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July 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 29/07/2024

This report covers the period from Monday 22nd July to Friday 26th July and was written by James Duncan. 

Coffee Market

After almost a full week of closing lower the coffee market rebounded on Monday 22nd July, closing 5.35 c/lb higher at 243.05 c/lb. There was little commercial activity, with most of the upward movement mirroring the Robusta market. The biggest movement of the week was on Wednesday 24th July when the market tumbled by 7.95 c/lb against open, closing out at 231.15. Arabica also tracked the Robust market on this day too, with most of the movement due to the funds decreasing their long position. The market rebounded slightly on Thursday before settling just above the 230 c/lb on Friday close.

 

COT & certified stocks

Non-commercials decreased their net long position by 2,394 lots to a total of 43,725 net long.

Commercials increased their net long position by 7,873 lots to a total of 92,883 net short.

Certified stocks: 814,801 bags, with 33,355 bags pending approval.

Origin

Risks of frosts in Brazil are passing, with rain now expected in the southeast coffee growing – ending the 90-day drought. All point towards better conditions which may ease any fundamental pressure on the Arabica market.

Concerns remain over the Vietnam Robusta supply for 24/25, keeping volatility high in the Robusta market. These pressures seem to be acting against one another, with the Arabica and Robusta market tracking each other closer than ever it seems.

Currency & Macro Outlook

The US economy surpassed growth expectation in Q2, driven by consumer spending and business investment. The Feds are expected to keep the interest rate in the 5.25%-5.50% range this week, with a cut anticipated for September. The GBP/USD exchange rate continued to fall from its post-election high as the Chancellor’s honeymoon period descended into a gaping £20bn shortfall.


Coffee Market Report 22/07/2024

This report covers the period from Monday 15th July to Friday 19th July and was written by Henry Clifford. 

Coffee Market

The NYC Arabica market opened at 248.25 c/lb on Monday. After the mega day of the 9th of July where the market closed 16.3 c/lb higher than how it opened, talks of 260 c/lb did not seem a ridiculous idea. All ranges that had been talked of 10 days prior went out the window and market watchers were reevaluating. Coffee has been one of the best performing commodities in the last 2 years and therefore is firmly in the crosshairs of the speculators.  

That said, Monday saw a small sell off and we saw the market close 6.1 c/lb lower than it started-save for a marginal increase on Tuesday, the week was a bearish week and although Friday could not close near the daily low of 233.60 c/lb, it did finish trading at 238.20 c/lb. The market has been unable to settle above 250 c/lb but if it does, this might be an indicator we will be at these lofty levels for a little while longer. 

COT & certified stocks

↓ Non-commercials decreased their net long by 3,046 lots to total 47,856 net long. 

↑ Arabica washed certified stock level: 818,230 bags (increase of 12,864 bags on same time last week). Guess how much of these are held in Europe? A whopping 98.32%! The remaining 1.68% are held in the USA at a total 13,718 Bags. This is why EUDR will have such a big impact on this variable. 

↓ Arabica pending grading:19,298 bags. 

Origin

In Brazil, forecasts of the crop currently being harvested were revised down by Safras & Mercado (Consultancy firm) and Rabobank (a bank with a strong pre-finance team in coffee): 3.72% and 3.87%, respectively. The driver? The impact of dry weather and high temperatures at the end of 2023 which has reduced the productivity of the coffee trees. The Brazilian Real weakened against the Greenback, starting the week at 5.45 and closing it out at 5.55. Differentials have remained firm, in spite of the frothy market and increasingly favourable exchange rate.

We are now nearing the end of the most dangerous month in the year for Brazil, where frost is most likely to occur. Thankfully, it is expected that weather conditions will remain stable for the remainder of the month, with no expected Jack Frost risk in the coming weeks. The market is already high so any sniff of some inbound chilly weather in Brazil will only serve to fuel the bulls who are already dominating the narrative. For now, all quiet on the Western Front.

Currency & Macro Outlook

Jerome Powell, Chair of the Fed, commented that the latest inflation readings showed progress, further increasing assumptions that there will soon be an interest rate cut. On Friday Reuters outlined a 98% probability of the first interest rate cut in the cycle to come in September this year. However, after Sunday’s news about Biden bowing out of the race, this may have an impact on the “Trump Trade” and the timing of rate cuts. The Pound strengthened to 1.301 GBP/USD in the middle of the week but settled at 1.292 following the publication of the UK’s latest retail sales figures which was worse than expected. 

The ECB voted to keep interest rates unchanged at 3.75%, but President Christine Lagarde stated that the decision on September 12 remains open, indicating caution in declaring victory over post-pandemic inflation. July has been a good month for the Euro and while Thursday was a slight retracement, it closed the week at 1.088. How the ECB and the FED manage rate cuts will continue to have a very large impact on these key currency pairs.


Coffee Market Report 15/07/2024

This report covers the period from Monday 8th July to Friday 12th July and was written by Priscilla Daniel.

Coffee Market

NYC Arabica market opened on Monday 8th July at 230.55 usc/lb (September 2024 terminal) with a narrow intraday volatility of 5.65usc/lb. But on Tuesday, Coffee futures made new yearly highs in a violent rally that saw prices rise by 18.05 usc/lb. Sep24 traded to a high of 252.35 usc/lb. The other wild session on the week was on Thursday where Arabica futures traded 7.95 usc/lb higher in the first 30 minutes of trading on 2,137 lots of volume, and had reached the day’s high of 255.30, which is 11.75 usc/lb over yesterday’s close. The rally lost traction by the time the U.S. came online and traded briefly into negative territory before settling 1.30usc/lb higher basis Sep24. On Friday Arabica settled 3.90 higher at 248.75 basis Sep24, failing to close below the base of support formed around 243, meaning an early test of recent highs is possible to start next week.

This week we have seen the market trade over 10 cents higher intraday on two separate sessions. There was a 32.20 usc/lb range on the week, with a low established on Wednesday 10 July 2024 at 223.10 and a high on Thursday 11 July 2024 at 255.30. Clearly, the market is concerned regarding the level of inventories in destination countries and will continue to closely monitor export flows from the two biggest producers as we move forward into new crop.

London Robusta market soared this week as tightness in supplies and rising differentials dominate market sentiment. Data today showed coffee exports from Vietnam dropped 11.4% in the first half of the year compared to the same time last year. On Thursday The robusta contract traded to a new historic high today of 4681 Agaisnt September 2024. Overall it was a constant bullish market.

COT & certified stocks

  • Non-commercials increased their net long by 6,081 lots to a total 50,902 net long which is the longest in 13 weeks.
  • Friday’s (12/7) Arabica certified stock level: 805,366 bags and Robusta Certified stock level: 6,065 bags.
  • Arabica pending grading (Monday 15th July): 23,264 bags.
  • The open interest increased by 10,591 lots to 221,963 and with options increased by 22,241 lots to 273,533, meaning new longs have been opening positions as prices have risen.

Origin

The Brazil crop year 24/25 production estimated remains on the high levels. It looks to be the biggest for the past 5 years. According to Stone X 24/25 production: 67 million with 44 million Arabica and 23 million Robusta.

Concerning the actual exports Cecafe summarise a record high of 42.9 million bags of green export (including 8.1 million of Conilon). Exports reached an increase of 73% from 4.7 million bags in 20/21.

Compared to May 24, June 24 exports fell by 18.6% especially due to logistics issues out of Santos causing a slowdown in exports. Overall, concerns in Brazil are around the bean size of the actual crop as dry weather cherries did not mature enough so too many smaller beans. The premium between 14/16 VS 17/18 is 10-15 usc/lb where usually is 3-4 usc/lb)With sieve beans below 17/18, coffee growers demand more beans to fill a bag, which in turn increases the unit cost of production.

CEPEA Even with field activities advancing well in Brazil, the prices of arabica and robusta continue to rise. Cepea researchers indicate that this is due to the tight global supply, especially robusta, and the still low volume from the new Brazilian crop being made available in the national spot – it is worth remembering that producers allocate the first lots to the fulfilment of contracts – support domestic values.

CoffeeNetwork (New York) – The latest data from the Vietnam Customs Authority showed that the country exported 1.17 million bags in June, down 11.5% from the same month last year. This brought cumulative exports for the first nine months of the current October 2023 to September 2024 coffee year to 20.94 million bags, a decline of 6.66% from the same period of the previous coffee year.

Coffee Network (Bogota)- Preliminary coffee inventories in Colombia increased to 1.062 million bags of 60 kg in June, up from 1.037 million bags of 60 kg in May, and higher from a revised 978,000 bags in April, according to figures provided by the Coffee Growers Federation. The increase in inventories is the result of rising production in June. Colombia, the world’s third-largest producer, produced 1.172 million bags in June, up by 23% from the same month last year when it produced 956,000 bags of 60 kg, the coffee growers federation said.

Currency & Macro Outlook

Weak US dollar following the publication of the latest US consumer price index. The weaker-than-expected inflation figures stoked Federal Reserve interest rate cut speculation, with the US dollar plunging as the odds of a September cut jumped to around 85%. The pound, meanwhile, was supported on Thursday by stronger-than-expected UK GDP figures. UK economic growth accelerated from 0% to 0.4% in May. Beating forecasts for a 0.2% expansion and further dampening bets on a Bank of England (BoE) interest rate cut in August.

Below the In the FX market on Friday 12th July 2024, GBP/EUR hit a 1 year 11 month high of 1.1914. GBP/USD hit a 51-week high of 1.2993. EUR/USD hit a 38-day high of 1.0911 and opened today at 1.0886. This level is confirmed by a weak US Dollar.


Coffee Market Report 08/07/2024

This report covers the period from Monday 1st July to Friday 5th July and was written by Jack Ravenscroft.

Coffee Market

As seems to be the recent trend, the arabica market consolidated between 220-235 across the 4-day trading week, testing both the lower and upper limits of this range. Prices opened lower on Monday with sellers coming in early with good volume. The low of 219.20 was short lived, with the market closing 1.95 cts down on 224.85 at end of day. There were similar swings on Tuesday with a 9.65 cts trading range. Wednesday cooled off in anticipation of market close on Thursday. Trading volumes were at their weekly lows and relatively constrained at (just!?!?) a 4.65 cts swing.

The Arabica market was closed on Thursday, 4th of July, for the American Independence Holiday. However, the Robusta market remained open and the 2.28% rise, driven by uncertainties over the supply of Vietnam’s crop due to the weather, prompted the arabica market to open strong when trading began on Friday. There are clear signals that some robusta demand is being redirected to arabica. The market closed at 228.95 on Friday afternoon, just a 0.94% gain from the preceding Friday.

COT & certified stocks

↑ Arabica Certified Stocks: 811,359 bags – an increase of 3,999 bags

↑ COT: 52,575 bags – an increase of just under 4,000 bags

Origin

In Brazil, there seems to be limited frost risk in the weeks ahead. A reduction in rain should also see positive conditions for the continued harvest. Cecafe will publish their export date for June next week, giving us an idea of fresh crop flow. These figures should also expose the extent of the container shortages and logistical delays at the port of Santos. The weather is slightly less promising in the north of Brazil.

Heavy rains in the short term will impact the harvest in Peru and Colombia (mitaca). There are also anecdotal reports of wet weather promoting leaf rust in Honduras. 

Currency & Macro Outlook

A big week for elections in Europe. Sir Keir Starmer led the Labour party to an overwhelming majority in the UK Election. Despite a slight upward trend, the response from the pound was relatively muted. It seems the market had already priced in the landslide victory ahead of time given the consistent polling in the build up to Thursday’s vote.

In France, the left-wing NFP alliance has eased fears that the far-right National Rally will win a clear majority in the second round of voting on Sunday, hence boosting the Euro at the beginning of the week. However, the possibility of a hung parliament or an RN outperformance could see the Euro slump back next week.