Good day. Welcome DRWakefield’s Weekly 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 18/12/2023
This report covers the period from Monday 11th December to Friday 15th December and was written by Philip Searle.
New York Coffee Market
Following a ‘quiet’ previous week we were hit with a new heat wave in Brazil which encouraged speculators buying on Monday 11th December. A weather forecast for the areas of Mato Grosso do Sul, North of Sao Paulo and areas of Minas Gerais and West of Bahia indicates temperatures could reach the 40s C. or 104 F. Similarly, the technical firmness supporting the 175 level drove the market north which found the market trading in a range of 183.50-194.50 for most of the week.
The market keeps a firm eye on the low certified stocks, reduced production forecasts and the hope that decent rains appear in Brazil halting losses in the upcoming crop.
COT & certified stocks
↑ Arabica Certified Stock level: 242,399 bags (increase of 7,700 bags from last week)
↑ Non Commercials, Net Long 17,268 bags (786 bags up on last week)
– Arabica bags pending grading: 24,608 bags
Origin
Vietnam’s coffee exports for 11 months in 2023 has decreased 13% compared to the same period in 2022. The crop is down 15-20% to 26.67- 28.33 million bags due to adverse weather during key development phases and decreased coffee area as farmers look for other crops with higher profits. 4 million is sold locally and many large roasters/ trade houses have already forward booked. Top exporters are holding back on offering until their inventories are secure and the market stabilises.
Currency & Macro Outlook
The UK’s latest GDP data showed us that the economy reduced by 0.3% missing forecasts that the growth would only stall.
One piece of news that wasn’t all doom and gloom is that the pound rallied in the wake of the BoE latest interest rate decision – keeping rates on hold at a 15-year peak of 5.25%. The Bank of England Governor, Andrew Bailey said there is still some way to go in the battle against – yippee!
Coffee Market Report 11/12/2023
This report covers the period from Monday 4th December to Friday 8th December and was written by Henry Clifford.
New York Coffee Market
Last week’s report had the mammoth Thursday move to report on where the market jumped 10.5 c/lb. This week was quieter in comparison, but we did see a reversal of the bulls, with the market closing 7.85 c/lb lower on Tuesday 5th of December. The market opened the week at 182.65 c/lb, and after the bearish Tuesday, it traded sideways for the rest of the week, closing at 177.25 c/lb.
The most salient market news last week surrounded a trader with operations in over nine countries, Mercon Coffee Group. The details are unclear, but it is reported that Mercon filed for bankruptcy, and the market is waiting to see how this plays out and whether or not they will be forced to liquidate their positions. This looms over the market like a grey cloud at the moment, and nobody has answers as of yet.
COT & certified stocks
↑ Non-commercials increased by (+ 3,032 lots) to a net long position of 16,482 lots.
↓ Certified increase by 10,633 bags to total 234,699 bags.
↑ ICE Arabica Lots pending grading: 24,608 bags.
Origin
As outlined above, Mercon was operating in over nine countries, and Nicaragua was where it had its highest market penetration, under the name of its exporter ‘Cisa Exportadora’. How the next few weeks pan out will certainly affect differentials in Nicaragua and perhaps those of some of its neighbours. How the futures are dealt with could also impact on the market in the short term.
Currency & Macro Outlook
December is typically the month that is most impacted by macroeconomic factors. This is due to reduced trading volumes and the impact of larger capital movements at the year’s end, leading to strong positive macro correlations during the month.
We have a talented excel whizz in the office who we call ‘macro man’, but I think it’s also safe to call December, ‘macro month’. That said, at the moment there is no clear macro direction that macro month is giving. The bears will point to reduced growth, falling brent crude pricing, and reduced inflation. The bulls will point to rising stock prices, bond values, and crypto, fuelled by bullish market sentiment around every corner. At the moment, there is no clear direction. Perhaps the FED and ECB meetings this week could change that?
Coffee Market Report 04/12/2023
This report covers the period from Monday 27th November to Friday 1st December and was written by James Duncan.
New York Coffee Market
The market opened this week at 167.00 c/lb after a stable week prior, rallying up to 172.50 on the back of speculative buying before settling to 169.05 by close. Tuesday saw a continuation of the bullish sentiment in part driven by strong technical performance, with the March/May switch following the trend of the December/March switch. Little change was noted on Wednesday before a huge rally of 1200 points on Thursday which closed at 184.70 c/lb – the highest levels in six months. This movement was in part due to the technical performance and the March/May switch hitting 4.15 c/lb, as well as early report of adverse weather in Brazil affecting the 24/25 crop outlook. Friday settled lower at 184.35 in the wake of Thursday’s volatility – but short-term specs playing both sides of the market kept it within the 175 support and 189 barrier. Although the open/close delta was 0.35, the high/low delta for the day was 10.3.
COT & certified stocks
↑ Non-commercials increased by (+ 951 lots) to a net long position of 13,450 lots.
↓ Certified decrease by almost 30% to 224,066 bags.
↑ ICE Arabica Lots pending grading: increase by 6,076 bags to 29/11, bringing the total to 28,090 before settling to 23,870 on 30/11 – a weekly increase of 1,856.
Origin
Brazil: Extreme heat combined with heavy downpours dominated the weather news at origin this week. Although early news of the weather did not seem to shake the market too much – questions remain over whether the weather played a part in the bullish sentiment this week.
Ethiopia: The CTA published 10% higher minimum pricing for 23/24 crop as compared to 22/23 in what is widely seen as an effort to clear the Ethiopian exporters surplus of coffee from the previous crop. Meanwhile, unseasonable rains in the southern coffee regions are affecting both the harvest and processing, with production expected to be lower year on year as a result.
Currency & Macro Outlook
The USD began the week on the back foot amid growing speculation that the Fed will begin to cut interest rates next year – fueled by the latest US PMI’s suggesting that private sector growth was stagnating, with the unexpected contraction in manufacturing sector growth. The GBP has remained strong with contrasting expectations that the BoE will not cut interest rates anytime soon, while the EUR faltered towards the end of the week as news of the Eurozone’s largest economy, Germany, had weaker than expected inflation.
