Coffee Market Report
The latest Commitment of Traders report from the New York arabica coffee market has seen the shorter term in nature Managed Money fund increase their net short position by 9.95% within this market over the week of trade leading up to Tuesday 10th. October 2023; to register a new net short position at 29,418 Lots. The longer term in nature Index Fund sector of this market posted a marginal decrease their net long position by 1.49% within the market, to register a new net long position of 42,949 Lots on the day.
Over the same week, the Non-Commercial Speculative increased their net short position by 8.91% within the market over the week of trade leading to Tuesday 10th. October 2023: to register a new net short position of 24,406 lots, which is the equivalent of 6,918,992 bags. This net short position has most likely been little changed following the period of mixed but overall sideways trade that has since followed.
The reports from Brazil indicate that the main arabica coffee districts in Southeast Brazil have been in receipt of good rains over the recent days and it is forecast to see these rains continue over the fortnight. This has been useful to initiate flowering and set the crop for the next Brazil 2024/2025 biennially bearing larger cyclical crop. It is however still early days, and the Brazil coffee farms will require regular and good rains through to March next year in order to support the 2024 crop.
It is the early stages of the October 2023 to September 2024 new crop harvest season for Colombia, Central America and Mexico coffee producers, where quality washed coffee harvests are soon to pick up pace. This while the seasonal hurricane season in the Gulf of Mexico historically comes to an end in November, one might anticipate further storms to form over the next few weeks to bring along spells of heavy winds and rainfall. The weather within this largest quality washed arabica producer bloc which accounts for an average 70% washed arabica production, is for the most part experiencing conducive weather conditions for harvesting activities to take place. There are concerns being raised meanwhile that the macroeconomic inflationary pressures continue to impact directly upon farm cost of production, while cost of finance and access to funding continue to present microeconomic challenges for this quality washed arabica sector. There are reports raising concern surrounding the ability to afford labour for the upcoming harvests and this is likely exacerbated by a growing trend of migration to the north.
Many independent forecasters predict that production volumes from Mexico, Colombia and Central America collectively, are due for increased volumes this October 2023 to September 2024 coffee year, when compared to the previous year. The internal pressures of higher costs to be borne by farmers versus the likelihood of lower returns in the context of a softer New York arabica market, 16.75% lower year on year, may lead to some neglect of farms that in harvest time may see farmers reduce their ripe picking rounds, as well as a reticence or lack of affordability to apply necessary husbandry to maintain plant health in the months ahead of the next October 2024 to September 2025 coffee year.
Ahead of the harvest that is set to soon pick up pace within the region meanwhile, coffee production for the October 2023 to September 2024 Coffee year in Colombia is forecast to potentially be 15.50% higher than the previous coffee year at a total of 12.60 million bags. This is forecast, although improved year on year is shy of the country’s average potential production of around 13.60 million bags per seasonal year. In Mexico coffee production for the October 2023 to September 2024 Coffee year is forecast to remain steady at an estimated total of 3.40 million bags. Guatemala meanwhile is expected to produce marginally more than the previous year, to potentially produce 3.50 million bags, whereas Honduras is likewise anticipated to have a 1.8% increase in production year on year at a total of 5.50 million bags.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 6,001 bags yesterday, to register these stocks at 434,772 bags, with 98.35% of these certified stocks being held in, Europe at a total of 427,587 bags and the remaining 1.65% being held in the USA at a total 7,185 Bags. Of this, a total 139,635 bags, or 32.12% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 62.53% 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 narrowed yesterday to register this at 45.51 usc/Lb. This equates to 29.52% price discount for the London Robusta coffee.
It was a mixed day on the commodity markets yesterday, with concerns reflected in the markets surrounding increased geopolitical tensions in the Middle East. The London Robusta Coffee, Cocoa, Soybean and Platinum markets ended the day on firmer note, the Sugar and Palladium market remained unchanged on the day, while the New York Arabica Coffee, Corn, Wheat, Gold and Silver markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.220 Sterling, at 1.055 the Euro and with the US Dollar buying 5.039 Brazil Real.
The New York and London markets started the day yesterday trading to the south of par on a modest softer note respectively. The New York market continued to oscillate to either side of par as the morning progressed, slowly building support, while the London market followed suit to likewise trend in a firmer direction as the morning progressed. As the afternoon progressed the London market hit a ceiling to limit the gains for the day, to see the market drop back from the earlier highs and trend back towards par. The New York market was also seen to drop back from the modest highs of the morning session and trend in a softer direction. The late afternoon session saw the London market continue on a softer path before finding support late in the day to see the market settle on a modest firmer note at the close, while the New York market tracked softer to settle near to the lows of the day with most of the earlier losses intact.
The London market ended the day on a positive note with 41.67% of the earlier gains of the day intact, while the New York market ended the day on a modest negative note with 26.79% of the earlier losses of the day intact. This mixed close for the markets, with the New York market recovering most of the earlier losses of the day to settle on a modest softer note for the day and the London market settling near to unchanged on the day, and one might think that the markets are due for a follow through hesitant start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
NOV 2393 + 5 DEC 154.15 – 0.75
JAN 2296 + 12 MAR 154.70 – 0.45
MAR 2239 + 12 MAY 155.25 – 0.35
MAY 2217 + 8 JUL 155.90– 0.35
JUL 2201 + 7 SEP 156.60 – 0.40
SEP 2189 + 7 DEC 157.85 – 0.45
NOV 2181 + 7 MAR 159.40 – 0.30
JAN 2169 + 7 MAY 160.60 – 0.05
