Certified Stocks
↑ Non-commercials increased their long position by 439 lots to 50,837 lots.
↑ Commercials increased their short positions by 3,112 lots to 152,725 lots.
↑ Arabica certified stock level was increased by over 30,000 bags to 940,426 with 94,495 bags pending grading.
Origin
News coming from Ethiopia is largely positive, with the 24/25 crop set to outperform 23/24. Weather conditions have been optimal for the development phase and initial offers from exporters have reflected this situation. One point of caution is increased rain as we move into harvest season. If not handled correctly, this could result in higher moisture content and quality issues upon landing.
According to CECAFÉ, November saw 4.66 million bags shipped from Brazil, a 5.4% increase compared to the same month in 2023. This follows strong shipment figures in both October and September despite an average 24/25 crop and reports of low inventories at origin. If these reports are accurate, we should see a considerable slowdown in exports in the coming months.
Currency & Macro Outlook
Brazilian fiscal uncertainties remain in focus. This week’s Copom meetings (Monetary Policy Committee of Brazil), the last of the year, were highly anticipated. An interest rate hike was already expected and Copom duly delivered with a 1 percentage point increase on the benchmark to 12.25% per year. Hikes will most likely be the norm until the fiscal uncertainties are addressed.
The dollar index rose through the week, reaching a 2.5 week high on Friday. This strength was supported by Friday’s news of an increase in the US Nov import price index ex-petroleum and stronger interest rate differentials.
The ECB cut rates by 25bps as expected in the final policy meeting of 2024 and signalled that further cuts are likely in the new year. Despite a tepid reaction to the news at the end of the week, this announcement could see the Euro test new lows in the weeks ahead.
Coffee Market Report 09/12/2024
This report covers the period from Monday 2nd December to Friday 6th December, and was written by Hannah Wakefield.
Coffee Market
Following Friday, November 29th, when the market hit a high of 335.45, almost breaking through the highest level we’ve seen since the 1970s, this reporting week, the lofty heights of the 330s eased, but not without further turbulence.
Monday, 2nd December, opened at 313.05 c/lb, already 5 c/lb lower than the close of the previous week. And that trend continued throughout the day, closing at 296.05 and a range of – 22c/lb! A decrease of more than 7% in one day. However, this respite below the 300 was short-lived. Tuesday, 3rd, December, saw the tide turn, and we were back over 300 by Wednesday. Although trading had slowed, with both origin and roasters exercising caution.
Through Thursday and Friday, prices rebounded strongly, hitting a high of 331.70 c/lb on Friday and closing at 330.25 c/lb with a weekly range of 41.65 c/lb.
COT & certified stocks
↓ Non-commercials reduced their long position by 1,071 lots to 50,398 lots.
↓ Commercials reduced their short positions by 7,155 lots to 149,613 lots.
↓ Total Open interest (non-commercial/commercials and index trade combined) for Arabica coffee futures at ICE Futures decreased by 2,241 lots to a total of 202,088 lots
↑ Arabica certified stock level was increased by 8,820 to 905,831 bags
– Arabica pending grading: 106,133 bags
Origin
According to a survey by the Brazilian Foreign Trade Secretariat (Secex) that was released on Thursday, 5th December, the total volume of green coffee exported from Brazil in November 2024 was 285,447 MT, up from 234,706 MT in November 2023, an increase of 21.6%. However, despite this impressively higher figure, port delays and logistics issues prevail. Due to a shortage of food-safe containers, many coffee shipments are getting rolled at very short notice, causing delays up to a month.
The figures are in for Vietnam’s total coffee exports in the period Jan-Nov 2024 from the General Statistics Office. A total of 1.2 million MT has been exported, which seems eye-wateringly high. However, this is 14.3% lower than the same period in 2023. This is due to crop failures causing a significant coffee shortage. A shortage which has been a key driver in the Robusta market pushing through record highs all year. Because of the high price of Robusta, whilst export volumes were down, the revenue generated by the lower volume rose by 35.4%.
In Colombia, the production of washed Arabica is increasing yearly. This November, they produced 105,600 MT, up 37% compared to November 2023, and an 8% increase in exports compared to the same period last year, according to figures released by the FNC. By the end of the year, Colombia is expected to produce 780,000 MT, which is 15% higher than in 2023. According to the FNC, this is because of the success of varietals that are more resistant to extreme weather conditions, such as drought and heavy rainfall, as well as diseases and fungus.
Currency & Macro Outlook
GBP has remained on a relatively stable, gentle upward trajectory. This has been supported by the expectation that the BoE may be slower to cut interest rates than other central banks such as the Fed or ECB.
Although, BoE policymaker Swati Dhingra has urged that further rate cuts are made, believing that current restrictive policy is harming living standards, business investment and productivity. She has highlighted weak consumption and supply capacity concerns and advocating for more policy easing, as reported by HSBC.
Despite Dhingra’s concerns, the Monetary Policy Committee (MPC) are still expected to vote in favour of holding the rate at 4.75% at their meeting on 19th December. They plan to continue with their ‘cut, pause, cut, pause’ pattern of easing and currently are looking to ‘pause’ but with further cuts to happen in the new year.
