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 19.59% within this market over the week of trade leading up to Tuesday 2nd April 2024; to register a new long position at 57,325 Lots. The longer term in nature, Index Fund sector of this market increased their net long position by 6.94% within the market, to register a new net long position of 53,546 Lots on the day.
Over the same week, the Non-Commercial Speculative increase their net long position by 25.60% within the market over the week of trade leading to Tuesday 2nd April 2024: to register a new net long position of 43,059 lots, which is the equivalent of 12,207,036 bags. This net long position has most likely been increased further following the period of firmer trade that has since followed.
The Intercontinental Exchange has issued a new Futures Contract rule, stipulating that any coffee stored in the European delivery warehouses of Barcelona, Bremen, Hamburg or Antwerp which is customs cleared, may not be submitted for exchange grading. This regulation will apply as from the 19th April 2024. The details are expanded to inform that Exchange Certified coffee stored within these warehouses not customs cleared, will lose their Exchange certification status once the coffee is cleared into the applicable European country. This is in reaction to the European Union Deforestation Regulations that will come into effect on the 30th December 2024.
The EUDR was published in the EU Official Journal on 9th June 2023 and entered into force 20 days later 29th June 2023. EUDR, "deforestation-free" stipulates that the itemised agricultural crops; cattle, cocoa, coffee, palm oil, soy, rubber, wood, can be imported into Europe from countries that have not cultivated these items on deforested land. The latter defined as the conversion of forest to agricultural use, whether human-induced or not, since 31 December 2020.
The decision and announcement by the Intercontinental Exchange, to regulate storage on the proviso that the certified coffee must not be customs cleared, is likely in an effort by the Exchange to manage risk in an environment where EUDR regulations have determined that coffee that is not EUDR compliant cannot be accepted into EU countries, after December 2024. Leading one to anticipate that certified coffee stocks, which report registration of coffee in both arabica and robusta consumer country warehouses, to, or from the certified exchange warehouses, and has some degree of influence on the speculative directional view of the coffee futures markets may instead reflect an extra layer of complexity in these certifications and decertification’s in months to come. This by regulatory detail rather than alternative generally accepted supply and demand movements in certified stocks, at least until such time as the regulatory compliances are more universally understood and applied. For the moment, the quantity of Exchange, customs cleared coffees that are stored within the European Union Exchange warehouses is indicated to be negligible.
The Certified washed Arabica coffee stocks held against the New York arabica market were seen to increase by 2,100 bags yesterday, to register these stocks at 615,562 bags, with 99.66% of these certified stocks being held in, Europe at a total of 613,477 bags and the remaining 0.34% being held in the USA at a total 2,085 Bags. Of this, a total 312,662 bags, or 50.79% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 18.60% of these certified coffees, originating from Honduras. The pending grading stocks were seen to marginally increase by 770 bags; to register 73,884 bags pending grading on the day.
The May 2024 to May 2024 contract arbitrage between the London and New York markets narrowed yesterday, to register this at 41.37 Usc/Lb. This equates to 19.60% price discount for the London Robusta coffee.
It was a mixed day on the commodity markets yesterday, the leading in influence energy markets firmer on the day, while the US Dollar oscillated through the morning, to register a firmer close against a basket of other major currencies. The speculative sector of the markets may be looking out for US CPI data and minutes from the US Federal Reserve’s March Policy meeting due out tomorrow. The Cocoa, Corn, Wheat, Gold, Silver, Palladium and Platinum markets ended the day on a positive note, while the Coffee, Sugar and Soybean markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.265 Sterling, at 1.086 the Euro and with the US Dollar buying 5.025 Brazil Real.
The New York market started the day trading to the north of par on a modest firmer note, while the London market started the day trading to the south of par on a softer note, pressured lower from the close on Friday. Both the New York and London markets quickly gained support to set highs for the day during the early morning session, before encountering resistance to drop back and trend softer for the remainder of the day. The markets were pressured lower throughout the late morning session, with some degree of selling in the market. As the afternoon progressed, the New York market continued to trade lower, accentuating the losses for the day, under good volumes of trade. The London was seen to drop lower, pressured by selling activity. The New York market was seen to settle into a range during the late afternoon session, to see the market close on a softer note, while the London market continued to trend softer, before finding support near to the lows of the day, to recover most of the earlier losses and settle on a modest near to unchanged softer note at the close.
The London market ended the on a modest near to unchanged negative note with 4.65% of the earlier losses of the day intact, while the New York market ended the day on a likewise negative note, with 45.90% of the earlier losses of the day intact. This softer close for the markets, albeit that both the New York and London markets recovered most of the earlier losses of the day, with the US Dollar index losing some ground against a basket of other currencies throughout the day’s session, one might think that the markets are due for a steady start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
MAY 3742 – 2 MAY 211.10 – 1.40
JUL 3683 + 4 JUL 209.45 – 1.55
SEP 3595 + 11 SEP 208.45 – 1.70
NOV 3496 + 7 DEC 207.60 – 1.70
JAN 3401 + 6 MAR 207.55 – 1.70
MAR 3321 + 9 MAY 207.15 – 1.70
MAY 3249 + 9 JUL 206.35 – 1.60
JUL 3167 + 9 SEP 205.25 – 1.50
