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 04/03/2024
This report covers the period from Monday 26th February to Friday 1st March and was written by Priscilla Daniel.
Coffee Market
Monday 26th February opened at 180.50 usc/lb and closed at 179.25 usc/lb. Coffee Futures fell as fundamentals continued to turn bearish. Activity was low with the volume reaching 26,823 lots, including 5,802 switches. The action was dominated by short term specs looking for volatility. On Tuesday, the May-24 delivery was more active with a market closing higher at 183.05. Short covering caused the bounce after the support touched the 177.50 level. Although futures closed on Wednesday with a relatively quite day of trading, Thursday picked up like a roller coaster since the market closed higher at 184.35 and was driven from short term traders looking for volatility and operators closing books for the end of the month. On Friday coffee futures settled mixed, consolidating within the price range of the previous two sessions. Without fundamental news, it was driven by short-term speculators. Strong support was noted below the 180.00 level, while resistance was above 185.50 usc/lb. The end of the week’s close saw a rise from 180.50 usc/lb to 184.80 usc/lb with a 4.30 usc/lb week range.
The London robusta market started with a reversal on Monday finding support at the 40 day moving average. Slow commercial activity led to sporadic buying. A bullish week for Robusta as it increased on average +50 every day between Tuesday and Friday. Robusta topped out at 3143 US$/MT caused by supply issues that dominate the news and nothing but rumours hinting at a solution.
COT & certified stocks
↓ Non-commercials decreased their net long by 2,080 bags to total of 32,126 bags net long.
↑ Arabica Certified Stocks level: 360,547 bags (increase of 6,941 bags)
↑ Arabica pending grading: 157,372 bags
Last Wednesday, ICE-monitored robusta coffee inventories fell to a record low of 1,958 lots, although they recovered modestly to a 2-week high of 2,453 lots. ICE-monitored arabica coffee inventories fell to a 24-year low of 224,066 bags on November 30, although they recovered moderately to a 3-4 month high on Friday of 360,547 bags.
Origin
Brazil
CoffeeNetwork (New York) – Coffee prices continue to fluctuate in the domestic and foreign markets. According to Cepea researchers, this is due to speculation about the expected volume for the 2024/25 Brazilian harvest, in addition to exchange rate variations and the behaviour of the weather.
Expectations regarding production are good: the current cycle is expected to grow compared to 2023/24, but a favourable climate for the start of activities in the field is essential for the season to be truly positive.
Conab, Brazil’s crop forecasting agency, on January 25 suggested that Brazil’s 2024 arabica coffee production would climb +5.4% y/y to 58.1 million bags. The 2024 coffee crop year is seen as the most productive of Brazil’s biennial coffee year cycle.
Vietnam
Vietnam’s General Statistics Office reported Wednesday that Vietnam’s Feb coffee exports fell -32.8% m/m and -20.1% y/y to 160,000 MT, although total Jan-Feb coffee exports are up +16.2% y/y at 398,000 MT. Also, Vietnam’s agriculture department on November 3rd projected Vietnam’s coffee production in the 2023/24 crop year could drop by -10% to 1.656 MMT, the smallest crop in four years, due to drought.
Honduras
Honduras, the biggest coffee producer in Central America, reported its Feb coffee exports rose by 26% y/y to 932,678 bags.
Costa Rica
CoffeeNetwork (New York) – The latest data from Costa Rica’s Coffee Institute (ICafe) showed that the country exported 87,541 bags of coffee in February, an increase of 1.8% from the 85,541 bags exported in February of last year. This brought cumulative exports for the first five months of the current October 2023 to September 2024 coffee year to 221,501 bags, a decline of 5.1% compared to the 233,356 bags exported in the first five months of 2022/23.
Currency & Macro Outlook
The US Dollar rallied at the end of the week as US consumer spending increased from 2.8% to 3%, stronger than expected.
On Thursday, the Commerce Department reported a 0.4% surge in the US core PCE price index for January amid a boost in the cost of services like housing and finance. The annual increase in inflation was the smallest in three years which keeps hopes for a mid-year interest rate cut.
A majority of economists expect the European Central Bank to first cut rates in June but are split on the chances of the cut coming earlier or later than expected.
The Bank of England reported on Thursday a rise in UK mortgage approvals in January, recording the highest increase since October 2022, indicating signs of recovery in activity. On Friday, The Bank of England’s Chief Economist, Huw Pill said that the central bank will probably adopt a new, scenarios-based system for economic forecasting which will give information on what may happen to interest rates in the event of shocks such as a total closure of the Red Sea to shipping.
Coffee Market Report 26/02/2024
This report covers the period from Monday 19th February to Friday 23rd February and was written by Mantvydas Trainavicius.
New York Coffee Market
This week, the coffee world began with a Holiday in the USA resulting in the ICE market being closed, which gave some time for everyone involved to prepare for FND (first notice day) which was on the 21st of February. So the trading week started on Tuesday with (May24 terminal month) opening at 187.20usc/lb while on Friday market declined second day in a row due to spec selling amid a lack of industry buying and closed the week at 180.30usc/lb (May24 terminal month), Thursday being most volatile with 5.85usc/lb day range.
While NYC was closed on Monday, the London Robusta market jumped to 3280$/mt (Mar24 Terminal month), but for the rest of the week, the market kept falling and closed at 3047$/mt (Mar24 Terminal month). Talks about the significant volume of Brazil Robusta Conillon coming to the board, might compensate for the supply issues in Vietnam.
COT & certified stocks
↓ Non-commercials decreased their net long by 3,856 bags to total 34,206 bags net long.
↑ Arabica Certified Stocks level: 324,157 bags (increase of 8,330 bags)
↑ Arabica pending grading: 127,421 bags
Origin
Coffee Network (Bogotá) – Peru shipped 3.382 million bags (60kg bags) in the calendar year 2023, down by 725,300 bags from the 4.107 million bags shipped in the previous year.
The National Coordinator for Disaster Reduction of Guatemala reported on the 21st of February through a statement that a forest fire occurred in Volcán de Agua, in Sacatepéquez, but coffee producers located around the mountain’s slope say they haven’t been affected.
In Colombia, coffee production is set to increase to 5.8 million bags in the first half of this year, the general manager of the coffee grower’s federation German Bahamon said output will represent an increase of 15.5% from the 5.020 million bags in the same period last year, according to figures from the coffee grower’s federation.
Currency & Macro Outlook
The official figures published by the Office for National Statistics on 21st February showed that the UK recorded its highest-ever monthly budget surplus in January, boosted by record seasonal tax inflows. The UK ran a budget surplus of £16.7 billion in January 2024, increasing from £7.5 billion in January 2023.
The European Central Bank on 22nd of February reported an annual loss for 2023 and emphasised that further losses were likely. The loss before the release of provisions was €7.9 billion after a loss of €1.6 billion in 2022.
A surprise drop in new unemployment claims last week was seen as encouraging the Federal Reserve to keep interest rates on hold and triggered the rebound in the US dollar.
As per the survey released by the European Central Bank on the 23rd of February, inflation expectations among eurozone consumers rose for the year ahead and held steady for three years out, indicating that the final stage of taming price growth may be challenging.
Coffee Market Report 20/02/2024
This report covers the period from Monday 12th February to Friday 16th February and was written by Phil Searle.
New York Coffee Market
Focus of the industry was the switch from Mar/May, origin sales fixing weighed heavy on the market but was halted further downwards due to industry buying. Certified inventories have been building up nicely, this could be correlated to inversion in the spread. The more expensive the cost of rolling/carrying stock becomes the more likely the larger players in the industry will deliver to the market.
Specs still holding a near multi-year highs.
COT & certified stocks
↑ Non-commercials increased their net long by 3,122 bags to total 34,940 bags net long.
↑ Arabica Certified Stocks level: 307,262 bags (increase of 9467 bags)
↑ Arabica pending grading: 65,717 bags
Origin
Sporadic rains in Colombia have given coffee trees the much-needed water they needed. The El Nino has caused drought in the main producing areas but let’s hope that these rains have dampened any damage.
In Tanzania the first auction of 2024 was held in Moshi, as there has been limited supply to sustain weekly auctions – there is limited volumes of the ‘good stuff’. Weather conditions remain favourable for new crop development.
Peru harvest seems to be gearing up, in the lower zone we have seen 1% of coffee with broca. Farmers in the middle to higher altitude areas seem to have a positive outlook on fertilization to maintain cherry quality.
Currency & Macro Outlook
The pound weakened against the USD due to data published by the Office of National Statistics showing that UK economy shrank more than expected meaning that the UK entered recession in the second half of 2023. That said, the UK inflation stayed firm at 4%, could this be signs that the UK economy is picking up?
The ECB remains cautious about cutting interest rates, which are currently at their record high since sep-23.
Coffee Market Report 12/02/2024
This report covers the period from Monday 5th February to Friday 9th February and was written by Henry Clifford.
New York Coffee Market
Monday 5th of February opened at 190.75 c/lb and closed at 189.50 c/lb. We touched the low of the week on Tuesday at 186 c/lb but the market could not sustain this level and we closed fairly similar to how the day started at 188.20 c/lb. For the days that followed, we saw some tentative trading with not too much activity, till Friday when the market soared upwards and closed 6.05 c/lb higher than how it began. This rise was driven by: industry buying, the non-commercials going longer, and the rolling of positions from March to May, particularly by funds; the end of the week’s close saw a premium of 5.50 c/lb from March to May.
COT & certified stocks
↑ Non-commercials increased their net long by 830 bags to total 34,940 bags net long.
↑ Arabica Certified Stocks level: 297,795 bags (increase of 30,905 bags)
↓ Arabica pending grading: 30,534 bags
Origin
The talk of town centres around the Houthi Rebels and how their actions impact the Suez Canal, which sees 15% of world trade move through the 193km canal in the Isthmus of Suez. Right now the impact has mainly been felt on containers coming from Asian and African coffee origins but the concern is how much this will spread to Central and South American origins. We are already seeing container displacement and increased freight rates, akin to what we saw in the Covid Pandemic. In Brazil, according to the Detention Zero Bulletin (DTZ) who collaborated with Cecafé on the data, delays of ships with coffee in the Port of Santos, reached 85% in January 2024, the highest percentage recorded so far. So far people are not getting too worried but there is concern that the situation could quickly escalate. The coffee world continues to monitor; with certified stocks already low, there is concern we might see a dip in supply at destination, especially since traders have been reducing their spot positions with higher interest rates and backwardation back in play. Could this prompt a further increase in the coffee market?
Currency & Macro Outlook
It was a strong week for the Greenback, which soared to 11 week highs. With escalating geopolitical tensions and the Federal Reserve’s Chairman Jerome Powell’s recent hawkish remarks, it appears that buying Dollars generally is back in vogue. Unless the Suez Canal challenges sort themselves out soon, it’s likely we will see more parking of money into this low-risk asset.
This was the case against all major currency pairs but the Euro fared much worse than Pound Sterling.
Why? European shoppers don’t seem to have the same thirst for box fresh sneakers that their American and British counterparts do. Eurozone retail data has been weighing down the Euro, and inflation seems to be stickier there too.
Coffee Market Report 07/02/2024
This report covers the period from Monday 29th January to Friday 2nd February and was written by Guus Bremer.
Coffee Market
The Arabica KCH24 contract buy and sell volumes balanced out last week, resulting in side-ways movement. The week opened at 192.85 and closed at 191.95 usc/lb. Most players expect higher volumes to be traded when the market lifts above $2.
Investment/speculating-wise; $2 billion of capital inflows into the soft commodity sector likely will set the tone for the first quarter.
In the short-term; a tight supply scenario keeps the futures curve inverted. For the mid/long term; the 24/25 crop is an ON cycle, meaning a higher productive season and so possibly more liquidity.
Robusta RMH24 reached a new high Wednesday at $3379/MT and corrected back to close the week at $3188/MT. On Friday, expectations of Conilons starting to flow to the board mid to late March encouraged a layer of arbitrage short covering (arabica vs robusta), with march23/march23 strengthening to 45 US cents/lb. ICE-monitored robusta inventories fell to a record low of 2,725 lots.
COT & certified stocks
↑ Non-commercials increased by (+745 lots) to a net long position of 33,365 lots.
↑ Arabica Certified Stocks increased by 4,997 bags to total 266,890 bags.
↓ ICE Arabica Lots pending grading: 65,114 bags.
Origin
Fundamentally, Brazil’s coffee trees have recovered after the 2021 frost pruning which could mean that the 2020 numbers of 70-75 mln bags will be matched – especially now that rains have returned since dec-23.
However, at the moment, the focus is on the troubles in the Red Sea and Asia as concerns rise about shipping rates and lead times to Europe.
In Colombia, coffee will start flowing again in March when the spring crop kicks in.
Currency & Macro Outlook
The US Federal Reserve – held rates unchanged for a fourth straight meeting while signalling its openness to cutting them. This resulted in GBP/USD hitting a two-month low and EUR/USD write up a 12-week low.
The dollar’s strengthening to the Brazilian real is influencing the devaluation of coffee prices.
