Coffee Market Report

The winter months are approaching in the southern hemisphere, and this, traditionally sees the focus of the speculative sector within the coffee markets to shift to the largest coffee producer and exporter, Brazil and the potential for the arrival of cooler weather to the vast coffee growing areas in Brazil. This coffee producer country accounts for on average 40.50% of global coffee production. There is some degree of dependency in world consumption terms upon this origin to produce good volumes of coffee year on year, to fuel both their own internal coffee demand as well as consumer market export demand. Thus, weather forecasts will be monitored closely by both the speculative sector and coffee industry participants, as winter months progress through August, with the potential to add further volatility to the coffee futures markets, in the short to medium term.

The focus of the European coffee consumer markets remains to the East, in light of the supply/demand imbalance from the world’s largest Robusta coffee producer, Vietnam. With a recovery in production 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. 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 noting that the potential for carry-over stocks into the next 2024/2025 year is likely to be limited and thus the development of the coming Vietnam robusta crop 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 5,142 bags yesterday, to register these stocks at 652,672 bags, with 99.72% of these certified stocks being held in, Europe at a total of 650,835 bags and the remaining 0.28% being held in the USA at a total 1,837 Bags. Of this, a total 306,940 bags, or 47.03% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 17.45% of these certified coffees, originating from Honduras. The pending grading stocks were seen to decrease by 1,930 bags; to register 55,934 bags pending grading on the day.

The July 2024 to July 2024 contract arbitrage between the London and New York markets narrowed yesterday, to register this at 32.40 Usc/Lb. This equates to 14.34% price discount for the London Robusta coffee.

It was a mixed day on the commodity markets yesterday, with the US Dollar gaining 0.20% 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, Sugar and Wheat markets ended the day on a positive note, while the Corn, Soybean, Gold, Silver, Palladium and Platinum markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.246 Sterling, at 1.071 the Euro and with the US Dollar buying 5.147 Brazil Real.

The New York and London markets started the day yesterday trading to the north of par in modest firmer territory, albeit that this was short lived as the markets quickly reversed the trend to follow lower during the early morning session. Both the New York and London market set new lows during the morning session to find support and rebound. As the afternoon progressed, both the New York and London markets rallied, finding support as stops were triggered along the way to accentuate the gains for the day, albeit under relatively modest volumes of trade ahead. The London market continued to trend firmer, before hitting a ceiling very late in the day to see the market limit the gains and settle on a very firm note at the close. The New York market was also seen to a hit resistance late in the day to drop back from the highs and settle on a firmer note at the close, with most of the earlier gains of the day intact.

The London market ended the on a positive note with 79.26% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note, with 72.32% of the earlier gains of the day intact. This firmer close for the markets, with the New York and London markets tracking upward throughout the session before finding resistance late in the day to drop back from the highs, might indicate some degree of pressure, to possibly see the market set for a hesitant start to early trade today, against the prices set yesterday, as follows:

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

JUL     4266 + 149                                        JUL    225.90 + 4.05
SEP     4181 + 137                                        SEP    224.25 + 4.15
NOV   4055 + 131                                        DEC   222.60 + 4.00
JAN    3912 + 129                                        MAR  221.90 + 3.90
MAR  3830 + 136                                        MAY   220.70 + 3.75
MAY  3780 + 132                                        JUL     219.40 + 3.70
JUL    3710 + 137                                        SEP     217.25 + 3.65
SEP    3651 + 137                                        DEC    215.05 + 3.75