November 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 02/12/2024

This report covers the period from Monday 25th November to Friday 29th November and was written by Phil Searle.

Coffee Market

How does coffee currently relate to Pamplona? They are both famous for their bull runs!

The market continued to surge Monday through Wednesday to a 47-year high (the market was closed Thursday—Thanksgiving). The rally was fuelled by a basket of trade hedge lifting and end-of-the-month roaster fixations. Origin continued to hide in the dark, aiming to stay as flat as possible.

Following the close on Wednesday the ICE U.S decided to throw more fuel to the fire, increasing the IM (initial margin) by $917 to $8,095 – this will result in an additional $179 million required by anyone participating. For those unfamiliar with IM this is the initial funding required to hold a futures position.

Friday brought relief to most of the industry who were net short in the market by closing lower for the first time in six sessions. Over the week the market climbed 17.45c/lb and $424 in robusta.

Let’s hope for a calm market, or I’ll be booking my flight to Turkey for a hair transplant!

COT & certified stocks

↑ Non-commercials increased their Net Long position by 8 lots to total 40,747 Lots Net Long

↑ Commercials got even shorter. 2,416 added to make 97,547 lots Net Short

Origin 

Cecafe’s preliminary data indicates that Brazil shipped 3.2 million bags of green coffee in November, an increase of 600k compared to October.

Heavy rains continue across most coffee producing regions in Indonesia. Warm periods of rain and storms are forecasted for this week. This has resulted in a delayed arabica harvest and drying activities. Without wanting to finish on a bad note, there are reports of good flowering for the upcoming harvest.

Vietnam faces a similar situation to Indonesia with delayed harvest activities. Apparently, only 15% completed to date. If rains continue, we will see a further delay – not a great situation given the amount of rolls exporters have done from the last crop.

Growing volume of FAQ and Grinder qualities are dominating the auctions in Tanzania as we approach the end of the season. Diffs remain soft given the market.

Currency & Macro Outlook

The US economy grew 2.8% in Q3, driven by strong consumer spending. October’s spending surpassed expectations. However, ongoing inflation and the possibility of tariffs under the incoming Trump administration could limit the Federal Reserve’s capacity to lower interest rates further.

The £/$ slowly made its way to 1.27, marking this week’s high. It’s a tough market out there, with the US showing steady growth, while the UK’s confidence hit a two-year low due to higher employment taxes and wage increases and pressure on low-margin businesses.

Coffee Market Report 25/11/2024

This report covers the period from Monday 18th November to Friday 23rd November 2024 and was written by Jack Ravenscroft.

Coffee Market

The bull run continues. As we shifted to the Mar ’25 terminal, the arabica market increased by 21.80cts/lb following a 28.45cts/lb run the week prior. Just 2 weeks ago, we were trading at 256.00, almost 20% below the current level. We are now above the $3 line for the first time since 2011.

On the fundamental side, uncertain news in the arabica market supported the upward trend. StoneX released their first preliminary report for the 2025/26 Brazil crop estimate. Despite an almost unchanged YOY ~ 65 million bag forecast, they have forecast arabica production to fall by 10% with Brazil conilon making up the deficit. However, as snow begins to fall in the UK, both of Dave Behrend’s recommendations are worth considering. November crop forecasts should always be viewed with some scepticism and a fuller picture will be available with January flowering.

Bad weather in Vietnam has continued to hamper the robusta harvest. Oct – Nov export figures have fallen below the 5 year average. Moving into Dec – Jan, we should see exports step up which will reveal the true size of crop and sales. Despite a long-term upward trend, the London rally has failed to keep pace with arabica. 2 months ago, arabica pricing was 107% of robusta. Today, levels are closer to 130%. This could easily be interpreted as a bullish factor for the robusta markets in the short term. Equally, it could be a return to 20-year arbitrage average of 176%.

Speculators continue to pile into the arabica bull market. At 280cts/lb, the specs still have over 5k lots of buying power based on historical figures, providing plenty of upside even as we break through the 300cts/lb mark. The market also sits right at the top end of the 6-month trend channel and continues to display high levels of momentum. A breakout above this channel in the coming weeks could see some short-term upside turbulence. On the bearish side, the market moving average is above RSI and as such, looks overbought.

The EU council released a statement last week ‘reconfirming’ their plan to extend the EUDR application to 30th Dec 2025. Many actors thought there could be a sell off if the EU Parliament voted to delay EUDR by 12 months, but it seems the decision has had little immediate impact.

COT & certified stocks

↑ Non-Commercials increased their net long positions to 40,747

↑ Commercials increased their net short position to 97,547

↑ Certified Arabica Stocks increased to 893,325 bags

Origin 

Despite the market rally, differentials continue to hold firm. This is contrary to what we would expect in such a bullish market.

In Brazil, the lack of bean development during the dry period means larger screens are still trading at a premium. It seems Brazilian producers are happy to hold if they can’t find buyers at current levels. Despite this, export figures remain high as Santos plays catch up with shipping delays.

In Central America, heavy rains in Costa Rica and Colombia during the harvest present a quality risk. This seems to be priced in to current differentials. As Henry mentioned last week, the reduced harvest in Peru drives purchasing into the upcoming Honduras crop that will be tight on supply.

Currency & Macro Outlook

The greenback continues to show strength in the markets as investors pile into the currency safe haven. This sentiment was underpinned by a rise in US treasury yields midweek. In the same breath, the Brazilian reais continues to soften. The coffee market seems to be ignoring these typically bearish factors.

The pound faced heavy pressure on Friday as retail sales fell 0.4% further than estimates off the back of higher public borrowing figures earlier in the week. Bank of England policymakers Clare Lombardelli and Swati Dhingra are due to speak early next week.

In Europe, ongoing fears around the Russia Ukraine escalation weighed heavy on the currency through the week. This was compounded on Friday by sluggish PMI results and disappointing GDP readings for Germany in Q3.

Coffee Market Report 18/11/2024

This report covers the period from Monday 11th November to Friday 15th November 2024 and was written by Henry Clifford.

Coffee Market

The New York Arabica market opened on Monday 11th November at 253.35 c/lb. Little did we know that the week would close out a whopping 28.45 c/lb higher at 281.80 c/lb. It’s not often we see a weekly increase of over 10% in the coffee market, especially at the frothy levels we are currently sitting at. You may rightly be asking yourself, what is going on?

Coffee is following a broader macro trend following the US election result with a heavy lean towards a risk on approach. Some members of the speculative community who were keeping their powder dry, having emerged from the shadows and are investing heavily in coffee (other markets have soared even higher, check out Bitcoin if you want to see a bigger bull). Coffee has been one of the best performers of late and the specs are piling in.

That said, this is not just a story of the specs. Arabica was put under pressure from its cousin Robusta, which has also had a big rally. While Robusta is surging, it’s difficult to see a big dip in Arabica occurring. Weather in Brazil continues to play a bullish role in the narrative and the vote by the EU Parliament on whether or not to postpone the infamous EU Deforestation Regulation (EUDR) stole the headlines.

Unfortunately, the risk of a fudge happening in Brussels is becoming more and more likely. On Thursday, the European Parliament voted on whether or not to delay EUDR, but The European Union’s assembly endorsed amendments put forward by its biggest political group, the European People’s Party, to soften the regulation. The market thought it was going to be a simple delay, but now there are extra demands in addition to the 12-month delay proposed by the European Commission, and the situation has become even more complex.

The result of this new proposal starts a longer voting process. The original commencement of the regulation was December 30th and although this still might happen, the industry will have to be EUDR ready either way as some containers are afloat headed to the EU and if there is no delay in the legislation and they are not compliant, they will not be able to clear customs. Many actors thought there could be a sell off if the EU Parliament voted to delay EUDR by 12 months but their actions have added more uncertainty to a fragile market.

COT & certified stocks

↑ Non-commercials increased their net long by 3,581 lots to total a Net Long Position of 40,739 lots Net Long.

Origin

This week, we are featuring Honduras and Peru, two origins that are more intertwined than you may think. Due to the seasonality of coffee harvesting, many roasters use coffee from Honduras for one-half of the year and then swap it with Peru for the second half of the year to have the freshest coffee possible. This dynamic is most pronounced in the certified coffee market, particularly for organic coffee. This year, the Honduran harvest finished much quicker than expected and many shippers could not fulfil their contracts. Some defaulted, and those that were able rolled the contracts to Peruvian coffee. This meant that the Peruvians were on the back foot from the start, as there was more demand than usual. This wasn’t a problem till the Peruvian harvest finished sooner than expected, and the volume of coffee predicted did not match what actually came in. We are now seeing in Peru what we saw in Honduras earlier this year and guess what origin is now being put forward as an origin that can fulfil the Peruvian contracts that could not be shipped? You guessed it, Honduras! Let’s hope this next harvest in Honduras is more straightforward than the last!

Currency & Macro Outlook

Coffee trended downwards in the second half of October while the US Dollar strengthened. Unfortunately, that correlation no longer held going into November, and as the Coffee Market continued to soar, so did the Greenback, with the US Dollar Index starting the month at 103.80 and strengthening to 106.4.

That said, last week we saw a slight pullback of the Dollar with the Euro in particular regaining some value. The strong negative correlation between the world’s most-traded currency pairing, coupled with upwardly revised Eurozone growth forecasts from the European Commission, helped the single currency recoup some of its recent losses. However, this Euro strength may be short lived if ECB President Christine Lagarde outlines that more interest rate cuts may be required.

However, the gains have not made a sizeable inroad into the losses already observed, and the Pound Sterling and the Euro are trading at 1.262 and 1.056, respectively.

On Friday, the Pound came under pressure following the release of the UK’s latest GDP figures: preliminary figures for the third quarter reported growth slowing from 0.5% to just 0.1% amid the uncertainty posed by the Labour government’s first budget. If the US Dollar stays where it is and the coffee market also stays where it is, we will be in a high coffee market and strong US Dollar environment, the worst combination for GBP/MT or EUR/KG warehouse pricing. Is coffee having its version of a stagflation moment? Only time will tell.

Coffee Market Report 11/11/2024

This report covers the period from Monday 4th November to Friday 8th November 2024 and was written by Guus Bremer.

Coffee Market

First Notice Day (FND) delivery Dec (KC Z24) is approaching November 20th. This is intensifying rollovers Z4xH5 (switches). Dec contracts ended the week with 53,296 open positions compared to 84,000 for the next expiry in March 2025. We saw a low on Monday (nov 4) of 242.10 and a high on Thursday (nov 7) of 261.40 Us cents per lb (+7%). These big swings reflect a $0.43/kg (€0.40/kg, £0.34/kg) difference for green coffee which can be hard for many to comprehend. 

ICO report showed world coffee exports for coffee year 2023/24 at an all-time high of 137.273 million bags. That highlights an unprecedented increase in global green coffee shipments. You would say this is a (very) bearish announcement and would cause NY market to ease down. However, don’t forget that what happens in New York Coffee Exchange are called ‘futures’ for a reason. It reflects what people expect to happen in the future. We are only in November, and already 75-80% of Brazil crop is sold. 2024/25 Brazilian harvest will be smaller and we have seen a rather disappointing flower set for the Brazilian 2025/26 harvest. Next years ‘off-season’ (feb-may) also called the ’in between crop’ season is heading for a deficit in Arabica (unlike robusta).  

COT & certified stocks

↓ Funds (non-physical/non-commercials) reduced their long positions by 906 contracts, totalling 37,158 lots long  

↓ Commercials reduced their short positions from 94,462 to 89,240 bags 

↓ Arabica Certified Stock level was reduced to 852,638 bags (Note: a year ago, certified stocks totalled 310,501 bags) 

↑ Arabica pending grading: 117,767 bags (of which 104,458 are of Brazilian origin)  

↑ Total Open Interest (non-commercial/commercials and index trade combined) for Arabica coffee futures at ICE Futures increased 3417 contracts to 257,626  

Origin

From January to September 2024, 36.4 million 60-kg bags were exported, compared to 27.8 million bags in the same period in 2023.

A key component, by following the coffee, is where is this all going?  Where historically we have been speaking of classic ‘destination countries’ with the bulk consumed in the US, Europe and Japan; over the last years, we have seen a gradual shift to producing countries who started to import more to:

1. Partly cover their own shorts
2. To satisfy increased local demand

Honduras was very dry earlier this year, but now more rains are slowing down the final development stages of the cherries. The earlier drought has affected the lower altitudes more than the higher-grown areas. SHG (strictly high-grown) volumes seem stable. 

Being completely sold out and over-sold, Peru is again facing serious shorts. Hence, more pressure is placed on Honduras to serve as a replacement for Peruvian qualities and coffees. 

Honduras is moving forward with its goal of recovering 1.3 million hectares of forest by 2030 as part of the National Reforestation Strategy. This initiative, led by President Castro and the Forest Conservation Institute (ICF), aims to restore degraded forest areas through reforestation, natural regeneration, agroforestry plantations, and silvopastoral systems. 

Arabica main crop from Indonesia is around the corner. It is raining a lot in the higher-altitude mountains, which is delaying some areas’ harvesting activities. The crop size does not look sizable; our partners are seeing less availability around (about 5-10% less than last year). The organic certifying bodies are putting cooperatives under increased pressure. In some cases, re-certification is taking up to 4 months after the audit is done. In peak season, this leaves the coops without organic sales, having to liquidate their coffee at lower conventional levels, even if the audit was completed and they are producing in harmony with nature and community. This is a challenge not only in Indonesia but all over Asia.   

Logistics Update

There is a lack of containers in Brazil and other coffee origins like Peru. Significant operational restrictions are causing bookings to roll, cargo cuts, and even vessels to skip ports. We have to stay proactive and plan ahead, managing a much longer lead time before coffee arrives at our warehouses.  

Currency & Macro Outlook

Trump’s election as US president has dealt a blow to the Euro (1.93%), falling from 1.09 (November 5) to 1.07 (November 8). Funny enough, the British Pound Sterling didn’t suffer that much (0.97%).

The return of Trump to the White House poses significant risks to the macro outlook: 

• Potentially looser US fiscal policy
• Possible US trade tariffs
• Broader geopolitical uncertainty
• And a possible market reaction to all three.