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September Coffee Market Report

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 02/10/2023

This report was written by Hannah Wakefield and covers news from the period Monday 25th September to Friday 29th September.

New York Coffee Market

The market opened on Monday 25th September at 150.30 c/lb. Trading was slower than the previous week’s bear run and the range was fairly small, with just 3.95 c/lb between the daily high and low, and closed at 148.80 c/lb. This downward movement, although slight, was driven by both a positive weather outlook in Brazil with plenty of rains due, and a weakening Brazilian Real and Colombian Peso. The following day, Tuesday 26th September, was the only day in the reporting period where the market closed higher than open, opening at 148.80 c/lb, hitting the week’s high at 152.15 c/lb before closing at 150.85 c/lb, this was caused by some short term concerns over rain in Brazil, but these were quelled in the following days. Wednesday saw new lows for Latin American currency, with the Brazilian Real falling to a 3.5-month low of 1 USD to 5.06 BRL and the Colombian Peso to 1 USD to 4,100 COP. Whilst neither of these levels are unheard of, as you can see below, they are quite a lot weaker than in recent weeks. This, plus the positive rain outlook in Brazil, kept the pressure downwards and the market remained firmly bearish for the rest of the week. The week closed on Friday 29th September at 146.15 c/lb, after hitting the period low of 144.95 c/lb.

COT & certified stocks

This week Commercials were pretty active in buying as the market came down:

Gross Long increased by 3,045 lots.

Gross Short decreased by 2,062 lots.

Certified stock numbers decreased by 2,128 bags, totalling 441,945 bags.

ICE Arabica Lots pending grading: 10,011 bags as of 2nd October.

Currency & Macro Outlook

It’s been another tricky week for GBP as it continues to further weaken against the USD. Wednesday 27th September saw a 7-month low of 1.2108. Although it did regain some ground by the end of the week off the back of the news that in Q2 of 2023 UK GDP actually grew 1.8%, rather than the previous estimates of 0.2% negative growth. On top of which UK households saw their real incomes rise by 1.2% in Q2 compared to Q1 of this year. Both of these figures suggest that things may not be as bad as they seem, and hopefully we won’t see much further weakening of GBP. The USD started strong and hit multi-month highs over Monday and Tuesday as investors sought its ‘safe-haven’ status due to growing concerns over China’s economic outlook. However, this was followed by a slump towards the end of the week under the looming threat of another government shutdown.

Origin

Once again, the Brazilian weather forecast has been the talk of the town! This period of the year is absolutely crucial in terms of flowering. At the end of September or start of October the drier weather should end and regular and heavy rain should begin to trigger the first widespread flowering of the crop. Although, of course nothing is that simple, if the rains are too heavy too soon then they may damage the flowers, which would be bad news for the crop, as no flowers means no cherries! This year the end of September was still looking quite dry, which was causing some anxiety over the 23/24 crop, however, as we enter October the rains look like they are set to come in any day. Once the rain starts and the flowering is triggered, the first estimates of the 23/24 will be available.


Coffee Market Report 25/09/2023

This report was written by Aissatou Diallo and covers news from the period Monday 18th September to Friday 22nd September 2023.

New York Coffee Market

In the early hours of Monday 18/09, the NY market reached new highs as it advanced towards the next resistance level at 163. Throughout most of the session, the daily trading range remained narrow, fluctuating between 159.00 and 160.50.

Once it exceeded the previous day’s high, the NY market attracted interest and saw a gain of 340 points, reaching a fresh high at 164.50 for the December 2023 contract, a level not observed in over a month. Recent market movements have been influenced significantly by changes in the dollar and crude oil prices. While the dollar stabilized, crude oil took centre stage, experiencing a noticeable retracement later in the session after hitting a 15-month high. Arabica coffee followed a similar pattern, retracing its steps before the session’s close. The December 2023 contract settled 135 points higher at 160.95 cents per pound but was still 355 points away from its session peak. In terms of fundamentals, market participants are closely monitoring dry weather conditions in Brazil and the ongoing grading of certified stocks in Brazil, which could have a significant impact.

As the week came to a close, the market faced substantial downward pressure, eventually trading down to 150.05 on Friday 22/09.

COT & certified stocks

Non-commercials increased their long position by 1,604 lots to 32,421 lots long.

Non-commercials decreased their short position by 7,805 lots to 48,046 lots short, with a net short position of 15,625 lots.

Certified stock numbers decreased by 1,695 bags, totalling 440,853 bags.

ICE Arabica Lots pending grading: 15,391 bags as of 21st September.

 

Origin

There has been a slight improvement in Brazil’s rainfall and temperature maps recently, but the overall outlook for the blooming phase remains below expectations. The combination of reduced rainfall and high temperatures poses a potential risk to the crop, although it’s worth noting that the 2024/2025 Brazilian crop is anticipated to be larger compared to previous ones, providing some optimism.

Nevertheless, there is a bullish risk emerging in the market, and this sentiment could persist or even intensify if unfavourable forecasts continue.

Moreover, the current presence of El Niño, coupled with suboptimal rainfall patterns in Indonesia, poses a significant risk to the Robusta coffee market.

Currency & Macro Outlook

GBP struggled to maintain its strength by the end of last week. After a sharp decline on Thursday following the Bank of England’s decision to halt its interest rate hikes, the pound continued its slide to reach new multi-month lows, largely due to disappointing economic data from the UK. Preliminary figures for September revealed a significant drop in UK services activity, reaching its lowest levels since the beginning of 2021. This, coupled with less-than-robust retail sales figures, heightened concerns about a potential recession in the UK and negatively impacted sentiment towards the pound.

In contrast, the euro experienced a relatively stable trading day on Friday, reacting to mixed data from the Eurozone.


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…