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.
Live Market Data
Coffee Market Report 27/11/2023
This report covers the period from Monday 20th November to Friday 24th November and was written by Mantvydas Trainavicius.
New York Coffee Market
20th of November NYC Mar 2024 opened 171.65 usc/lb and entered a one-day rally with a close of the day at 177.90. It was most active day of the week since we had a FND on 21st of November, which was with a little drop, and the following days recovered very quickly. Also, the market closed on 23rd due to Thanksgiving Day in the United States. The total range of the week for Mar 2024 was the following 170.00 reached on 20th and 181.00 reached on 24th. The market closed at 178.65 on the last trading day of the week giving an exact 7.00 usc/lb gain since the beginning of the week. The weakening USD gave some support to NYC during the week.
COT & certified stocks
↑ Non-commercials increased by (+ 1,292 lots) to a net long position of 12,499 lots.
– Certified stock remains at 290,734 bags.
↑ ICE Arabica Lots pending grading: increased by 4,389 bags bringing the total to 22,014 bags.
Origin
Colombia: Coffee Network (Bogota)-Colombia, the world’s third-largest coffee-producing country is set to produce between 11.4 and 12.6 million bags of 60-kg bags in the 2023 calendar coffee year, Carlos Armando Uribe director of union affairs at the coffee grower’s federation, said today. Colombia produced 8.846 million bags in January-October, and to reach the lower end of the target, the country will have to produce 2.54 million bags in the last two months of the year.
Vietnam: according to USDA, Vietnam’s coffee production for 2023/24 forecast is lowered by 3.8 million bags to 27.5 million bags due to unfavourable weather conditions due to climate change and El Nino climate patterns. According to the Vietnam Meteorological and Hydrological Administration forecasts, the ENSO (El Niño–Southern Oscillation) phenomenon is expected to return in the last three months of 2023.
Currency & Macro Outlook
USD continues to remain weak vs most of the currency pairs, especially vs GBP, which recovered its strengths as of early September 2023 at 1.2606, while EUR vs USD has recovered levels since August 2023 at 1.0944.
The UK Finance Minister, Jeremy Hunt, announced tax cuts for workers before the 2024 election, along with permanent investment incentives for businesses to boost the economy.
The European Central Bank Governing Council member Joachim Nagel said on Wednesday that the Eurozone interest rates are approaching the peak or may have already reached it. He also said he was sceptical about the risk of a hard landing caused by a monetary policy squeeze.
U.S. Federal Reserve officials agreed at their last policy meeting that they would proceed “carefully” and only raise interest rates if progress in controlling inflation faltered.
Coffee Market Report 20/11/2023
This report covers the period from Monday 13th November to Friday 17th November and was written by Jack Ravenscroft.
New York Coffee Market
KCZ23 (December) opened on Monday at 172.60 usc/lb before jumping to 179.45 usc/lb by end of day. This rally was sustained through the week, reaching a high of 182.20 usc/lb on Thursday 16/11. This is the first time the market has eclipsed the new FT minimum price of 180 usc/lb since the change came into place in August 23’. The bullish gains from the beginning of the week were wiped out by Friday, with the market closing on Friday at 170.95 usc/lb.
The bulls of the week were driven by dry weather from the weekend, a strengthening of the December – March switch and the continued withdrawal of certified stocks. However, with the first notice day (FND) approaching on 21/11, the expected fall did eventually materialise. Rain forecasts for the producing regions of Brazil induced sales, while weak technical performance triggered speculators to liquidate their positions ahead of the FND. The Dec/Mar spread remains in backwardation currently sitting at around 5.00 usc/lb.
The New York market will be closed on Thursday 23/11 in observance of the Thanksgiving Day holiday.
COT & certified stocks
↑ Non-commercials increased their net long position by 5,379 bags to 11,207.
↓ Certified stock numbers decreased by 12,536 bags, totalling 289,699 bags.
– ICE Arabica Lots pending grading: 7,550 bags
As Priscilla suggested last week, pending volume finally re-emerged on the exchange. Unusually, said coffees come from a wide spread of origins including both PNG and Kenya. If this number continues to increase, will we see a bearish sentiment develop?
Origin
Brazil: Weather patterns continue to influence market and speculators. Despite continued rainfall and future forecasts showing light – moderate rains spreading across the southern regions for the next 6-10 days, some models continue to indicate that the coffee-growing regions east and northwest of Minas, ES and Bahia could end the month with some hydric deficit.
Currency & Macro Outlook
US headline CPI remained unchanged month on month with core CPI rising 0.2% in October. The outcomes support the view that the underlying inflation is slowing down which should in turn reflect the peak of the hiking cycle for the Fed. On the back of the data, USD index weakened slightly.
The euro’s negative correlation with the US dollar in addition to the downbeat mood helped the single currency to move higher to a 2.5 month high against the dollar. The pound also made small gains on the USD but traded to a 6.5 month low on the Euro following hawkish comments from Bank of England (BoE) policymaker Megan Greene.
Coffee Market Report 13/11/2023
This report was written by Priscilla Daniel and covers news from the period Monday 6th November to Friday 10th November.
New York Coffee Market
KCZ23 (December) opened on Monday at 170.25 c/lb almost flat level from the close price on Friday 3rd November at 170.90 c/lb. This is justified as the fundamentals remain the same with certified stocks drawing down and no structure of when a replacement will come.
Monday to Thursday was moderately bullish, compared to the previous week with the highest level of the week hitting 179.00 c/lb on Thursday, which correlates with a 24-year low certified coffee stocks level. On Friday, the market had the widest daily range of the week at 5.80 c/lb and closed at a level average for the week at 174.50 c/lb with a 4.25 c/lb increase from Monday and 4.50 c/lb down from the highest weekly level. On the same day the December-23 Arabica terminal (KCZ23) options expired.
The Dec/Mar spread remains in backwardation currently sitting at around 4.00 c/lb.
Commercial activity was quite muted as shown in the Open interest down 678 contracts to 194,319 contracts on 6th November.
There is talk that we will see more certified stocks at the end of the month. Will this bring a bearish sentiment to the market?
COT & certified stocks
↑ No new COT numbers due to the US holiday on Friday 10th November.
↓ Certified stock numbers decreased by 57,774 bags, totalling 302,235 bags.
Shrinking ICE Stock are supporting NYC Prices. Coffee inventories fell to a 24-year low on Thursday 9th November 2023.
– ICE Arabica Lots pending grading: 0 bags
Origin
Brazil coffee exports were 25% higher in October year on year. There is an issue with congestion at the ports in Brazil. Somar Meteorologia reported that Brazil Minas Gerais region received 59.5 mm of rain in the past week, 135% of the historical average. This abundant rain is supportive of coffee yields and can be bearish for coffee prices. However, some estimates of a dry December raises concern.
Vietnam’s General Department of Customs reported that Vietnam coffee exports fell 14.2% month on month and 48.8% year on year. About 10-13% of the Robusta crop has currently been harvested. Weather forecasts are indicating a positive impact on the drying and processing in December. Bear in mind that Vietnam’s harvest this year is expected to drop more than 7%, the smallest crop in 4 years according to a Bloomberg survey.
Last week, Sintercafe was held in San Jose, Costa Rica, where the majority of Central and South America met to discuss challenges and opportunities of this 2024 market, business and market activity was a bit slower as a result.
Currency & Macro Outlook
Crude Oil is at 4-month lows, The US dollar is rangebound while stocks, bonds and Bitcoin are still benefiting from the flat interest rate delivered from the FED as liquidity risk are minimised in the system.
Moody’s downgraded the outlook of the US Credit rating pointing to significant deficits, increasing interest costs and political uncertainties. This could lead to a weaker U.S. dollar index whereas GPB/USD remains flat at 1.22.
At the meantime, European Central Bank Christine Lagarde say that an inflation rise is still expected to 2% in the Eurozone even with the ECB ‘s current unchanged interest rate. This justified a moderate decrease of EUR/USD to 1.069.
We saw a six-month low GBP/EUR with an FX level of 1.143, signs of emergent oversold conditions could combine with any positive UK data surprise to help a recovery in the coming days. Till next time coffee folks!
Coffee Market Report 06/11/2023
This report was written by Philip Searle and covers news from the period Monday 30th October to Friday 3rd November.
New York Coffee Market
As a well-known music artist once sang “you’re up then you’re down you’re wrong when it’s right” and this was very much how the market played out this week – BIG swinging volatility.
Monday – the calm before the storm with an open at 160.05, Brazil improved expectations for the 24/25 crop which hampered any upward trajectory closing the day out at 159.10.
Tuesday – we saw the start of what was to follow for the rest of the week Aggressive short covering by the specs meant we had a 8.20c/lb range of the day’s closing at 167.30c/lb
Wednesday – the market came under pressure closing 4.48% lower at 159.80, as the market saw liquidation of the Dec23 positions into Mar24.
Thursday – certified stocks played a huge role into today’s play as we approached the lowest levels since April 1999. The pace which these will recover looks likely to be sluggish due to the ban of the re-certification of coffee. The day finished 3.5% higher at 165.35c/lb
Friday – spec buying was encouraged by another draw down of cert stocks. The Dec/Mar switch showed us that there could be a shortage of fresh coffee nearby. The week finished at a 6.5 week high at 170.90c/lb.
COT & certified stocks
↑ Non-commercials switched (+ 4,479 lots) from a net short position to a net long position of 2,327 lots.
↓ Certified stock numbers decreased by 30,126 bags, totalling 360,009 bags.
– ICE Arabica Lots pending grading: 0 bags
Origin
Ethiopia’s banking industry has been dominated by the state owned Commercial Bank of Ethiopia with the sector having 29 players all being locally owned.
Abiy Ahmed’s Ethiopia’s Prime Minister has promised to open up this historically closed-door sector by issuing up to five banking licenses for foreign banks. Could this mean the end of the lack of foreign currency in Ethiopia, will there be a reduction of coffee exporters as their need for coffee exports to generate Us Dollars might not be needed?
Currency & Macro Outlook
On the back of BoE decision to keep interest rates at a 15 year high of 5.25%, some think that interest rates have now peaked, the fact that the monetary policy committee voted 6-3 to hold the rate was not as tight as the first vote to hold rates which was 5-4.
Nevertheless, the BoE was clear to state that there are plenty of factors that could lead to changes in the near term, and they are not going to try and predict them – could we see the inflation rate go back up with the conflict in the Middle East?
The pound had a strong week vs the US Dollar not only because of the interest rate but also aided by the increase in jobless claims in the US which prompted anxiety over its labour market. The GBP/USD closed the week at 1.238
