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 30/10/2023
This report was written by Henry Clifford and covers news from the period Monday 23rd October to Friday 27th October.
New York Coffee Market
Monday opened at 163.25 c/lb and there was a short covering rally which pushed the market up and continued on into Tuesday to close the day out at 168.15 c/lb. On Wednesday it rose to hit the weekly high of 169.05 c/lb but it could not sustain the momentum and the market was clearly overbought. After nearly touching 170 c/lb, the market quickly fell to close at 162.30 c/lb. In terms of fundamentals, the talk of town is still the 2024/25 Brazilian crop, which is an “on-year” in its biennial cycle and with reports of good development, this is certainly a bearish factor. However, the uncertainty of the impact of El Nino still clouds over: this could impact Arabica but it’s likely it will have a larger impact on Robusta growing regions. Trading was relatively quiet towards the end of the week and we ended with a close of 160.95 c/lb.
COT & certified stocks
↓ Non-commercials reduced their net short position by 13,629 bags to total 2,152 bags. They were short by 22,410 bags at the beginning of the month. Have the funds become more bullish or are they simply pivoting away from coffee?
↓ Certified stock numbers decreased by 27,249 bags, totalling 394,175 bags.
– ICE Arabica Lots pending grading: 0 bags
Origin
Peru enters the final phase of its harvest. Around 90% of the country’s coffee has been harvested but there is still over 25% of it unsold, which is much higher than usual and is likely impacted by the change of Fairtrade minimum pricing back in the summer. Many certified buyers committed to contracts before the 1st of August and also managed to close some Central American deals for 2024, which has meant that they are not demanding as much coffee spot. Also, the sharp decline in Colombian differentials signified that less conventional Peru Grade 1 was sold as many buyers switched to that origin instead as it offered better value, considering the cup/price ratio. Cooperatives and exporters are holding out but we might see a rapid price drop if demand stays where it is.
Currency & Macro Outlook
We started the week on the back of a few strong days for both the Euro and the Pound but this was not to last, as the Greenback turned the tide and strengthened. As discussed in previous reports, the Dollar has had a strong year, in spite of the astronomical levels of debt in the US. However, the market is starting to take note that debt accumulation at the corporate level fuelled by ultra-low interest rates could prove to be a problem in the years ahead as debt maturities grow and interest rates have reset at much higher levels than when those debts were first taken on. With the U.S. public deficit also surging and ongoing political turmoil, investors are on the hunt for alternative dollar investments. Gold has risen by 6.5% this month and Bitcoin by 27.0%. Rome was not built in a day though, and people still flocked to the Dollar last week. The ECB kept their rates unchanged at 4% and this stemmed the tide somewhat, with the Euro finishing at 1.056. The Pound was less fortunate and finished at 1.210.
Coffee Market Report 16/10/2023
This report was written by Guus Bremer and covers news from the period Monday 16th October to Friday 20th October.
New York Coffee Market
We saw a very steep uptick in New York coffee last week. This has been largely down to the strong rally on the Dec23/March24 spread moving us again from a carrying market to inverted. This means more pressure on the nearby coffee and less on forward future terminal months, making it even more expensive to carry coffee for the trade.
The trigger has been largely caused by the drawdown in certified stocks (coffee sold to the NYC board) with no replacement seen, nor are there any pending certified stock coffees to grade. This has triggered the spec community to cover shorts. The very little selling happening in origin at the moment has exaggerated the rally further.
COT & certified stocks
↑ Non-commercials reduced their net short position by 8,625 bags to total 15,781 bags.
↓ Certified stock numbers decreased by 19,349 bags, totalling 421,424 bags.
– ICE Arabica Lots pending grading: 0 bags as of 23rd October.
Origin
Last week, over 300 containers of Brazil conilon were traded on FOB (16 up). With the rapid increase in demand by importers, sellers increased prices from +2 to over +5. The Real has gotten stronger in relation to the Dollar, making the purchase of coffee more expensive on the domestic market and consequently on FOB.
Vietnam’s Robusta market seems frozen as players are still waiting to receive delayed coffees. The expectation is that despite the new harvest from Vietnam arriving in November, prices will remain high. However, buyers are worried about the quality of coffee and logistics, due to the high volume of business that can occur. We have seen higher moisture levels due to particularly wet conditions in Vietnam at the moment. The ocean freight rates out of Asia seem to be going down still.
In Peru, there is a large flow of coffee in the main areas. Internal prices are being reduced and so we are seeing attractive differentials being offered, especially when compared to Honduras.
Currency & Macro Outlook
The Euro finally improved against the USD but the Sterling still traded sideways. We may see demand for the US dollar rising as the ongoing Israel-Hamas conflict continues to unsettle investors. In contrast, a cautious mood by investors as they shy away from the increasingly risk-sensitive pound.
From a Macro perspective, the tensions in the Middle East prove support (bullish) to the energy and correlated agricultural futures markets. The halted interest rate hikes on the other hand are a bearish headwind for commodities. Till next time coffee folks!
Coffee Market Report 16/10/2023
This report was written by Mantvydas Trainavicius and covers news from the period Monday 9th October to Friday 13th October.
New York Coffee Market
Arabica has been tanking since the 19th of September 2023, but we saw a reversal from the 6th of October 2023 at 145.00c/lb and has been heading up. 9th opened at 146.05 c/lb and the trend continued with a very strong close on Friday 13th at 154.90 c/lb. It was the biggest daily range since the 15th of September 2023 from 143.80 c/lb to 155.7 c/lb.
We have been hearing a lot about rain in Brazil lately, and that has some positive effects on the upcoming harvest. The news has been positive lately, but the market gained some momentum last week, especially on Friday which has been caused by strong short covering. Quite often one-day rallies gain can gain momentum and the market keeps going up for more than a week due to the result of shorts coverings or even negative news. Now weather and especially rain in Brazil is being heavily monitored.
COT & certified stocks
↑ Non-commercials increased their net short position by 1,011 bags to total 24,406 bags.
↓ Certified stock numbers decreased by 1,449 bags, totalling 440,773 bags.
↓ ICE Arabica Lots pending grading: 2,240 bags as of 16th October.
Origin
The latest data from the Uganda Coffee Development Authority (UCDA) reveals that in September 2023, the country exported 577,073 bags, marking a 12.76% increase compared to the same month last year. This figure comprises 543,361 bags of Robusta, reflecting a year-on-year increase of 14.93%, and 33,712 bags of Arabica, indicating a decline of 13.53% year on year.
Coffee Network (Bogota)- Colombia’s second-half coffee crop is shaping up to be similar or slightly lower than the one reported last year although some bean players in the Andean nation stressed that high temperatures have prompted the spread of Broca infestations. After suffering low production for the past five years due to bad weather with torrential rains, the world’s largest producer of high-quality washed Arabica beans expects to report a similar production for the second half than the one reported in the same period last year.
Currency & Macro Outlook
USD has been weakening since the beginning of October but last week on the 12th of October it gained its strength against quite a few currency pairs and in two days 12th and 13th it recovered from the previous week.
According to the European Union’s statistics office on Friday, Euro zone industrial production rose by 0.6% month on month, as factories made more consumer goods although overall output was down by more than 5% from the prior year. The Bank of England Governor Andrew Bailey echoed other BoE officials stating that future interest rate decisions by the central bank would continue to be tight after officials voted to leave borrowing costs on hold. According to the Philadelphia Federal Reserve President, Patrick Harker, the U.S. central bank is likely done with its policy tightening amid waning price pressures. Till next time coffee folks!
Coffee Market Report 09/10/2023
This report was written by Henry Clifford and covers news from the period Monday 2nd October to Friday 6th October.
New York Coffee Market
Arabica opened at 146 c/lb on Monday 2nd and we were unsure whether we would see the bull run (driven by positive rain news from Brazil) continue. Rain in Brazil has been the focal point of coffee market news of late and this did not change last week. Why? The presence of consistent rain could trigger the first major flowering, which would give us more information about the next Brazilian crop. If it does, the rain will need to continue as the coffee trees are very susceptible to hot and dry conditions in this phase. Therefore over the next few weeks, get ready to embrace the British obsession of talking about the weather! Monday closed a few c/lb higher at 149.10 c/lb but this was not to last, as the market spent the next three days nudging downwards, feeling the pressure of the macro outlook and the strength of the Greenback, which soared to 10-month highs.
The week closed out at 146.05 c/lb, only marginally higher than it started, but it did hit 144.45 c/lb on Friday, which was the lowest level we have seen in the last 12 months. The other salient point of the week was the ICE released a new rule (already the case with Robusta) that prohibits the re-grading of coffee that has already been certified. This should reduce the amount of hoodwinks played by certain industry actors.
COT & certified stocks
↑ Non-Commercials increased their net short position by 6,110 bags to total 22,410 bags.
↓ Certified stock numbers decreased by 277 bags, totalling 442,222 bags.
↓ ICE Arabica Lots pending grading: 8,365 bags as of 9th October.
Origin
I did promise we would talk more about weather…September was a dry month in Colombia, although Cenicafe (national research centre) reiterates that the oceanic and atmospheric variables are consistent with the development of moderate El Niño conditions. Read more on our latest article on El Niño here. October is the rainiest month in Colombia, and we expect the rains to arrive this week. If they don’t, this could cause some issues with production volumes for next crop.
Currency & Macro Outlook
As mentioned above, the Greenback hit 10-month highs this week! This did not come as a surprise though as this has been a slow and steady journey. EUR/USD and GBP/USD hit 1.047 and 1.208 respectively on Tuesday 3rd: not great levels for coffee pricing, but the low market is helping to keep pricing down. Labour market data in the US helped Pound Sterling and the Euro claw back a bit of value towards the end of the week, and what kind of data is released later this week on US inflation will likely have an impact on our key currency pairs. Kevin McCarthy was removed as speaker of the House of Representatives, the first time this has ever happened. Will this give confidence or draw confidence away from the Greenback? Hard to say as even though this should shake investor confidence, the Greenback is still the cleanest dirty shirt in the draw. Till next time coffee folks!
