Coffee Market Report
The coffee production in Brazil, Colombia, and Central America have faced climatic challenges, particularly the El Niño phenomenon experienced from the third quarter of 2023 through to the end of the first quarter in 2024. El Niño, characterised by the periodic warming of sea surface temperatures in the central and eastern Pacific Ocean, can alter weather patterns globally.
In Brazil, El Niño can cause hot and dry weather in key coffee-growing regions, such as Minas Gerais and São Paulo. This warmer weather can lead to stressing of coffee plants and reduced bean size turnout and yield. This factor, now that the harvest is underway, is being monitored by the coffee market closely.
The median industry forecast for the current July 2024 to June 2025 Brazil coffee crop was initially, pre-harvest, put at around 68.50 million bags, however concerns have been raised regarding the reports of lower bold bean intake and uneven ripening compared to the same period last year, which may lead to possible lower independent and private industry crop revisions in the weeks to come. This Brazil crop is still likely to be somewhere in the region of a sizeable 67 million bags plus, although limited carryover stocks and low consumer market inventory conditions that prevails, may see further crop news from Brazil, fuel further speculative sentiment in the already volatile, weather market related, futures terminal markets.
Similarly, Colombia has experienced weather variations due to El Niño, with the Mitaca coffee crop, which is an important midyear harvest that takes place between April and June, to complement the main harvest season from October to December, experiencing some climatically induced challenges which may result in lower production figures. This crop is primarily grown in the central and southern coffee regions of Colombia. The Mitaca harvest is necessary to maintain a steady supply of coffee throughout the year and supports the livelihoods of many smallholder farmers.
Weather forecasters are predicting favourable conditions for harvesting across Brazil's vast coffee-growing regions for the week ahead, with temperatures expected to be in the lower teens in degrees Celsius. The Brazilian Real has depreciated by 5.87% over June, settling at a yearly low against the US Dollar as of yesterday. This depreciation traditionally encourages increased selling activity within Brazil, as returns to producers are higher in Real terms. A factor that may influence direction within the coffee futures markets albeit in the short term.
The Certified washed Arabica coffee stocks held against the New York arabica market were seen to decrease by 33,975 bags yesterday, to register these stocks at 808,459 bags, with 98.81% of these certified stocks held in, Europe at a total of 798,866 bags and the remaining 1.19% being held in the USA at a total 9,593 Bags. Of this, a total 404,240 bags, or 50.01% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 16.12% of these certified coffees, originating from Honduras. The pending grading stocks were seen to decrease by 8,355 bags; to register 35,807 bags pending grading on the day.
The Certified Robusta coffee stocks held against the London Exchange were seen to increase by 7,833 bags during the week up to the 24th. June 2024, to register a total of 986,500 bags, with Brazil Conillon accounting for over 90% of coffee held against the London Exchange.
The September 2024 to September 2024 contract arbitrage between the London and New York markets narrowed yesterday, to register this at 40.24 Usc/Lb. This equates to 17.94% price discount for the London Robusta coffee.
It was a mixed but overall softer day overall on the commodity markets yesterday, ahead of the U.S. core personal consumption expenditures price index data due to be released tomorrow. This may provide speculative guidance on inflation, and the Federal Reserve monetary policy easing cycle. The Sugar and Platinum markets ended the day on a positive note, the Wheat market remained unchanged on the day, while the Coffee, Cocoa, Corn, Soybean, Gold, Silver and Palladium markets ended the day on a negative note. The day starts with the U.S. Dollar trading at 1.263 Sterling, at 1.069 the Euro and with the US Dollar buying 5.524 Brazil Real.
The New York market started the day yesterday trading to the south of par, pressured lower from the close on Tuesday, whilst the London market started the day trading on a firmer note, gaining momentum to set a new high for the day during the early morning session. The support in London filtered into the New York market to see the market likewise gain momentum and set a new high for the day during the early session. This support was short lived as both the New York and London markets were seen to encounter resistance during the morning session to drop back below par and trend softer for the remainder of the morning session. As the afternoon progressed the volume increased, to contribute to the day’s direction with speculative selling pressuring the New York market lower as stops were triggered along the way. The London market followed suit and the markets continued to project lower with a measure of speculative long liquidation to accentuate the losses for the day’s trade. The late afternoon session saw the markets rebound off of the lows of the day to recover a small degree of losses, to see the markets settle on negative notes at the close.
The London market ended the day on a negative note with 61.70% of the earlier losses of the day intact, while the New York market ended on a likewise negative note, with 77.95% of the earlier losses of the day intact. This follow through softer close for both New York and London markets, with the markets pressured lowered throughout the session to settle near to the lows of the day, might see the markets set for little better than a hesitant start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
SEP 4059 – 58 SEP 224.35 – 4.95
NOV 3873 – 64 DEC 222.50 – 4.75
JAN 3710 – 63 MAR 220.90 – 4.80
MAR 3625 – 61 MAY 219.10 – 4.65
MAY 3562 – 62 JUL 217.05 – 4.55
JUL 3505 – 61 SEP 214.85 – 4.40
SEP 3422 – 61 DEC 212.50 – 4.30
NOV 3377 – 61 MAR 210.85 – 3.95
