Coffee Market Report
The latest weather forecast reports to come from the U.S. Governments National Weather Service’s Climate Prediction Centre anticipate that a transition from El Niño Southern Oscillation (ENSO) neutral conditions to El Niño weather conditions has taken place. There remains a strong possibility that El Niño weather conditions are expected to continue through to the second quarter of 2024, by which time a shift to El Niño Southern Oscillation (ENSO) neutral conditions is expected. The El Niño weather pattern, would historically threaten partial drought conditions for the Pacific rim coffee countries such as Colombia and Indonesia. It would however bring with it further afield, the potential for increased rainfall for the coffee districts in Southeast Brazil.
Therefore, mixed signals for the coffee markets, in terms of its potential to impact coffee production for some countries, but to assist to support the forecasts for a large new Brazil coffee crop for the 2024/2025 year. However, it must be said that if El Niño weather conditions prove to only be modest in nature, it is unlikely that it would have a marked affect upon global coffee production for the coming year.
The weather news from Vietnam meanwhile, largest producer and exporter of robusta coffee to consumer markets, is that the rain season has continued into November. This extended rain season could play a role in foreseeable delays for deliveries to come from the interior as the harvest season of the October 2023 to September 2024 new crop begins. Drier weather is needed for harvest and quality drying to take place. The relative surge in international demand for robusta coffee over the past three years boosted by the wide arbitrage which developed in a combination of arabica supply factors leading with a culmination of six years of low prices in main washed arabica producer countries and reduced availability, pandemic related logistical bottlenecks, as well as the Brazil frost price cycle in 2021, has since seen demand for Vietnam robusta coffee supersede supply in the October 2022 to September 2023 coffee export year, albeiit eased to some extent by alternative robusta producers, primarily Brazil. There is with the late rains continuing in the Vietnam countryside however, a degree of pressure building for the new crop coffee that will soon need to start to flow to the ports for export preparation in fulfilment of forward shipment commitments. Looking ahead and so long as the wet weather subsides into December, and with development thus far conducive, the new robusta crop is anticipated to come in at around 28 million bags, and thus the prevailing tight supply may gradually ease into January 2024.
There has been some improvement in selling activity within Brazil over the past week following a measured pace and into the upward momentum in New York, although the development of a firmer Brazil Real over the same time, may have capped the potential for further sales. Following the Brazil Proclamação da República (Republic Day) holiday in Brazil on 15th November, several states are observing holidays on Monday 20th November, many taking the opportunity to extend this into a long weekend. The prospects for further activity from this largest coffee producer and exporter to consumer markets, may be muted in some regions as the week draws to a close.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 7,401 bags yesterday, to register these stocks at 289,699 bags, another record low. with 98.29% of these certified stocks being held in, Europe at a total of 284,711 bags and the remaining 1.71% being held in the USA at a total 4,988 Bags. Of this, a total 55,764 bags, or 19.24% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 72.90% of these certified coffees, originating from Honduras. There was a 7,550 bags increase to the number of bags pending grading to the exchange; to register 7,550 bags pending grading on the day.
The December 2023 to January 2024 contract arbitrage between the New York and London markets narowed yesterday to register this at 59.71 Usc/Lb. This equates to 33.91% price discount for the London Robusta coffee.
It was a mixed day on the commodity markets yesterday, as the US Dollar index held near a more than two-month low, a weaker US Dollar is seen to be a bullish factor for commodities traded in other currencies. The London Robusta Coffee, Cocoa, Corn, Sugar, Gold, Silver and Palladium markets ended the day on firmer note, while the New York Arabica Coffee, Soybean, Wheat and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.241 Sterling, at 1.085 the Euro and with the US Dollar buying 4.863 Brazil Real.
The New York and London markets started the day yesterday trading to the north of par on a buoyant note respectively. The markets oscillated around par for the remainder of the early morning session, before attracting some degree of selling pressure to the New York market drop below par and trend softer during the morning session. The London market continued to trend firmer. As the afternoon progressed, speculative selling returned in volume to the New York floor to trigger stops along the way before finding support to rebound from the earlier lows and recover some of the earlier losses. The London continued to trend firmer before being capped for the day. This saw the market attract some degree of selling pressure to drop back from the highs and settle on a modest firmer note at the close. The New York settled on a softer note at the close, with most of the earlier losses of the day intact.
The London market ended the day on a positive note with 37.38% of the earlier gains of the day intact, while the New York market ended the day on a negative note with 92.16% of the earlier losses of the day intact. This mixed but overall softer close for the markets does little to indicate direction, with the New York market settling near to the lows of the day and the London market dropping back to end the day near to unchanged, one might think that the markets are due for little better than a follow through hesitant start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
JAN 2566 + 17 DEC 176.10 – 4.70
MAR 2484 + 11 MAR 171.20 – 3.95
MAY 2460 + 11 MAY 171.30 – 3.70
JUL 2436 + 10 JUL 172.05 – 3.60
SEP 2422 + 10 SEP 172.95 – 3.55
NOV 2410 + 9 DEC 174.35 – 3.55
JAN 2399 + 9 MAR 176.45 – 3.55
MAR 2386 + 9 MAY 177.45 – 3.55
