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 decrease their net long position by 0.45% within this market over the week of trade leading up to Tuesday 26th December 2023; to register a new long position at 39,761 Lots. The longer term in nature Index Fund sector of this market marginally decreased their net long position by 0.13% within the market, to register a new net long position of 65,198 Lots on the day.
Over the same week, the Non-Commercial Speculative decrease their net long position by 6.99% within the market over the week of trade leading to Tuesday 26th December 2023: to register a new net long position of 22,183 lots, which is the equivalent of 6,288,782 bags. This net long position has most likely been little changed following the period of mixed but overall sideways trade that has since followed.
The primary focus for the coffee markets that is contributing towards speculative sentiment on the futures markets meanwhile, remains on the summer weather news to come from Brazil to establish the production potential for the next 2024/25 crop to come. This while exports are flowing to consumer markets and the current 2023/24 crop has recorded 18.52 million bags exported in the first five months of their coffee year, an improvement in export performance of 27.35% when compared to the same time in the 2022/23 season. This while the new robusta Conillon crop that is set to begin harvest in April 2024 and the new July 2024 to June 2025 arabica coffee crop is developing on the trees. There are variations across the expansive coffee production areas, however levels of rainfall are positive in the weather forecasts for across the region for the remainder of this week.
The news on logistics is being followed and in an updated development several of the world’s major shipping lines have announced a continuation of the re-route policy to set their vessels via the Cape of Good Hope on Africa’s southernmost tip. This follows the escalation of geopolitical tensions and security concerns in the Red Sea and Suez Canal shipping lanes. The Suez Canal facilitates around one third of global container ship cargo, with concerns being raised around There are concerns that should these disruptions continue, the disruption in lead times as well as add cost to movement of all goods could lead to the potential for some degree of global inflation.
South Korea’s Agricultural Ministry announced today, that the country will extend the Value-added tax exemption on green coffee imports through to 2025 as part of a broader governmental strategy aimed at easing the financial burden on consumers amid the increasing cost of living. The 10% exemption was introduced in 2022 and initially scheduled to end in December 2023. With the year-on-year growth in coffee imports in South Korea, the Agricultural Ministries announcement today, might continue to encourage business development and coffee consumption trends within the growing coffee shop culture.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to remain unchanged yesterday, to register these stocks at 251,224 bags, with 97.83% of these certified stocks being held in, Europe at a total of 245,773 bags and the remaining 2.17% being held in the USA at a total 5,451 Bags. Of this, a total 50,080 bags, or 19.93% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 63.30% of these certified coffees, originating from Honduras. There was, meanwhile, a drawdown of 3,483 bags in the number of bags pending grading to the exchange; to register 10,556 bags pending grading on the day.
The March 2024 to March 2024 contract arbitrage between the London and New York markets widened yesterday, to register this at 62.96 Usc/Lb. This equates to 33.11% 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, on the back of a firming US Dollar against a basket of other currencies. The New York Arabica Coffee, Cocoa and Sugar markets ended the day on a positive note, while the London Robusta Coffee, Corn, Soybean, Wheat, Gold, Silver, Platinum and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.264 Sterling, at 1.098 the Euro and with the US Dollar buying 4.926 Brazil Real.
The New York market started the day yesterday trading to the north of par on a firmer note, while the London market carried through the pressure from the close on Friday to start the day trading on a negative note. A continuation for both markets through the early morning session oscillating between par and mildly positive in early trade. As the day progressed, a firmer trend built as activity increased in New York. The arrival of the America’s at the start of their business day pushed New York higher, triggering buy stops along the way to accentuate the gains for the day, this assisted to trigger speculative short covering which saw the New York market gain ground quickly throughout the afternoon session. The late afternoon session saw the London market follow suit, before being capped to limit the gains for the day and see the market drop back from the earlier highs to encounter a large degree of resistance and move below par, the market continued on a softer trajectory during the late afternoon session to settle near to the lows of the day at the close. The New York market continued the upward momentum, before hitting a ceiling to limit the gains of the day during the late afternoon session. The New York market dropped back from the highs of the day to settle on a firmer note at the close.
The London market ended the day on a negative note with 97.37% of the earlier losses of the day intact, while the New York market ended the day trading on a positive note with 43.53% of the earlier gains of the day intact. This mixed close for the markets, with the London market retaining most of the earlier losses and the New York market dropping back from the earlier highs of the day, does little to indicate direction and one might think that the markets might be pressured 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.
MAR 2804 – 37 MAR 190.15 + 1.85
MAY 2732 – 25 MAY 187.65 + 1.45
JUL 2665 – 29 JUL 187.75 + 1.45
SEP 2623 – 30 SEP 188.50 + 1.50
NOV 2595 – 30 DEC 189.80 + 1.50
JAN 2570 – 27 MAR 191.55 + 1.55
MAR 2563 – 27 MAY 192.45 + 1.60
MAY 2556 – 27 JUL 193.25 + 1.55
