Coffee Market Report
The weather forecasters are indicating sporadic rainfall across the vast regions of the Brazil coffee growing areas for the remainder of this week, a relatively normal forecast as this largest producer country heads towards the seasonal drier winter months to come. The Brazil Real has depreciated by 4.93% over the past week and settled around the low for the year against the US Dollar, yesterday. The Brazil Real weakness to the US Dollar can traditionally encourage increased selling activity within the interior of Brazil, as returns to producers are increased in Brazil Real terms, however, producers are relatively well financed and continue to take a measured stance, with the prevailing Brazil coffee export year drawing to a close soon, and the new robusta harvest already begun in the Conillon areas, to be followed mid-year by the arabica harvest. There is limited incentive for internal selling activities to become more aggressive at this time, within the current coffee futures market environment.
Weather conditions within Vietnam continue to be monitored closely, as reports come to the fore that April is drier than average conditions thus far for this largest Robusta producer, while the new October 2024 to September 2025 crop develops. The central highlands of Vietnam are experiencing comparatively drier weather at this time of year, in that the rain season is traditionally due to begin in April, weather forecasters are predicting rainfall to start to pick up towards the end of the month, which will be a much welcome sign to producers and coffee market players alike. This as a recovery in production is needed to continue to fuel consumer market demand, following lower-than-average robusta production during the October 2022 to September 2023 coffee year registered at 26.50 million bags, which saw robusta demand outweigh supply in line with a combination of factors including increased robusta usage in consumer markets and lower robusta production due to biennially bearing factors. The forecast for the current coffee year is at a median estimate for the October 2023 to September 2024 Vietnam robusta coffee production to reach a total 28.50 million bags. This larger crop is assisting to boost exports to the consumer markets although the potential for carry-over stocks into the next 2024/2025 year is likely to be limited, so long as Vietnam continues to be the dominant robusta coffee in northern hemisphere blends. Thus, the success of the development of the next Vietnam robusta crop is a factor that is being closely monitored by all market participants.
The Certified washed Arabica coffee stocks held against the New York arabica market were seen to increase by 7,357 bags yesterday, to register these stocks at 630,856 bags, with 99.67% of these certified stocks being held in, Europe at a total of 628,771 bags and the remaining 0.33% being held in the USA at a total 2,085 Bags. Of this, a total 296,516 bags, or 47.01% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 18.05% of these certified coffees, originating from Honduras. The pending grading stocks were seen to increase by 1,035 bags; to register 57,848 bags pending grading on the day.
The July 2024 to July 2024 contract arbitrage between the London and New York markets widened yesterday, to register this at 50.07 Usc/Lb. This equates to 20.83% price discount for the London Robusta coffee.
It was a mixed day on the commodity markets yesterday, with the US Dollar gaining ground against a basket of other currencies, a firmer Dollar is traditionally seen to be a bearish factor for commodities traded in other currencies. The Coffee, Cocoa, Soybean, Silver and Palladium markets ended the day on a positive note, while the Corn, Sugar, Wheat, Silver, Gold and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.247 Sterling, at 1.068 the Euro and with the US Dollar buying 5.233 Brazil Real.
The New York market started the day yesterday trading on a modest softer note, while the London market started the day trading on a firmer note carrying through momentum from the close on Tuesday. 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, ahead of First Notice Day on Monday 22nd April in the prompt month, 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 positive note with 95.20% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note, with 89.50% 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 in good volume of trade. One might therefore think that the markets will be set for another hesitant steady start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
MAY 4234 + 229 MAY 247.95 + 11.20
JUL 4195 + 218 JUL 240.35 + 11.95
SEP 4111 + 215 SEP 238.40 + 11.55
NOV 4000 + 206 DEC 236.45 + 10.95
JAN 3883 + 199 MAR 225.40 + 10.60
MAR 3801 + 199 MAY 234.00 + 10.50
MAY 3739 + 204 JUL 232.40 + 10.50
JUL 3664 + 213 SEP 229.95 + 10.50
