Coffee Market Report
With the current Brazil harvest complete, the weather reports from Brazil, forecast good rainfall to fall across the major coffee growing regions over the next few days. Weather forecasters are indicating that more intense rains are due to reach certain regions of coffee belt early next week. The seasonal rains that traditionally come to the Brazil coffee belt around October each year, are necessary to set the flowering and maintain fruit development ahead of the next coffee crop, which arabica coffees have around ten months of development ahead, before the harvest to come, around midyear, in 2024.
The largest robusta producer and exporter to consumer markets, Vietnam, is in this anomaly coffee export year, already sold out ahead of the country’s new October 2023, to September 2024 crop to come. There is some attention to be drawn to the rainfall in Vietnam which should traditionally ease into the dry season to allow for harvesting to begin. The internal market continues to be stalled ahead of the new crop harvest, with negligible carryover stocks to fuel any interim short-term supply to consumer markets.
The Certified Robusta coffee stocks held against the London Exchange were seen to increase by 48,333 bags during the week up to the 25th September 2023, to register a total of 716,167 bags. One might comment that these Certified Robusta coffee stocks have seen significant drawdowns over the past six months due to the lack of coffee flow from the largest Robusta coffee producer Vietnam, however the most recent increases in certified stock levels can be attributed to an increase in Brazil Conilon shipments, which are anticipated to top up the historically low levels of certified stocks. It has been reported that during the week up to 22nd September, 73,333 bags were graded of which 70,833 were Brazil Conilon. It may be that this trend will continue as further Brazil Conilon robusta coffee flows to northern hemisphere consumer markets, and potentially to the London robusta certified exchange in the weeks to come.
The northern hemisphere coffee importing consumer blocs, USA, Canada, Europe, and Japan, will soon be heading towards their main winter roasting season. These mature markets in terms of coffee consumption are anticipated to continue to register a consumption recovery following the pandemic related disruptive years, to be collectively somewhere in the region of 92 million bags of coffee consumption per annum.
There is some degree of uncertainty meanwhile in the overall dampened economic sentiment across the globe, as the world’s largest consumer market USA., continues to lead the charge on inflation and second largest economy in China continues to post muted monthly economic growth data. The international financial environment is meanwhile vulnerable to volatility in the key northern hemisphere currency markets. There are some reports filtering into the speculative sector of the markets, of a likelihood that leading in influence Central Banks may need to alter fiscal policy course and could potentially steer away from further interest rate increases heading into the new year. This alteration of prevailing policy may be required to stimulate additional consumer spending in countries that are currently navigating unfamiliar territory in the impact of costs incurred to borrowing, and in economies where interest rates and the cost of borrowing, has not necessarily been a factor for at least a decade.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to remain unchanged yesterday, to register these stocks at 446,518 bags, with 98.35% of these certified stocks being held in, Europe at a total of 439,160 bags and the remaining 1.65% being held in the USA at a total 7,358 Bags. Of this, a total 135,302 bags, or 30.30% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 64.49% of these certified coffees, originating from Honduras. There was meanwhile no change to the number of bags pending grading to the exchange; to register 0 bags pending grading on the day.
The November 2023 to December 2023 contract arbitrage between the London and New York markets widened yesterday to register this at 39.45 usc/Lb. This equates to 26.15% price discount for the London Robusta coffee.
It was a softer day overall on the commodity markets yesterday, with the leading in influence Oil markets softer on the day. The Coffee, Cocoa, Soybean and Wheat markets ended the day on a positive note, while the Corn, Sugar, Gold, Silver, Platinum and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.214 Sterling, at 1.056 the Euro and with the US Dollar buying 4.987 Brazil Real.
The New York market started the day trading on a modest softer note, while the London market started the day yesterday trading to the north of par on a firmer note. The New York market took a firmer track into the early morning session, while the London market followed suit to likewise trend firmer for the remainder of the morning session. As the afternoon progressed the New York market was capped, limiting the gains for the day, this saw the market drop back from the earlier highs of the day and trend back towards par. The London market was met with selling pressure to plot a softer path into negative territory as the day drew to a close. The New York market found support near to the lows of the day to stage a late recovery and settle on a firmer note at the close, while the London market continued to trend lower before rebounding from the lows of the day to recover all of the earlier losses and settle near to unchanged for the day.
The London market ended the day on a modest positive note with 43.33% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note with 61.19% of the earlier gains of the day intact. This relatively firmer performance for the New York and London markets, albeit that the markets fell back from the earlier highs of the day, might indicate some degree of confidence and direction to possibly see the markets set for a follow through steady start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
NOV 2456 + 13 DEC 150.85 + 2.05
JAN 2352 + 8 MAR 151.90 + 2.00
MAR 2299 + 6 MAY 152.65 + 1.85
MAY 2274 + 6 JUL 153.35 + 1.75
JUL 2262 + 6 SEP 153.90 + 1.75
SEP 2250 + 5 DEC 154.85 + 1.70
NOV 2242 + 5 MAR 156.05 + 1.55
JAN 2234 + 5 MAY 157.10 + 1.20
