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 conditions to El Niño Southern Oscillation (ENSO) neutral conditions is likely to take place between April and June this year. 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. The longer-term U.S. Governments National Weather Service’s Climate Prediction Centre weather forecasts meanwhile point towards a 55% potential for La Niña weather phenomenon, although the strength and timing of this weather phenomenon will contribute to determining any as yet unforeseeable impact that this could bring, historically La Niña weather brings drier weather conditions to the south-eastern regions of Brazil.

The Vietnamese internal market continues to be muted as coffee farmers and exporters have been off the field of play, as they celebrate the Tet New Year which has brought in the Year of the Dragon. The Tet New Year holidays are due to be complete by the 14th February, when market players are expected to return to their desks.

Logistical disruptions continue to be felt in coffee consumer markets. The onset of shipping disruptions in the Suez Canal has led to shipping lines rerouting vessels, causing extended transit and arrival lead times to consumer markets. This has particularly affected coffee-producing countries in the equatorial and Indian Ocean regions, such as Vietnam, India, Indonesia, and East Africa. The altered schedules and shipping routes have impacted exports to key consumer markets in the northern hemisphere. Additionally, constraints in the South Pacific and Oceania shipping lanes due to low water levels in the Panama Canal, further exacerbate the situation. These challenges, combined with an already lower-than-average consumer market inventory position, continue to fuel volatility in the coffee markets.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 807 bags yesterday, to register these stocks at 289,552 bags, with 98.34% of these certified stocks being held in, Europe at a total of 284,747 bags and the remaining 1.66% being held in the USA at a total 4,805 Bags. Of this, a total 100,492 bags, or 34.71% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 41.64% of these certified coffees, originating from Honduras. There was meanwhile, no change to the number of bags pending grading to the exchange; to register 65,114 bags pending grading on the day.

The March 2024 to March 2024 contract arbitrage between the London and New York markets narrowed yesterday, to register this at 41.61 Usc/Lb. This equates to 22.04% price discount for the London Robusta coffee.

It was a mixed day on the commodity markets yesterday, with the US Dollar index gaining 0.1% against a basket of other currencies. The London Robusta Coffee, Cocoa, Sugar, Soybean, Silver and Platinum markets ended the day on a positive note, while the New York Arabica Coffee, Corn, Wheat, Gold and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.261 Sterling, at 1.078 the Euro and with the US Dollar buying 4.996 Brazil Real.

The New York and London markets started the day yesterday trading to the south of par in softer territory, both markets were seen to oscillate around par for the remainder of the early morning session. The New York market attracted some degree of selling pressure to see the market drop back and trend softer into the late morning session. As the afternoon progressed the London market was seen to build support and make gains for the day, this saw the market continue to trend in a firmer direction before being capped to limit the gains for the day during the early afternoon session, while the New York market continued to trend in a softer direction, extending the day's losses. The New York market attracted fresh buying activity late in the day, limiting the losses for the day during the afternoon session, ahead of first notice day on the prompt month on the 21st February. This market registered a recovery albeit to settle on a negative note at the close, while the London market settled on a firmer note at the close, maintaining some of the earlier gains of the day.

The London market ended the day on a positive note with 71.43% of the earlier gains of the day intact, while the New York market ended the day on a negative note with 80.85% of the earlier losses of the day intact. This mixed but overall softer close for the markets does little to inspire confidence, with the New York market dropping back from highs of the day to settle on a negative note towards the close, one might think the markets might be due for a steady start to early trade today, against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT                 NEW YORK USC/LB.

MAR   3245 + 25                                          MAR   188.80 – 1.90
MAY   3109 – 6                                            MAY    185.85 – 2.00
JUL     3024 – 14                                          JUL      185.15 – 1.95
SEP     2950 – 18                                          SEP      185.25 – 1.85
NOV   2891 – 19                                          DEC     185.50 – 1.85
JAN    2852 – 20                                          MAR    185.90 – 1.60
MAR  2827 – 20                                          MAY     185.95 – 1.65
MAY   2810 – 20                                         JUL       185.90 – 1.70