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 01/07/2024
This report covers the period from Monday 24th June to Friday 28th June and was written by Phil Searle.
Coffee Market
Unlike England’s cricket team, we saw some big swings in the market. On Monday, the market closed 11.25 higher and on the following day, 6.95 lower.
On Wednesday, we saw the market holding near the low of the 21-day SMA. This movement did tease the industry that the market could move lower as prices held just above last week’s low—but you guessed it….we went back up.
On Thursday, we saw a drawdown of certified stock, which motivated the buyers into the early morning trading session.
Friday seemed like most of the industry had their sights on World of Coffee as volumes stayed towards the low side. Minimum temperates are forecasted to reach 10c in Brazi, the mere thought of this is holding back any specs to go short – perhaps being above 200 is the new norm?
COT & certified stocks
↓ COT: Non-Commercials at 47,713 lots long, reduction of 1,667 lots
↑ Arabica Certified Stock level: 807,394 bags – an increase of over 30,000 bags compared to last week
Origin
Protests have been seen throughout Kenya. The cause of this is the new finance bill, which the Kenyans are against. However, the government didn’t take much notice and forced the bill through parliament. The worst part about this whole situation is that lives have been lost as police intervened to disperse the protestors—let’s hope this all settles down peacefully.
Brazil—Harvest is estimated to be 40% Arabica and 74% Conilon. South Minas 38%. Zona da Mata 45%. Cerrado 30%. São Paulo 48%. Espírito Santo 72%. Bahia 70%. Demand continues to outpace producers, keeping the differentials elevated.
The Brazilian Real (BRL) was weak against the US Dollar (USD) throughout the period, focusing on Brazil’s stubbornly high fiscal debt burden and the government’s strategies to tackle this.
Currency & Macro Outlook
ECB policymaker Francois Villeroy de Galhau expressed confidence that inflation will reach the 2% target next year despite potential data fluctuations. The Central Bank recently cut interest rates for the first time in five years, and future rate cuts will depend on upcoming inflation data.
Revised official data on Friday showed the UK economy exiting the recession faster than expected in Q1 of this year. However, the overall economic situation remains fragile ahead of next week’s election.
Two European Central Bank policymakers stated that the central bank might gradually reduce interest rates if inflation decreases as anticipated. Although the ECB cut rates in June, it hasn’t committed to further actions.
Coffee Market Report 25/06/2024
This report covers the period from Monday 17th May to Friday 21st May and was written by Guus Bremer.
Coffee Market
Thursday, the 20th, was First Notice Day for NY arabica JUL-24 contracts, and those who didn’t want to fix the buy side this ‘high’ rolled into September, also showing the most volume. Tuesday reached the week’s low at 223.05 against a high on Thursday at 236.25, a range of 13.6 cents.
Continued fundamental issues in Vietnam are making the RC (robusta) structure vulnerable. This resulted in a whopping high of 4505$/MT on Friday. Arabica was playing catch-up.
Coffee has been hovering at or near 60,000 net long positions for the past several weeks and has continued to be very near its highest level for the past 52 weeks.
The higher-grown (better-quality) Central American coffees are selling out fast in origin for the remainder of 2024 and seem to be drying up in inventories held in US and EU warehouses.
COT & certified stocks
↑ Certified stock increased to 831.595 bags on Friday (of which 84% is transition stock: defined as non-EUDR compliant stored in EU ports with a bill of lading on or after June 29, 2023 and prior to December 31, 2024). That’s up 23,528 bags since Friday 14/June, and an increase of 66,232 bags over the last month
↑ Arabica pending grading: 41,036 bags
↓ Commercials decreased their long position by 25,865 lots to 48,654 lots
↓ Commercials decreased their short position by 26,635 lots to 143,730 lots.
Origin
Colombian Mitaca harvest flow in the coffee axis is coming to an end, and the main crop will start in September. Differentials remain firm, with the transition to la niña (wet period) and lower yields due to insect-damaged beans being the main challenges.
The harvest in Peru is gradually picking up the pace, with 20% underway in central (Junín, Huanuco, and Ucayali) and 35% complete in the north (Amazonas and Cajamarca). The mid-low lands have favourable weather for coffee drying, and the highlands have beneficial rains. Internal prices seem undervalued and so are bound to move upward, especially now that Honduras is sold out for the rest of the year for decent qualities.
Accelerating on the back of dry weather, the Brazil harvest is underway at about 30-35%. Producers have been using slower drying and processing methods, which favours the quality but also explains why there’s little coffee available for trading. The peak will be July/August where a daily input of 60k bags can be reached. The current crop is seen at (just) 22% sold. Due to a screen size issue, grinders are relatively well-priced at the moment.
Currency & Macro Outlook
The Brazilian real keeps losing strength against the USD, showing one of the worst-performing currencies, quoting between R$5.39 and R$5.48, which hasn’t seen that high since 4th Jan this year.
The Bank of England (BOE) left the interest rate unchanged at 5.25% as expected, but the probability to cut in August are now higher (44% chance).
Coffee Market Report 17/06/2024
This report covers the period from Monday 10th June to Friday 14th June and was written by James Duncan.
Coffee Market
Overall, the market stayed relatively stable this week – opening at 225 c/lb on Monday 10th and closing out at 224.15 c/lb on Friday 14th. Stable is not always expected though; with the market falling for three consecutive days and testing the 220 c/lb support, many expected it to break through and test the next support – perhaps even reach lows of 200 c/lb. Any bearish momentum was arrested on Wednesday, where, after hitting a weekly low of 215 c/lb, the market rallied all the way up to 227.35 c/lb before closing at 224.35 c/lb. The market then tested 230 c/lb to no avail and closed out the week just 0.85 c/lb lower than the weekly open.
This week saw relatively strong volume in the July terminal, with many traders switching over to September positions. As of close on Friday, traders will have just two sessions left to square their July position before deliveries begin on June 20th. The market will be closed on 19th July for Juneteenth public holiday in the USA.
COT & certified stocks
↑ Commercials increased their long position by 6,550 to 74,519.
↑ Commercials increased their short position by 3,131 to 170,365.
Origin
According to Cecafé, Brazil coffee shipments from July ’23 to April ’24 totalled 39.25 million bags, an increase of 28% year over year. According to the same source, Brazil is also on track for a record-breaking 4.4 million bags exported in May ’24. The USDA currently predicts 69.9 million bags for total Brazil coffee production in the 24/25 crop.
Coffee exports in Uganda increased to 553,000 bags in May, a rise of 41.6% month on month or 22.1% year on year. The south harvest is taking place currently, after which we will receive a firmer picture of the total yield for ’24.
Currency and Macro Outlook
The USD closed stronger last week as a volatile market saw investors flocking to the safe currency. Part of the news fuelling the fears came from the US itself, as it is expected that the Fed will only make one interest rate cut this year – leaving questions about economic growth as the US tries to bring down inflation.
Political instability in France, bolstered with the news of a snap election, has caused the Euro to stay on the back foot – with the single currency suffering its worst weekly losses for the year. The pound sterling faced similar pressure this week, with unanswered questions of the country’s economy after the election keeping the currency volatile.
Coffee Market Report 10/06/2024
This report covers the period from Monday 3rd June to Friday 7th June and was written by Hannah Wakefield.
Coffee Market
June kicked off with some long awaited sunshine and a, perhaps, less-needed rally in the NYC. Coming off the back of a bearish close to the previous week, it opened on Monday 3rd at 219.95 c/lb, and headed skyward, hitting highs of 228.05 c/lb, before closing at 225.50 c/lb. The first four days of the week saw the same pattern, closing higher than open, having hit an even higher high during the course of the day.
The highest level of the week was hit on Thursday 6th June, at an eyewatering 238.70 c/lb. We haven’t seen levels like this since April where a bull run took us through the 200 c/lb level to highs of 243 c/lb. This volatility was driven by concerns over weather in Brazil and Vietnam, creating uncertainty over future supply for both Arabica and Robusta.
Friday, June 7th, saw things ease off. The market hit its weekly low of 219.05 c/lb and closed at 220.90 c/lb, less than 1 c/lb higher than the open of the week. Weather concerns were calmed, and reports of the accelerating harvest in Brazil gave reassurance to future supply.
Overall this week was volatile, but the market remained high throughout, something that seems to be becoming a trend over recent weeks.
The London Robusta market followed a similar trend, opening at 4,121 $/mt on Monday 3rd June, heading upwards until Thursday 6th June, with a high of 4,528 $/mt, almost breaking another historic high for robusta. The highs eased on Friday 7th June, closing the week at 4,275 $/mt. A lack of supply, plus a slow pace of exports out of Vietnam (the world’s biggest producer of robusta) are keeping the market at these staggeringly high levels.
COT & certified stocks
↓ The commercials decreased their long position by 1,808 lots to 60,881 lots.
↑ The commercials increased their short position by 1,116 lots to 92,529 lots.
↑ Friday’s (31/5) Arabica certified stock level: 799,038 bags (14,267 bag increase from Friday 31/5)
↓ Arabica pending grading: 26,883 bags
Origin
Due to very dry weather over the last year in Colombia, brought about by El Nino phenomenum, the screen size of the crop is smaller than usual as there was not enough rain for the beans to develop. This means that the availability of Supremo (screen 17/18) has been seriously impacted. El Nino has recently transitioned into La Nina, which means for Colombia heavy and irregular rainfall. This is happening whilst the harvest is underway, which makes drying the coffee difficult and may have an impact on the quality of the crop.
Fears over the future of the robusta crop in Vietnam continue to keep the market high. The weather is excessively dry, as a result of El Nino, and specualtors are fearing another small crop. Some reports suggest that the 24/25 crop will be the lowest in 13 years.
The harvest is currently underway in Brazil, and accelerating, which will help ease supply concerns. As of 4th June, it was 29% complete, above the five-year average of 27% at this time of year. There were some concerns about a lack of rain in Brazil, although they have softened slightly as Minas Gerais (where 30% of Brazilian coffee is grown) received 25.6mm of rain the week 27th – 31st May, which is 135% of the historic average.
Currency & Macro Outlook
During the reporting period we saw a USD rally, increasing the strength of the Dollar. This was driven by the release of employment figures showing growth in both employment levels and payroll which were unexpectedly high. This eased fears that the US job market is “cooling” and push the value of the USD higher. The DXY reflected this, and was close to 105 at the close of the week.
GBP remained steady, trading between 1.27 and 1.28 against the USD all week. However, the latest UK jobs report is due to be published on Tuesday 11th June, and depending on the results, the value of Sterling, as with the USD, will very likely be affected. If the report reveals that unemployment levels have increase, for example, we expect the value of GBP to drop down.
