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 increase their net long position by 13.13% within this market over the week of trade leading up to Tuesday 26th March 2024; to register a new long position at 47,936 Lots. The longer term in nature Index Fund sector of this market decreased their net long position by 2.08% within the market, to register a new net long position of 50,032 Lots on the day.
Over the same week, the Non-Commercial Speculative increase their net long position by 20.43% within the market over the week of trade leading to Tuesday 26th March 2024: to register a new net long position of 34,284 lots, which is the equivalent of 9,719,362 bags. This net long position has most likely been increased further following the period of mixed but overall firmer trade that has since followed.
The National Coffee Institute of Costa Rica (ICAFE) have reported that the country’s coffee exports for the month of March were 29.35% lower than the same month last year, at a total of 94,379 bags. This they say has contributed to the cumulative coffee exports for the first six months of the current October 2023 to September 2024 coffee year to be 14.05% lower than the same period in the previous year, at a total of 316,358 bags. The National Coffee Institute of Costa Rica ICAFE, have estimated production for the October 2023 to September 2024 coffee year will total 1.30 million bags or 13% lower than the previous coffee year, this is primarily attributed to unfavourable weather during development as well as a lack of pickers during harvest time.
Over the past year, global coffee stocks have been seen to be drawn down quite dramatically. The reasons illustrated are a combination of factors including inflation in coffee prices over time, cost of capital in retained inventory in mature coffee markets as positive interest rates took hold, with an unhelpful and sustained period of market backwardation or inversion spurred by the need for roasters to draw from locally held consumer country warehouse stocks. The already prevalent squeeze in robusta prices follows a tandem development of an increased allocation and demand for robusta coffee in the international blend, and two years of consecutive lower production of an estimated 2 million bags shortfall in potential to come from leading robusta producer and exporter, Vietnam. Most recently, the escalation of tensions in the Red Sea has created unforeseen complications in shipment routes, container availability and vessel schedule integrity, fuelling the need for roasters to turn to consumer country held coffee stocks and is reflected once more in the inverted market structure as spot demand seemingly outstrips supply.
In the latest consumer stock reports, the European Coffee Federation, E.C.F. have reported that the port warehouse coffee stocks held within reporting warehouses in Belgium, Germany, France, Italy and Spain, to have registered a 2.47% decrease during the month of February 2024 to total 6,696,450 bags at the end of the month. The stocks are reported as 1,901,950 bags robusta coffee, 2,102,500 bags natural arabica coffee Including Brazil semi-washed and 2,692,000 bags washed arabica coffee.
This figure reported at the end of February 2024 is 42.88% lower than the same time last year when the port warehouse coffee stocks registered at 11,724,463 at the end of February 2023. It is worth noting that the overall Robusta stock levels at the end of February, are 21.06% lower over the first two months of the 2024 calendar year and represent only one month of consumption, considered to be very low in terms of roaster demand, illustrating the prevailing overall tightness in the Robusta coffee market.
The new Brazil Conillon robusta crop is shortly due to begin harvest and the coming Brazil arabica coffee crop due to begin harvesting closer to middle of the year. The perspective from many of the earlier reports would indicate that the new Conillon robusta crop shall be in line with the previous year’s production at 22.50 million bags, likely to exceed domestic market demand and provide a boost to potential Conillon robusta exports to consumer markets. The domestic support for local coffee demand is however, geared toward these more attractively priced Conillon robusta coffees, for value add and soluble exports while the prevailing narrow arbitrage may see some internal market players shift towards lower grade natural arabica coffees which present good value against the record high London futures market.
The certified washed arabica coffee stocks held against the New York Exchange continue to register gradual daily increases, climbing from more than twenty-year lows recorded earlier in the year, to register a still comparatively low 604,079 bags yesterday. This marks a drawdown of 138,815 bags or 18.68% from the same time last year when the certified washed arabica coffee stocks registered 742,894 bags on 3rd April 2023. In comparison, these certified washed arabica stocks have increased by 340,521 bags or 129.20% over the first quarter, with the number of bags pending grading to the exchange registered at 68,651 yesterday. The new registrations coming mainly from Brazil semi-washed arabica, Honduras as well as a percentage of registrations coming from Peru.
The Certified washed Arabica coffee stocks held against the New York arabica market were seen to increase by 8,870 bags yesterday, to register these stocks at 604,079 bags, with 99.65% of these certified stocks being held in, Europe at a total of 601,994 bags and the remaining 0.35% being held in the USA at a total 2,085 Bags. Of this, a total 316,089 bags, or 52.33% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 19.03% of these certified coffees, originating from Honduras. The pending grading stocks were seen to decrease by 11,645 bags; to register 68,651 bags pending grading on the day.
The Certified Robusta coffee stocks held against the London Exchange were seen to increase by 25,500 bags during the week up to the 27th March 2024, to register a comparatively low total of 507,833 bags, with Brazil Conillon accounting for 90% of coffee held against the London Exchange. This figure is is 748,500 bags or 59.58%, lower than the same time last year.
The May 2024 to May 2024 contract arbitrage between the London and New York markets narrowed yesterday, to register this at 31.60 Usc/Lb. This equates to 15.98% price discount for the London Robusta coffee.
It was another firm day on the commodity markets yesterday, as investors seemingly anticipate lower interest rate announcements to come from the leading consumer economy, U.S.A., where the Federal Reserve Bank latest assessments hinted at the possibility, to come around mid-year. In somewhat unsteady economic and political macroenvironment that prevails and elections of some national importance to be held in over 70 countries this year, the most on record, there is steady interest in the safe haven currency Gold, which reached an all-time record high during the session yesterday. The Coffee, Cocoa, Gold, Silver, Platinum and Palladium markets ended the day on a positive note, while the Corn, Sugar, Soybean and Wheat markets ended the day on a negative note. The day starts with the U.S. Dollar trading at 1.258 Sterling, at 1.078 the Euro and with the US Dollar buying 5.066 Brazil Real.
The New York and London markets started the day yesterday trading on a firmer note, and New York carrying through momentum from the close on Monday. The London market quickly gained momentum gapping higher at the outset of the early morning session, in limited volume. The New York market was slower to react and having set a higher level, traded either side of par in a comparatively quiet volume morning. Both the New York and London markets were seen to build support as the day progressed. 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, with the London market following suit to make significant gains throughout the afternoon session. The New York market continued the upward momentum before being capped very late in the day, to see the market marginally drop back and settle on a very firm note at the close. The London market followed suit to settle on a very firm note at the close, with most of the earlier gains of the day intact.
The London market ended the on a very positive note with 92.46% of the earlier gains of the day intact, while the New York market ended the day on a likewise very firm note, with 90.15% of the earlier gains of the day intact. This follow through firmer close for the markets, might indicate some degree of support and direction with both the New York and London market gaining momentum throughout the session to settle near to the highs of the day under good volumes of trade. One might therefore think that the markets might be pressured for a steady start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
MAY 3663 + 184 MAY 197.75 + 5.95
JUL 3580 + 184 JUL 197.10 + 6.00
SEP 3490 + 171 SEP 196.40 + 5.70
NOV 3388 + 155 DEC 195.60 + 5.35
JAN 3293 + 135 MAR 195.65 + 5.05
MAR 3206 + 110 MAY 195.75 + 4.65
MAY 3131 + 93 JUL 195.50 + 4.30
JUL 3047 + 89 SEP 194.95 + 4.15
