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 18/09/2023
This report was written by Jack Ravenscroft and covers news from the period Monday 11th September to Friday 15th September 2023.
New York Coffee Market
As is often the case at this time of year, market movements this week closely tracked weather updates from Brazil. The market gained 420 points on Monday 11/09 reaching 152.85cts/lb off the back of low rain forecasts following last weeks’ flowering. A lack of fundamental weather updates on Tuesday and Wednesday saw light to moderate trading activity with levels remaining firm. However, the end of the week saw a bullish upturn as light rain forecasts for Brazil’s main producing regions failed to materialize and a dry pattern is expected to remain in the region in the coming days. The market closed on Friday 15/09 at 159.15cts/lb, an upturn of 1050 points from the beginning of the week.
COT & certified stocks
↑ Non commercials held a Net Short Position of -25,034. They increased their Net short position by 835 bags
↓ Certified stock numbers decreased by 7,605 bags, totalling 442,548 bags
↑ ICE Arabica Lots pending grading: 19,820 bags as of 15th September
Origin
Adding further context to the market movement, many of Brazil’s producing regions have started to experience widespread flowering. This event needs further rains to convert flowers to cherries. As discussed above, no meaningful rains are forecast for the short term. A continued dry spell could cause an abortion event, leading to trees dropping their flowers. Although the weather is not yet critical, concern has arisen among farmers and dealers. September in Brazil traditionally marks the beginning of the wet season.
Exports from Colombia registered another decrease (-11% MoM, -13.6% YoY), with approx.. 750k bags shipped in Aug. It seems the reduced level of coffee exported is a result of lower production and reduced demand. These factors will continue to keep the pressure on already low Colombian differentials.
Currency & Macro Outlook
GBP continued its recent struggles amid poor economic outlook. Economists expect the Bank of England to increase rates to 5.5% from 5.25% on Thursday 21/09. This would represent the highest rate since 2007.
The euro also declined as the European Central Bank raised interest rates by 25bps to 4.5%. Applying further pressure to the euro were the ECB’s accompanying forecasts, as it downgraded its Eurozone growth expectations for 2023, 2024 and 2025.
USD saw a slight rally off the back of some positive economic data. Retail sales, PPI and jobless claims releases all beat expectations. Fed policymakers are unlikely to go for another rate hike despite their tightening perspective.
Coffee Market Report 11/09/2023
This report was written by Philip Searle and covers news from the period Monday 4th September to Friday 8th September 2023.
New York Coffee Market
This week was a 4 day trading week with the market closed on Monday 4th September for Labor Day. When we finally got matters underway, we opened at 151.70c/lb, which saw the market under pressure as a wave pushed prices near recent lows. Commercial buying and short covering nudged the market back over the 150-level closing the day on 153.45c/lb. The following day saw similar action mirroring the support around 150, closing at 153.80c/lb. The latter part of the week saw a bearish trend as Brazil’s harvest comes to an end and their coffee will flow into the market. The week ended at 148.65c/lb, a 3.05 reduction from start to finish.
COT & Certified Stocks
↓ Non commercials held a Net Short Position of -25,869. They reduced their Net short position by 2,021 bags
↓ Certified stock numbers decreased by 8,258 bags, totalling 450,153 bags
↑ ICE Arabica Lots pending grading: 17,560 bags as of 11th September
Currency & Macro Outlook
Like last week, the GBP continued its decline against the USD. A large part to the Dollar strength was the publication of the US initial jobless claims which were the lowest since February, bolstering the Feds interest rate expectations. The GBP was pressured by the fall in UK house prices which may make the BoE reluctant to continue raising interest rates.
Origin
The Brazilian harvest may come to an end this week if rain does not reduce the pace of proceedings. On the other hand farmers who have finished for the season are in hope for significant rain to trigger flowering in the days ahead.
Cecafe updated their export figures to 3,805,743 the industry seems to be holding back until they seem for favourable prices, whilst farmers are adopting a more cautious approach on the selling side – we will have to see who can hold out the longest…
