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.
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Coffee Market Report 31/07/2023
This report was written by James and covers news from the period Monday 24th July to Friday 28th July.
New York Coffee Market
Following the upturn at the end of last week, Monday continued the trend which had us all thinking the ‘black bull’s in town’ as the market hit the weekly high of 165. It cooled off before close, however, and ended up at 163.3 c/lb fuelled in part by speculative short covering. The net short position last week stood at 16,274 which had been building for a few weeks as speculators hoped the bearish run would break the 155 c/lb support level. Midweek trading remained steady, before promising news concerning Brazil’s 2024 crop drove the market down to its weekly low of 157.75 c/lb, closing marginally higher at 158.2 c/lb.
COT & certified stocks
⇩ COT cut off 25th of July: Non-commercials decreased their Net Short position by 1,404 to 14,870.
⇩ ICE Arabica Coffee warehouse stocks: 528,752 (-3,771 bags from last Monday).
– ICE Arabica Lots pending grading: 0
Origin
Cooxupe in Brazil held a conference last week, where agronomists from Lavras University reported better than expected vegetation growth along with a high number of knots in the branches of coffee trees they observed. All their findings so far point towards a better 2024 crop for Brazil. However, the internal flow of coffee remains quiet as producers are reluctant to sell, hoping for a rally to secure better prices.
In Ethiopia, the data for coffee exports for the fiscal year was recently announced with a total value of 1.33 billion USD which fell short of their expected 2 billion USD. This is likely due to the declining price of coffee internationally as well as contract cancellations due to lack of demand in destination countries. Authorities have revised their estimates for 2023-2024 fiscal year in response.
Currency & Macro Outlook
It’s all about central banks this week – the Feds kicked things off by raising interest rates by 25 bps to the 5.25-5.50% range on Wednesday. The European central bank then raised its deposit rate for the ninth time in a row to 3.75% – the highest level since 2000. Now the Bank of England is expected to raise interest rates by 25 bps to 5.25% on the 3rd of August, however, a repeat of last time’s 50 bps rise is still on the cards as the UK lags behind other large economies on core inflation.
The results of all of this activity looked much like a heart rate blip for the GBP:USD and EUR:USD – both briefly rallying before the announcements, falling sharply on Thursday before stabilising by the end of the week.
Coffee Market Report 24/07/2023
This report was written by Jack and covers news from the period Monday 17th July to Friday 21st July.
New York Coffee Market
The recent trend continued as the week began with a bearish run. The market opened on Monday at 159.85 cts/lb and fell to a weekly low of 155.05cts/lb on Tuesday 18/07. Despite coffee volumes remaining low in warehouses, the market continued to be pressured by the Brazil crop and sat between 155cts/lb and 160cts/lb through most of the week. However, repeated resistance at 155cts/lb finally yielded more of a spark as the market jolted upwards on Friday 21/07, closing at 161.80cts/lb. Continued high prices of Robusta may be a bullish factor in driving further interest in the “C” market in weeks ahead with prices trading near pre-frost 2021 levels.
COT & certified stocks
⇧ COT cut off 18th of July: Non-commercials increased their Net Short position by 2,932 to 16,274.
⇩ ICE Arabica Coffee warehouse stocks: 541,266 (-4,237 bags from last Monday).
⇧ ICE Arabica Lots pending grading: 4,371 (+2,163 from last Monday).
Origin
Weather models continue to indicate firm weather for the coming days in the main production areas of Brazil. According to the extended forecast released by the Oceanic and Atmospheric Administration on 19/07, there is no rain forecast until August. The models also indicate a low chance of intense cold in the production areas for the coming weeks.
According to local sources in Colombia, internal prices may recover, reflecting reports of a poor “mitaca” crop and supply shortages. This trend may be supported by the 30% decline in Colombian coffee imports for the month of June.
Currency & Macro Outlook
The USD remains resilient, as does the BRL, bringing some stability to FX rates for fresh crop offers. W/C 24/07 we will see the impact of more external factors, including the release of the IMF’s world outlook on Tuesday and the Fed interest rate decision on Wednesday.
Despite a marginal weekly decline, GBPUSD remains strong as some commentators are starting to suggest overvaluation at 1.30 levels. This higher valuation of the currency means that fundamentals must outpace expectations in order to justify further strengthening.
Policymakers from the European Central Bank will announce the latest interest rate for the Euro Area on Thursday 27/07. Markets expect a 25-basis point rise, which would take the rate to 4.25%.
Coffee Market Report 17/07/2023
This report was written by Aissatou and covers news from the period Monday 10th July to Friday 14th July.
New York Coffee Market
The New York coffee market opened at 159.85 cts/lb on Monday 10th July and closed on a high note on Friday 14th July at 160.80 cts/lb.
The week started with a bearish run, following the trend from the previous week, hitting a weekly low on Wednesday 12th July at 157.00 c/lb. The harvest in Brazil made steady progress, but sales remained low as producers seem to be waiting for higher prices. However, the market rebounded on Friday 14th July, closing at 160.80 cts/lb. This was driven by short covering and speculative buying. This could see the market go back to 175-180 levels.
There have been no bags graded for exchange in the last week.
COT & certified stocks
⇧ COT cut off 11th of July: Non-commercials increased their Net Short position by 2,819 to 13,342.
⇩ ICE Arabica Coffee warehouse stocks: 545,503 (-320 bags compared to last Monday).
– ICE Arabica Lots pending grading: 2,208 (no change compared to last Monday).
Origin
Even though the temperatures dropped below normal in some producing regions of Brazil, coffee trees were not threatened as temperatures stayed above frost level. We should see warmer temperatures returning gradually and rains have allowed the harvest to follow its development. Cooxupe, Brazil’s largest coffee exporter and the world’s biggest cooperative have reported harvest progress being up 33.3 % from last year in the area.
However, the latest news on El Niño shows potential long-term risk for some crops, specifically in Vietnam. Even though there are no significantly large risks at the moment, Colombia, Uganda and Indonesia are being closely monitored.
Currency & Macro Outlook
According to Richard Hughes, the Chair of Budget Responsibility, high inflation in the UK economy will not help its public finances like it did in the past, because the government debt is more sensitive to fluctuations in interest rates and prices.
The dollar kept weakening throughout the week, with the GBP/USD hitting a 15-month high of 1.3140 on Friday 14th, due to the most recent US inflation data. It’s not just the GBP that made gains against the dollar, as the USD index has also fallen below 100 which hasn’t happened in a long time. EUR/USD has also hit a 17-month high of 1.1244.
Coffee Market Report 10/07/2023
This report was written by James and covers news from the period Monday 3rd July to Friday 7th July.
New York Coffee Market
The New York coffee market held relatively steady last week, opening at 159.90 c/lb on Monday 3rd July and closing at 160.90 c/lb on Friday 7th July, with the market closed on Tuesday 4th July for American Independence Day. The week began following the bearish run from last week before hitting the weekly low on the 6th of July at 155.80 c/lb. Later that day the market rebounded to its weekly high of 163.90 c/lb before edging off slightly and closing at 160.45 c/lb. This upwards momentum was driven by short-covering and not the fundamentals, as an increase of 1,486 lots to a total of 187,067 traded that day confirms shorts were added during the previous session. The market then remained steady on Friday, closing at just 0.45 c/lb higher with a relatively low trading volume of just 24,964 lots.
Cold weather forecasts for Brazil and a weaker USD helped keep the prices up, with the London Robusta terminal also influencing the Arabica market on the 7th which had a change of +111.
COT & certified stocks
⇩ COT cut off 4th of July: Non-commercials increased their Net Short position by 6,584 to 10,523.
⇧ ICE Arabica Coffee warehouse stocks: 545,615 (+1,020 bags compared to last Monday).
⇩ ICE Arabica Lots pending grading: 3,034 (-2,615 compared to last Monday).
Origin
Brazilian Arabica remains in high interest as the market is low and new crop differentials stable. The cold spell in the Southeast region has passed now and temperatures are forecast to increase in the following days. There is another cold front predicted to hit the Southeast later this week but is currently only forecast to hit the coastal regions and should not cause a drastic drop in temperatures in the coffee growing regions. The Brazilian Real has also weakened against the USD in July following a steady increase from the beginning of the year, although this will mean producers will get more of their local currency for the same price in USD now.
Currency & Macro Outlook
The Recruitment and Employment Confederation reported this morning a cooling in pay pressures for the UK Labour market, which should somewhat calm the concerns of continuing core inflation. Jeremy Hunt, the UK Finance Minister, will also announce plans to encourage pensions funds and asset managers to invest in high growth sectors later today (possibly by the time this has gone out!). The U.S. Federal Reserve also agreed to pause interest rate hikes at a recent meeting, meaning we will see a continued federal funds rate of 5% to 5.25% for longer than in previous months. GBP/USD hit a 14 month high on Friday of 1.2849, with the EUR/USD also hitting a weekly high of 1.0973 contributing to a change in the Dollar Index of -0.790.
FX Data
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