Coffee Market Report

The respected U.S. Department of Agriculture Global Agricultural Network USDA have forecast that the next October 2023 to September 2024 Vietnam coffee crop that is due to start being harvested later this year, will be 5.21% larger than the current October 2022 to September 2023 crop, to total 31.30 million bags. This crop they foresee, to be made up from 30.23 million bags Robusta coffee and 1.07 million bags of Arabica coffee. In addition, there is an estimated carryover stock from the present coffee year to potentially add 1.81 million bags from this largest robusta producer of coffee, into the coming October 2023 to September 2024 coffee year.

Of this new October 2023 to September 2024 crop, the forecast is that Vietnam will export 5.41% or 1,400,000 bags less than the current October 2022 to September 2023 coffee year, at an estimated 24.50 million bags of green coffee. USDA have reported that there was an increase in exports during the first half of the October 2022 to September 2023 coffee year, stating favourable exchange rates and high export demand as influencing factors, however due to this surge in exports during the first half of the coffee year 2022/23, exporters are now restricted by the lower overall production in 2022/23 year, in combination with lower overall carryover stocks leading up to the 2023/24 coffee year. The USDA has in this report, highlighted the approaching EU regulation amendments that are anticipated to be implemented by September, for a selection of agrichemical maximum residue limits to be lowered, and the impact that this development may have on producer productivity, as well as access to consumer markets within this largest combined coffee consumer bloc, over time.

The seasonal rains within the Vietnam Central Highlands coffee growing regions are expected to continue to be favourable for development of the 2023/2024 coffee crop. According to the Vietnam Meteorological and Hydrological Administration’s forecasts, there is a 50-60% chance that the La Niña phenomenon will continue through the next quarter, before waning to transition to ENSO (El Niño–Southern Oscillation) neutral conditions. Within the prevailing situation of a tighter internal market as the remaining coffee crop 2022/23 meets measured sales in a demand environment that currently appears to outweigh supply, one might comment that there are several months ahead before the new coffee crop from this leading producers and exporter of robusta coffees, may become available, and that unforeseen weather anomalies such as a continuation of rainfall into the harvest season may lead to a continuation of the prevailing firm prices within this leading producer and exporter of robusta coffees to consumer markets.

The Brazil conilon robusta crop is in harvest and with the new Brazil arabica coffee crop cherries maturing and soon to start being harvested, the prospects for the coming new crop, are positive. The perspective from many of the earlier reports would indicate that the new conilon robusta crop will be better than the previous year’s production, likely to exceed domestic market demand, to fuel potential for increased conilon robusta exports to consumer markets. The prevailing arbitrage may continue to play a role however, in the already relatively strong support for conilon coffees from within Brazil, and their local coffee roaster industry. Weather through this crop development has been mostly conducive, and barring any unforeseen climatic influence in the weeks ahead is likely to be sufficient to fuel domestic and consumer market demand through to next year.

The USA will observe their Memorial Day holiday on Monday 29th May, and the New York Arabica market will be closed accordingly, whilst the UK will celebrate their Spring Bank Holiday on the same day which shall see the London Robusta Market closed for the day.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to remain unchanged yesterday, to register these stocks at 620,633 bags, with 97.41% of these certified stocks being held in, Europe at a total of 604,549 bags and the remaining 2.59% being held in the USA at a total 16,084. Of this, a total 230,612 bags, or 37.16% of the coffees registered and stored in consumer country certified warehouses of the exchange, Brazil washed arabica, and a further 58.99% of these certified coffees, originating from Honduras. There was meanwhile a no change to the number of bags pending grading to the exchange; to register 0 bags pending grading on the day.

The July 2023 to July 2023 contract arbitrage between the London and New York markets narrowed yesterday to register this at 71.29 usc/Lb. This equates to 37.92% price discount for the London Robusta coffee market. This wide arbitrage may be viewed by price sensitive roasters as an attractive alternative discount for Robusta against the comparatively higher value arabica coffee.

It was a mixed but softer day on the commodity markets yesterday, with the US Dollar gaining ground against a basket of other currencies, a firmer Dollar is seen to be a bearish factor for commodities traded in other currencies. The Coffee, Corn and Soybean markets ended the day on a positive note, while the Cocoa, Sugar, Wheat, Gold, Silver, Platinum and Palladium market ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.233 Sterling, at 1.073 the Euro and with the US Dollar buying 4.959 Brazil Real.

The New York and London markets started the day yesterday, trading to the north of par on modest firmer notes respectively. The markets attracted selling pressure early in the day, to drop below par and trend lower. Both markets found support to reverse the trend in the early morning session, this saw the markets attract buying support early to track above par, for the remainder of the early morning session. The mid-morning session in New York dropped back from the early highs to trend back towards par. In latter day trade, both markets settled into a narrow range, New York continued to oscillate around par to settle on a modest near to unchanged firmer note, while the London market followed suit, to maintain most of the earlier gains and settle on a likewise modest firmer note at the close.

The London market ended the day on a positive note with 69.57% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note with 28.21% of the earlier gains of the day intact. This firmer close for the markets, albeit that the New York market fell back from the earlier highs of the day to settle on a modest firmer note at the close, might indicate that the markets are set for a buoyant hesitant start to early trade today, against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT              NEW YORK USC/LB.

JUL     2573 + 16                                       JUL    188.00 + 0.55
SEP     2530 + 20                                       SEP    185.75 + 0.55
NOV   2484 + 17                                       DEC   183.90 + 0.60
JAN    2446 + 16                                       MAR  183.70 + 0.55
MAR  2429 + 16                                       MAY   184.10 + 0.60
MAY  2423 + 16                                       JUL     184.60 + 0.65
JUL    2420 + 16                                       SEP     185.30 + 0.65
SEP    2414 + 14                                       DEC    186.25 + 0.90