Coffee Market Report
The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector cut their net long position by 3.60% within the market over the week of trade leading to Tuesday 18th. June 2024: to register a new long position of 43,321 lots, which is the equivalent of 12,281,312 bags. This net long position has most likely been increased following the period of mixed but overall firmer trade that has since followed.
Weather conditions within the main coffee growing regions, the Central Highlands of Vietnam is highlighted as a point of focus for the markets as reports indicate that the region has been impacted by drier weather and extreme heat over the months of March through to May. The Mercantile Exchange of Vietnam MXV have reported that they expect a 10%-16% reduction in production output due to the adverse weather conditions experienced earlier in the year. Seasonal rainfall is reported to have commenced and is soon expected to pick up and continue through to October, which will be a much welcome sign to producers and coffee market players alike.
The respected U.S. Department of Agriculture Global Agricultural Network USDA have come forth to revise their early forecast for the October 2023 to September 2024 coffee crop from Colombia, higher by 6.09%, to now total 12.20 million bags. The same report has forecast the new crop to come from Colombia for the forthcoming October 2024 to September 2025 coffee year, at an anticipated marginal 1.64% increase on that of the previous coffee production year, at a total of 12.40 million bags. It is anticipated that Colombia will export marginally more than the current coffee year, during the 2024/2025 coffee year, at a total of 10.80 million bags.
The respected U.S. Department of Agriculture Global Agricultural Network USDA have reported their forecast for the exclusively arabica coffee crop from Honduras for the present October 2023 to September 2024 coffee year, to reach an overall 5.30 million bags, or 7.02% lower than the previous coffee production year October 2022 to September 2023 that is reported at 5.70 million bags. The same report has forecast that the new crop to come from Honduras for the forthcoming October 2024 to September 2025 coffee year, is anticipated to remain stable from the current year. The new arabica crop which is due to start harvest toward the end of the year, is forecast to come in at 5.30 million bags. Of this new crop to come, the forecast is that Honduras will export 5.00 million bags or 2.04% more than the current year.
To the north in Mexico, the USDA Global Agriculture Network estimate ahead of season a marginally higher production than 2023/24 to come in 2024/25, to potentially reach 3.90 million bags. The quality washed arabica coffee producer Guatemala is foreseen to be on par with their production in the current coffee year, and the forecast for the coming October 2024 to September 2025 coffee year to reach a total of 3.12 million bags. There are signals however as the year progresses that this producer is already well sold. Other, neighbouring Central American washed arabica quality coffee producers, Nicaragua forecast to reach 2.68 million bags production or 10.28% higher year on year, Costa Rica, estimated to reach 1.10 million bags or steady year on year, along with the approximate mostly steady 450,000 bags estimated to come from El Salvador.
The Certified washed Arabica coffee stocks held against the New York arabica market were seen to increase by 3,849 bags yesterday, to register these stocks at 835,444 bags, with 98.92 % of these certified stocks held in, Europe at a total of 826,401 bags and the remaining 1.08% being held in the USA at a total 9,043 Bags. Of this, a total 431,773 bags, or 51.68% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 15.68% of these certified coffees, originating from Honduras. The pending grading stocks were seen to increase by 532 bags; to register 52,212 bags pending grading on the day.
The September 2024 to September 2024 contract arbitrage between the London and New York markets widened yesterday, to register this at 43.38 Usc/Lb. This equates to 18.36% price discount for the London Robusta coffee.
It was a firmer day on the commodity markets yesterday, with the US Dollar softening against a basket of other currencies, a weaker Dollar is traditionally seen to be a bullish factor for commodities traded in other currencies, along with speculative focus this week on the U.S. core personal consumption expenditures price index (PCE) data due to be released on Friday. The Coffee, Sugar, Soybean, Gold, Silver, Palladium and Platinum markets ended the day on a positive note, while the Cocoa, Corn and Wheat markets ended the day on a negative note. The day starts with the U.S. Dollar trading at 1.269 Sterling, at 1.074 the Euro and with the US Dollar buying 5.390 Brazil Real.
The New York and London markets started the day yesterday trading on a firmer note. 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 day on a positive note with 77.49% of the earlier gains of the day intact, while the New York market ended on a likewise positive note, with 89.64% of the earlier gains of the day intact. This 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 albeit under modest volumes of trade, ahead of first notice day on the prompt month in the London market due in less than two days’ time, following from first notice day in the New York market which took place last week. 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.
SEP 4252 + 148 SEP 236.25 + 11.25
NOV 4063 + 130 DEC 234.25 + 11.00
JAN 3885 + 112 MAR 232.80 + 11.00
MAR 3792 + 108 MAY 230.75 + 11.15
MAY 3729 + 107 JUL 228.60 + 11.25
JUL 3671 + 108 SEP 226.25 + 11.20
SEP 3588 + 108 DEC 223.80 + 11.15
NOV 3543 + 108 MAR 221.75 + 11.00
