Coffee Market Report
The Vietnam Customs Authority have reported that Vietnam’s coffee exports for the month of January have registered 14.80% higher from the previous month, at a record high of 3,971,100 bags. This number is proving to be higher than the 3.25 million bags that had been initially forecast for the month’s coffee exports. This export performance exceeds the average for the month of January for coffee exports from Vietnam which is put at an average 2.36 million bags. The cumulative export performance for the first four months of the current October 2023 to September 2024 coffee year in Vietnam that is the largest producer of robusta coffee, is reported to be 1,019,417 bags or 11.24% higher than the same period in the previous year, at a total 10,088,350 bags.
While the export statistics provided by Vietnam authorities report export performance in January last year at 2,375,733 bags, this export performance during January from Vietnam in 2023 can in part, be attributed to the low period of activity within the interior over the festive Tet Lunar New Year, which was observed in this month last year, and not in February as in 2024. The 2022/23 coffee year registered overall production of 27.60 million bags and an export performance at 25.40 million bags. This compared with five-year median average of 29 million bags production and 24.40 million bags exports.
It is anticipated that the current October 2023 to September 2024 coffee year may once again bring in a robusta coffee crop that is below potential, forecast ahead of harvest is at a perhaps slightly optimistic median 28 million bags, of which the industry estimate is for another 25.50 million bags potential for export. The escalation of the export performance from Vietnam in January 2024 likely reflects a combination of external and internal market drivers, to include catch up shipment commitments from this coffee crop to consumer markets following the 2022/23 below average production year, as well as beneficial internal record prices to producers set against the value the more than twenty-year high in London. As such, the record export figures stated for January 2024, may not immediately reflect the reality of the tighter supply that is anticipated by most industry players to come from Vietnam this year. The current coffee flow and momentum in Vietnam has subsequently plateaued, with producer selling activity slow and measured, as local industry activity attempts to pick up a notch following the return from Tet celebrations observed last week.
The General Statistics office of Vietnam have at the same time, reported the country’s coffee revenue value for the month of January 2024, is reported at 133.70% higher than the same period in the previous year, at a total of approximately 726 million US Dollars.
The month of February has thus far, brought with it improved weather conditions for the main coffee districts in Southeast Brazil, with good rains reported. This follows improved rainfall for the month of January, which has been necessary to ensure soil moisture levels are maintained. There has been some focus on the Conillon robusta areas which had experienced El Niño related record hot days though the last weeks of 2023, as well as below average rainfall recorded through mid-November, into December. Following the last months of 2023 drier and warmer days recorded, there has been a general improvement in rainfall across the expansive Brazil coffee growing areas in January and thus far into February.
In the context of El NiÅ„o 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 indicated that there was a spate of very wet weather during the harvest at the beginning of December. The weather has since improved, and harvest activities were able to progress uninterrupted. Within Nicaragua meanwhile, 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. Weather conditions have for the most part been reported to have normalised with the Central American region, with little to indicate any further climatic stress to hinder the health of the trees ahead of the next flowering to come in 2024, at this stage.
Further to the south, the next new crop harvest may be expected to start in a couple of months' time, in Peru, where the forecasts for the coming April 2024 to March 2025 coffee crop year indicate production will be marginally lower than the current year at a total 4 million bags. The current April 2023 to March 2024 coffee year that is nearing its end is forecast to reach 4.20 million bags or 15.50% increase in production on that of the previous year.
The forecasts from the U.S. Governments National Weather Service’s Climate Prediction Centre maintain the prediction for a 55% potential for a La Niña weather phenomenon to develop later in the year, this following one of the more notable El Niño weather patterns on record, which is forecast to wane through the months ahead, with a La Nina forecast on the horizon.
The Certified washed Arabica coffee stocks held against the New York arabica market were seen to remain unchanged yesterday, to register these stocks at 307,262 bags, with 98.44% of these certified stocks being held in, Europe at a total of 302,457 bags and the remaining 1.56% being held in the USA at a total 4,805 Bags. Of this, a total 114,094 bags, or 37.13% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 39.12% of these certified coffees, originating from Honduras. There was meanwhile a 43,025 bags increase to the number of bags pending grading to the exchange; to register 108,742 bags pending grading on the day.
The May 2024 to May 2024 contract arbitrage between the London and New York markets widened yesterday, to register this at 44.25 Usc/Lb. This equates to 23.76% price discount for the London Robusta coffee.
It was a firmer day on the commodity markets yesterday, as the US Dollar index lost 0.20%, a weaker US Dollar is seen to be a bullish factor for commodities traded in other currencies. The Cocoa, Corn, Soybean, Wheat, Gold, Silver, Platinum and Palladium markets ended the day on a positive note, while the Coffee and Sugar markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.263 Sterling, at 1.081 the Euro and with the US Dollar buying 4.923 Brazil Real.
The New York market started the day yesterday on a softer note, while the London market started the day trading in an upward direction and both markets in light volume to start the day. The early morning session attracted some degree of buying support to see the markets’ trend in a firmer direction. As the afternoon progressed, the New York and London markets continued to track upward, buoyed by spread activity ahead of first notice day in New York, to see the markets hit a ceiling during the mid-afternoon session and a new high set in New York ahead of speculative selling activity returning to the floor. The markets traded within a narrow range for the remainder of the late afternoon session before attracting a degree of buyer support in a void toward the end of the session to register an upward trajectory following a wide range of trade leading to a prompt month positive close in New York, and in London a modestly softer settlement.
The London market ended the day on a negative note with 47.27% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note with 20.45% of the earlier losses of the day intact. The open interest holds with a degree of buoyant activity in technical trade due in New York, in London first notice day on the prompt month in a few days' time, the markets could 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 3248 – 32 MAR 191.60 + 0.75
MAY 3146 – 26 MAY 186.25 – 0.45
JUL 3082 – 19 JUL 185.05 – 0.55
SEP 3020 – 18 SEP 185.00 – 0.45
NOV 2959 – 16 DEC 185.10 – 0.60
JAN 2905 – 19 MAR 185.25 – 0.70
MAR 2877 – 19 MAY 185.55 – 0.85
MAY 2857 – 19 JUL 185.60 – 1.00
