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 03/06/2024
This report covers the period from Monday 27th May to Friday 31th May and was written by Mantvydas Trainavicius
Coffee Market
NYC Arabica market was closed on the 27th of May due to (Memorial day), so we opened the week of trading on Tuesday 28th of May with a round level of 220.00usc/lb (Jul2024 Terminal month). The day kicked of with a rally and closed at 230.95usc/lb, being pushed up by funds going long. The market was up and down on Wednesday and Thursday but still with an upside trend. On Friday, like a lot of Fridays on trading, showed a bit of character and, most importantly, high activity, which pushed the market to 222.35uss/lb, so this sell-off put us back nearly where we started the week.
The London Robusta market was closed on Monday too, but the picture of the week was rather bullish. Although the market dipped on Friday, it got support and closed at 4120usd/mt (Jul2024 Terminal month) with a total of 226usd/mt gain from beginning of the week.
Let’s see if both markets continue their downtrend focus since last Friday.
COT & certified stocks
↑ Non-commercials increased their net long by 2,410 lots to total 43,787 net long.
↑ Friday’s (31/5) Arabica certified stock level: 784,771 bags (10,085 bags increase from the Tuesday (28/05).
↑ Arabica pending grading (Friday 27th): 28,069 bags
Origin
Vietnam—According to The Ministry of Agriculture in Vietnam, the coffee crop will fall by 20% due to adverse weather. They have also estimated that the dry season will arrive earlier than usual due to climate change. Vietnam has already been experiencing above-average temperatures and low rainfall, and reservoirs are said to be at very low levels.
Coffee Network (Bogotá)- Peru shipped 847,100 bags of 60-kg in January-April, more than twice as much as the 362,800 bags in the same period a year earlier, according to information from the import-export data company Veritrade. The increase in exports reflect growers selling retained beans awaiting an increase in coffee prices, the coffee and cocoa chamber told Coffee Network.
Challenges in Colombia, CBB (coffee berry borer) poses a major concern due to its potential to damage beans, reducing both the quality and yield of the harvest. Coffee-growing regions such as Antioquia, Huila, Tolima, and Caldas are particularly vulnerable due to favourable climatic conditions and extensive coffee production. Currently, farmers are experiencing a significant increase in CBB infestations, exacerbated by climate change and prolonged dry periods.
Currency & Macro Outlook
The ECB chief economist Philip Lane quoted on Monday that, “The subsequent pace of rate cuts will be slower if there are upward surprises to underlying inflation and the level of demand and will be faster if there are downward surprises”.
According to the industry data, the UK retail sales bounced back in May after an April slump possibly caused by Easter timing and bad weather, while shop prices indicated the weakest inflation in nearly four years.
From early April through to mid-May, U.S. economic activity continued to expand, but firms became more pessimistic about the future with weakening consumer demand & inflation increasing modestly, a U.S. Federal Reserve survey showed on Wednesday. Central bankers are debating how long to keep interest rates at their current levels.
USD currency had a bit of movement during the week but finished the week at similar levels as it began versus pairs like EUR and GBP. Meanwhile, USD has been strengthening versus BRL (Brazilian real) from 5.17 at the beginning of the week to 5.20 on Friday.
Coffee Market Report 27/05/2024
This report covers the period from Monday 20th May to Friday 24th May and was written by Henry Clifford.
Coffee Market
The July terminal opened Monday at 205.90 c/lb. We had spent much of the week prior sub 200 c/lb and some people were already beginning to say that we were in a new range straddling the 200 level. That, was not to last. Monday was a fairly narrow daily range but Tuesday saw the bulls come to town and we closed at 217.20 c/lb, a chunky 10.20 c/lb higher than the day’s open. What unleashed the bulls? Generally speaking, we are in a positive macroeconomic environment with US stocks at all-time highs and Soft Commodities roaring ever higher (read here for an interesting update on what’s going on in Cocoa). However, this sudden move was mainly technical with the speculators coming in to add to their long position. The days that followed were not as large in their ranges as Tuesday, with Wednesday nudgeing up further, Thursday retraceing, and Friday settling at 218.25 c/lb, 12.35 c/lb higher than Monday’s open.
Robusta is still trading at very high levels (3,806 $/mt) and this is providing support for Arabica. That said, the beginning of the Brazilian Arabica harvest is showing indications of good supply, according to the 2nd Coffee Crop Survey for 2024, published by Conab (the National Brazilian Organisation who monitors harvest volumes), the expected crop for Arabica coffee in Brazil is 42.11 million bags, representing a 5.9% increase in the performance of Brazilian plantations and a higher production per hectare. However, it seems there will be less of the bigger SCR 17/18 beans available-if you are a fan of big beans, worth noting the gap between pricing for that and 16+ might widen this year.
COT & certified stocks
↓ Non-commercials reduced their net long by 238 lots to total 41,377 net long.
↑ Friday’s (24/5) Arabica certified stock level: 774,716 bags (14,333 bags increase from the Monday {20/5} figures down since last week). We were sat around 250,000 bags entering 2024 so there has been a healthy uptick in the last 5 months.
↓ Arabica pending grading (Friday 24th): 22,200 bags
Origin
Central Americans in March and April still had a great deal of coffee to sell and it showed in the differentials being offered with a return of single digits for commercial SHBs and SHGs. Some of these offers looked too good to be true, and it seems many people thought so, as Nicaragua and Honduras sold out very quickly, closely followed by Guatemala. All eyes are on Peru now, and it will be interesting to see if we observe an uptick in differentials there driven by the Central American sell-out.
Currency & Macro Outlook
Only a month ago Pound Sterling and the Euro were fareing very differently to the Greenback sitting at around the 1.23 and 1.06 levels. They have both since strengthened to 1.27 and 1.08 respectively and this is providing a welcome impact on £/mt and €/kg pricing for UK and European roasters.
How and when the BoE and ECB cut rates could dampen further rises, as it seems they will be one step ahead of the Fed in this regard: slower to increase rates and quicker to slash them over this side of the pond!
Coffee Market Report 20/05/2024
This report covers the period from Monday 13th May to Friday 17th May and was written by Jack Ravenscroft.
Coffee Market
Predictably, the gentle meanders of last week reported by Philip Searle came to a swift end with July ’24 quoted between 192.75 and 207.15 across the week. The peak came from a stern market rally on Friday with the C market closing at 206.60, gaining 870 points during the days’ trading. Perhaps the generally brightening macro backdrop helped the market shake off some midweek apathy?
Weather continues to play a key role in market dynamics. The Brazilian arabica harvest has started in many regions and will pick up pace in the coming weeks. Itaú BBA maintained their harvest estimate for the 2024/25 Brazilian crop at 69.4 million bags. Weather conditions seem agreeable for now. However, as the Brazilian winter approaches, the market will continue to monitor any forecasted cold fronts. Any potential frost concerns will cause increased volatility.
Certified stocks have risen to above 750,000 bags, with an increase in certified stock usage over the first two weeks of May totalling 35,000 bags. As per last week, this bearish signal is offset by the uncertainty in Vietnam that continues to prop up the Arabica market.
COT & certified stocks
↓ Non-commercials reduced their net long position to 40,005.
↑ ICE Arabica certified stock levels increased to 760,383 bags.
↓ Arabica pending grading: 34,993 bags
Origin
Ethiopia
Financing constraints in Ethiopia mean high-quality lots are scarce. This is a product of new regulations mandating cash payments to farmers and brokers before coffee is moved to Addis. This has been compounded by recent high prices in the Arabica market prompting most of the coffee already in Addis to be sold. As such, local prices are on the rise.
The Red Sea crisis continues to have implications on logistics across Africa, with reported container shortages and increased costs from some shipping lines. This fear is reflected in the uptick of the Drewry World Container Index in recent weeks. Due to the scarcity of 20ft containers in Addis, shippers have started employing 40ft containers to ship their cargo.
Brazil
Sticking to the same theme, logistical problems are also on the rise in Brazil. In the month of April, 80% of container ships due to export coffee from the Port of Santos suffered schedule changes and / or delays. Furthermore, only 11% of shipments had a gate opening period of more than 4 days for the Port of Santos. This figure is the lowest number since the survey began 18 months ago.
“Brazilian exporters continue to face intense logistical challenges, with the high rate of ship delays and the lack of space at the Santos port, resulting in inefficiencies and adding significant extra costs to coffee players” comments Eduardo Heron, technical director of Cecafé.
Currency & Macro Outlook
The USD struggled to find direction last week. A recent US inflation report suggested some cooling, leading to optimism about potential interest rate cuts. Despite this, the US dollar index saw some weakening over the past week.
GBP/USD climbed close to a two-month high, with the uptick in the currency appearing to be linked to a modest repricing of Bank of England interest rate cut bets.
EUR traded sideways on Friday, following mixed comments from European Central Bank officials.
Coffee Market Report 13/05/2024
This report covers the period from Monday 6th May to Friday 10th May and was written by Phil Searle.
Coffee Market
At the start of the week, we experienced more domination by the specs and witnessed some spec selling pushing the market down to 195.20c/lb – interesting to note that this was a very similar level to where they all became trigger-happy and pumped the market.
The rest of the week, we meandered gently (for once) over the hump of the 200 level. The recent fund liquidation appears to have come to an end and the industry has its sights on Vietnam’s rainfall, the harvesting of Brazil’s crop and if there are changes to the crop forecasts which were issued around flowering time.
Certified stocks continue to increase, this should technically put downward pressure on the market but the dire situation in the robusta market is one of the main reasons for the arabica remaining steady.
COT & certified stocks
↑ Non-commercials reduced their net long by 5,633 lots to a total 43,343 net long.
↓ Today’s Arabica certified stock level: 682,306 bags (4,652 bags drawn down since last week)
↑ Arabica pending grading: 94,734 bags
Origin
Vietnam’s weather remains a main factor affecting coffee prices. According to the latest reports, 40% of the coffee trees in Dak Lak, which represent one-third of the coffee production, haven’t received enough water, and the province this month has received precipitations 50 % lower than last year.
Dryness in Brazil could reduce yields. Similar to Vietnam, Brazil needs water and some rain. Mass hot, dry air continues to dominate coffee-growing areas with no forecast of rain/falling temps.
Currency & Macro Outlook
The Bank of England left its key rate (the key interest rate) at 5.25%. This remains at a 16-year high and it has been ‘stuck’ here for six consecutive meetings.
So that we don’t have all negative news to read, the UK economy grew stronger than expected in q1, leaving the small recession it founds itself during the back end of last year.
