Coffee Market Report
With the month of December almost complete and shipment statistics already at hand, the Vietnam General Statistics office have estimated that the coffee exports for the month of December will be 4.50% lower than the same month last year, at a total of approximately 3,166,667 bags. This they say, shall result in the countries coffee exports for the first three months of the current October 2023 to September 2024 coffee year to be 12.07% lower than the same period last year, at a total of 5,885,417 bags.
The General Statistics office of Vietnam have at the same time estimated that the value of the country’s coffee exports for the 2023 calendar year, shall be 3.10% higher than the same period last year, at a total of approximately 4.20 billion US Dollars.
The Indonesian government trade data from Sumatra, the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month of November were 742,334 bags or 77.45% lower than the same month last year, at a total of 216,039 bags. This contributes to the islands cumulative robusta coffee exports for the first eight months of the current April 2023 to March 2024 coffee year to be 1,749,147 bags or 49.22% lower than the same period in the previous year, at a total of 1,804,328 bags.
Within the washed arabica coffee segment meanwhile and many of these producer countries in harvest, 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 forecast, although improved year on year, is still shy of the country’s average potential production that is put at around 13.60 million bags per seasonal year. Weather conditions within Colombia have for the most part normalised after experiencing two and a half years of excessive rainfall brought about by the La Niña weather phenomenon. The weather has since been conducive for crop development and indications are that although there has been less rainfall during October and November, due to the oscillation to an El Niño weather phenomenon, this is still considered adequate. With the harvest now progressing, it is estimated that the country should be able to export approximately 10.80 million bags in the current October 2023 to September 2024 coffee year, an improvement of 12.50% year on year.
The exclusively arabica coffee crop from Honduras for the October 2023 to September 2024 coffee year is forecast to reach an overall 5.35 million bags, or 5.98% lower than the previous coffee year. Of this current crop, the forecast is that Honduras will export 4.95 million bags. In the context of El Nińo weather, the vast Central America region historically experiences drier than usual weather, although this can be influenced by manifestation timing of the phenomenon. Reports from Honduras have come forth to indicate that there has been a spate of very wet weather during the current harvest at the beginning of December. The weather has since improved, and harvest activities are continuing. The National Coffee Institute of Honduras (IHCAFE) have reported that cumulative coffee exports for first two months of the current October 2023 to September 2024 coffee year to be around 16,629 bags or 17.91% higher than the same period in the previous coffee year, at a total of 109,494 bags.
The Coffee Institute in Honduras has indicated that coffee remains the main agricultural export product for the country, to contribute a sizeable 3% of national GDP, according to the most recent report. Concerns have been raised within the washed arabica producer sector of a lack of affordability within the prevailing price environment, for farmers to adequately apply inputs and harvest their fields. This is in combination with other socioeconomic factors that has seen a growing migration trend from the rural areas to urban environments. The attraction of urban employment instead of rural farming livelihoods continues to present a generational pull, which is nowadays exacerbated by a collective generational desire to have access to the online world and connectivity. The latter services are still somewhat scarce in many countries that lack sufficient infrastructure in rural areas.
The average estimate by independent forecasters for the current October 2023 to September 2024 Guatemala coffee year, for their quality washed arabica coffee, is for a steady year on year production ahead, at an estimated at 3.44 million bags, of which it is anticipated that 3.15 million bags will be exported to consumer markets. The harvest is in peak and is due to continue through the first couple of months in the New Year. There was a logistical disruption at the tail end of the past crop, heading into the new coffee year as different civil groups in Guatemala initiated a national strike within the country ahead of the scheduled inauguration of the president elect. The extraordinary, extended protest events which followed, resulted in disruption in the flow of goods to and from the ports in October and November, leading to several delays in export shipments from this country. The internal situation and port congestion has since improved in Guatemala, however, the latest weather related, logistical congestion that has developed along shipping lanes routed via the Panama Canal could lead to more delays to delivery to consumer markets, and slowdown in South and Central America coffees to the northern hemisphere consumer markets.
Neighbouring Central American washed arabica quality coffee producers, Nicaragua, is forecast to reach 2.55 million bags production for the October 2023 to September 2024 coffee year, marginally lower than the previous year, along with the approximate steady 680,000 bags of washed arabica coffee that is estimated to come from El Salvador over the same coffee year. The coffee harvest in higher altitude regions is underway with weather reported to be conducive. The onset of the El Niño weather system had brought about some concern of potential risk of insufficient moisture in later coffee development stages, however there are subsequent reports that the impact of drier weather has not been as severe as initially anticipated while drier weather is conducive for harvest underway. The El Nino weather phenomenon is forecast to begin to dissipate in the months ahead, and so long as weather patterns return to a ‘normal’ neutral environment ahead of time, there is little to indicate any further climatic stress to hinder the health of the trees ahead of the next flowering to come in 2024.
In Mexico, production for the October 2023 to September 2024 coffee year is forecast to remain steady at an estimated total of 3.50 million bags. The hurricane season in the Gulf of Mexico brought with it a category five Hurricane Otis. This is not considered to have had crop damaging potential; however, these storms do bring about significant challenges to the region, devastating humanitarian disaster, heavy rainfall, strong winds, flooding and landslides. When these storms severely damage infrastructure it often takes extended time to repair, creating obstacles to the process of delivery of coffee to mills, and the route to market becomes more challenging from already remote areas. Mexico has a growing local consumption and value addition coffee industry meanwhile, and alongside coffees that are imported for the purpose, consumption is estimated at around 2.95 million bags, in 2023/24 coffee year. It is estimated that the country should export approximately 2.00 million bags in the current October 2023 to September 2024 coffee year, on par with the previous year.
Peru is nearing the end of the country’s April 2023 to March 2024 washed arabica export season and this coffee year is forecast to reach 4.20 million bags or 15.50% increase in production on that of the previous year. With a modest coffee consumption in Peru, the forecast estimate is that Peru should export around 4.06 million bags of coffee in the 2023/24 coffee year, slightly higher than the prior year. There is however an altered landscape in the overall softer prices to be had for washed arabica prices year on year, which could see this country as well as other tenderable washed arabica coffees, either carrying higher inventories at origin warehouses in costly storage and high interest rate economic environments between harvests, or alternatively shipping to the certified warehouse of the New York arabica exchange, to be graded to the certified warehouses of the New York exchange.
The harvest of the new crop arabica coffees from Papua New Guinea is complete, with this country producing 95% arabica coffees. The 2023/24 arabica coffee crop initially forecast by the USDA to reach 850,000 bags, or 3.03% higher than the previous year.
The dominant washed arabica producer bloc remains Colombia, Central America, Mexico and Peru, that collectively produces an annual 31.50 million bags, and this together with approximately 30% washed arabica production made up from coffee producing nations in Africa and Asia, where the new harvest season harvest for arabica coffee to come from China, India and Vietnam is underway. Within China, it is the Yunnan Province where mainly arabica coffee is grown and this year forecast to produce a potential 1.8 million bags. Within the producing nations of India and Vietnam, arabica coffee production represents a smaller portion of overall coffee production. The USDA have reported that the coming October 2023 to September 2024 Indian arabica coffee of around 80% washed process to potentially reach 1.23 million bags, representing 21.17% in overall production. Vietnam, meanwhile, with greater recognition internationally as the leading producer of robusta coffee, is expected to produce 1.07 million bags of arabica coffee during the 2023/24 year, around 3.45% of overall coffee production from Vietnam.
With global washed arabica production forecast cumulatively around 44.30 million bags for the October 2023 to September 2024 coffee year, there is an anticipation for an overall improvement of 2.19 million bags or 5.20% year on year.
The overall estimated international demand for washed arabica coffee, has tracked a steady trajectory over time as mature coffee consumer market consumption has flattened out over time, though balanced in part by new coffee consumer markets driving a growth trend. The evidence of lower demand for fine washed arabica coffee that currently prevails, may have set out initially though a gradual price consequence that was created by a shortfall in supply and a lack of availability, that in 2021 pushed demand and differentials for these quality coffees to fresh highs. A surge in physical coffee cover through uncertain pandemic years, followed by the Brazil 2021 frost market conditions, pandemic related logistical issues, an inverted futures market, energy cost increases and positive percentage interest rate hikes, have taken a toll on consumer market affordability. Coffee consumption trends in mature markets such as northwest continent Europe have shifted over the time, as the traditional drip method of brewing coffee progressed toward single serve, bean to cup and other brewing methods with portion control and less waste. High pressure extraction brewing methods are historically suited to bodied coffees, the growing popularity of this brewing method widespread through international coffee shop chain expansion has likely been a contributory conduit, in tandem with market forces, such as availability and comparatively attractive prices, in the shift in trend in mature coffee consumer market acceptance, and absorption of higher percentage of natural arabica and more recently, the inclusion of a percentage of robusta coffee, to now make up a combined dominant presence in the international coffee blend.
Coffee consumption within the European Union is preliminarily estimated to have decreased by 4.23% during the October 2022 to September 2023 coffee year when compared to the previous year to total, 54.30 million bags. The USA and Canada have comparatively registered a 4.56% decrease in coffee consumption during the October 2022 to September 2023 coffee year, when compared to the previous year, to an estimated total 29.30 million bags. With the drawdown in consumer stocks observed within Europe, one might assume that the stock position within the USA has also experienced a decline. The Green Coffee Association of the U.S.A. announced earlier this year that the Association will no longer release the monthly reports of the level of green coffee stocks within the country. In the last publicly available report, the GCA announced that the country’s port warehouse stocks were registered at 6,016,272 bags at the end of the March 2023.
Japan is considered a mature coffee consumer market and has reported year on year growth from the October 2022 to September 2023 coffee year to the current coffee year where consumption has posted a comparatively positive consumption increase year on year. This, following a few years of economic deflation compounded by Covid19 lockdown, a gradual consumption recovery is reported at 7.31 million bags or 6.16% larger year on year.
With the exclusion of Brazil, which is a well-established coffee consumer market that is second only to the USA in consumption terms; there are relatively new coffee consumer markets which have developed over time, mostly within the coffee producer sector; countries such as China, India, Indonesia and Vietnam, have registered increased internal coffee consumption, as well as growth within the value add and export sector. Albeit that for these more traditional tea consumer markets, coffee consumption is developing from a very low base. There has similarly been an increase registered over recent years in non-producer countries in southeast Asia, Middle East, and to some extent, Africa, as the trendy out of home coffee shops in urban areas, attract younger generations to coffee consumption.
China continues to report year on year growth in coffee consumption, with the USDA reporting that domestic consumption is forecast to grow by 4% during the October 2023 to September 2024 coffee year, to total 5 million bags. This is mainly comprised of coffees produced locally within China, with less than 40% of the total consumption reported to be imported coffees.
The USDA estimates the October 2023 to September 2024 domestic coffee consumption in India could grow by 2.42% to 1,270,000 bags, when compared to the previous year. This is indicated to be largely driven by sales of soluble coffee for at home consumption through e-commerce and retail channels. As well as a rise in at home consumption that will be supported by the out-of-home hospitality HORECA hotels, restaurants, catering and institutional sectors.
The domestic coffee market in Indonesia is by now considered a mature consumption market, and has shown marginal growth during the April 2022 to March 2023 coffee year, reported by the USDA to register a steady 0.43% increase year on year, this supported by the development of local roasting and value add industries, absorbing a percentage of local coffee production as well as assisted by permitted imports of other origin coffees. Domestic consumption in Indonesia is made up of a combination of local and imported soluble products as well as local and imported roast and ground coffee products and is forecast by the USDA to be in the region of 4,790,000 bags in the 2023/2024 coffee marketing year.
There has similarly been an increase registered over recent years throughout non-producer nations in southeast Asia, Middle East, and to some extent, Africa, as the trendy out of home coffee shops in urban areas, attract younger generations to coffee consumption.
Growth in coffee consumption in South Korea continues to rise, with overall coffee imports during 2022 reaching a record 3.33 million bags or 9.50% higher than the previous year, according to Korean Customs Services, with consumption statistics for the 2023 calendar year shortly due to be released, one might expect to see a continued level of growth. These imports primarily made up of 90% green bean raw material, with the remainder roasted finished product. This growth in consumption is being led by the growing coffee shop culture, with a large percentage of the population living in urbanised areas.
Overall, the demand for coffee continues to register increases year on year out of Asia and is put at 33.50 million bags or 2.5% higher than the previous year October 2022 to September 2023 coffee year. This with another positive consumption year ahead in 2023/24 year, estimated to potentially reach 34.90 million bags.
The Middle East as a consumer bloc is benefiting from supportive promotional activities within the public and private sector in these countries, with the aim to develop and build upon the coffee trade and consumption. In this respect consumption growth over the past year is indicated at an increase of 41.35% year on year though the October 2022 to September 2023 coffee year, to reach a cumulative 7.35 million bags.
The New York and London markets are closed for the day on Monday 1st January 2024 and shall resume trade on Tuesday 2nd January 2024.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 11,458 bags yesterday, to register these stocks at 258,399 bags, with 97.89% of these certified stocks being held in, Europe at a total of 252,948 bags and the remaining 2.11% being held in the USA at a total 5,451 Bags. Of this, a total 54,070 bags, or 20.93% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 62.78% of these certified coffees, originating from Honduras. There was a drawdown of 13,176 bags in the number of bags pending grading to the exchange; to register 9,495 bags pending grading on the day.
The March 2024 to March 2024 contract arbitrage between the London and New York markets narrowed to register this at 64.83 Usc/Lb. This equates to 32.74% price discount for the London Robusta coffee.
It was a mixed day on the commodity markets yesterday, in light pre-holiday trade volumes with speculative expectations for interest rate cuts to come as early as March 2024. The Coffee, Cocoa, Sugar, Wheat and Platinum markets ended the day on firmer note, while the Corn, Soybean, Gold, Silver and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.274 Sterling, at 1.107 the Euro and with the US Dollar buying 4.852 Brazil Real.
As the year draws to a close, the futures markets trade in relatively muted volumes which can add considerable speculative and technical volatility, as low volume meets with comparatively large orders in either direction.
The New York and London markets started the day yesterday trading modestly above par, albeit in light pre-holiday volumes. The markets continued to trade near to par for the remainder of the morning session. As the afternoon progressed, the arrival of the America’s at the start of their business day pushed New York higher, in a speculative move upward and in a void of seller pressure and speculative short covering continued to drive the New York market in positive territory throughout the afternoon session. There was a degree of resistance as the late afternoon progressed to limit the gains for the day, the market altered track lower, to be met with increased selling activity to accentuate the losses and the market settled on a near to unchanged note at the close. The London market followed the New York market higher throughout the session, to maintain most of the gains at the close and settle on a firmer note.
The London market ended the day on a positive note with 79.76% of the earlier gains of the day intact, while the New York market ended the day trading on a likewise modest near to unchanged positive note with 6.94% of the earlier gains of the day intact. The follow through firmer close for the markets, albeit that the New York market settled near to unchanged, losing most of the earlier gains of the day during the late afternoon session, might inspire some degree of follow through support, to possibly see the markets set for a steady start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
MAR 2936 + 67 MAR 198.00 + 0.25
MAY 2849 + 37 MAY 195.75 + 0.40
JUL 2771 + 22 JUL 195.90 + 0.50
SEP 2724 + 19 SEP 196.50 + 0.50
NOV 2697 + 18 DEC 197.65 + 0.85
JAN 2669 + 13 MAR 199.30 + 1.00
MAR 2662 + 13 MAY 200.05 + 1.10
MAY 2655 + 13 JUL 200.65 + 1.30
