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February Coffee Market Report

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 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.