Coffee Market Report
The latest Commitment of Traders report from the New York arabica market has seen the Non-Commercial Speculative sector increase their net long position by 10.14% within the market over the week of trade leading to Tuesday 25th. June 2024: to register a new long position of 47,713 lots, which is the equivalent of 13,526,424 bags. This net long position has most likely been decreased marginally following the period of mixed but overall softer trade that has since followed.
The latest Commitment of Traders report from the London robusta coffee market has seen the Speculative Managed Money Sector increase their net long position by 7.24% within the market over the week of trade leading to Tuesday 25th. June 2024: to register a new net long position of 32,459 Lots which is the equivalent of 5,409,833 bags. This net long position has most likely been little changed following the period of mixed but overall sideways trade that has since followed.
With the month of June complete and shipment statistics already at hand, the Vietnam General Statistics office have estimated that the coffee exports for the month are reported as 40% lower than the same month last year, at a total of approximately 1,416,667 bags. The June 2024 export performance is anticipated to result in the countries coffee exports for the first nine months of the current October 2023 to September 2024 coffee year to be 7.59% higher than the same period last year, at a cumulative total of 25,255,017 bags. The General Statistics office of Vietnam have at the same time estimated that the value of the country’s coffee exports for the first six months of the current calendar year, shall be 34.50% higher than the same period in the previous year, at a total of approximately 3.20 billion US Dollars.
The median estimate for production from the largest robusta producing nation of Vietnam for the current October 2023 to September 2024 crop year is put at around 29.10 million bags, or 4.25% higher than the previous year, estimated to be made up of 28 million bags Robusta coffee and 1 million bags Arabica. The USDA have forecast that the coming October 2024 to September 2025 Vietnam coffee crop that is due to start being harvested later this year, will be 0.35% smaller than the current October 2023 to September 2024 crop, to total 29 million bags. This crop they foresee, to be made up from 27.85 million bags Robusta coffee and 1.15 million bags of Arabica coffee. In addition, there is an estimated carryover stock from the present coffee year to potentially add a very modest 492,000 bags from this largest robusta producer of coffee, into the coming October 2024 to September 2025 coffee year, as this producing country comes off the back of two deficit production years.
The Indonesian government trade data from Sumatra, the leading coffee producing island within Indonesia, has reported that the islands robusta coffee exports for the month of May were 122,544 bags or 53.99% lower than the same month last year, at a total of 104,425 bags. This contributes to the islands cumulative robusta coffee exports for the first two months of the current April 2024 to March 2025 coffee year to be 179,559 bags or 51.34% lower than the same period in the previous year, at a total of 170,193 bags. The new April 2024 to March 2025 coffee year, which is around 85% robusta coffee and the balance arabica coffee, has been conservatively forecast to potentially reach a median of 10.90 million bags. The current firmer London coffee futures market has led to rising internal prices in this primarily robusta-producing nation, influenced by the higher reference price in London for robusta coffee. This market may encourage producers to be selective about when they sell, in light of the supply challenges from Vietnam. As a result, strong competition might emerge within Indonesia's internal market, with the local domestic consumer sector against export consumer markets. Historically, Vietnam and Indonesian robusta coffee has been a preferred choice for European roasters. Indonesia has through time developed their own internal consumption for local and export value addition, making this alternative traditional robusta supplier to consumer markets, extraordinarily expensive in comparison to alternatives. With Brazil, Indonesia and Uganda currently harvesting their mid-year crops, there will be some coffee flow to supply gaps caused by climate issues that have affected Vietnam, and ahead of their new crop to come toward the end of this year, from this largest robusta coffee producer.
The United States Department of Agriculture Foreign Agriculture Service (USDA) have reported that due to good agricultural practices and a coffee rotation and pruning program that has seen old trees taken out of production and replanted, now coming into fruition that coffee production in Uganda for the coming October 2024 to September 2025 coffee year shall be 50,000 bags or 0.74% larger than the current October 2023 to September 2024 coffee year, at a somewhat optimistic total of 6,900,000 bags. This crop is expected to be made up of 5,895,000 bags of Robusta Coffee and 1,005,000 bags of arabica Coffee. Of this new crop, the USDA forecast is that Uganda will export 0.92% more than the current year, at a total of 6,575,00 bags. There is certainly an enthusiasm within the country to increase robusta productivity, a direct relationship to the improved value that producers are receiving for their coffee considering the robusta supply demand shortfall within the worldwide consumer markets, and the record prices reflected in the London futures market.
The mainstream northern hemisphere coffee consumer markets are entering their slower summer holiday season, and privately held arabica inventory levels in consumer markets climbing back to a more comfortable level, the primary focus is on the supply shortfall and its impact on the commercial coffee industry. The market faces a dilemma as Vietnam's coffee crop, which typically supplies consumer markets throughout the year, has seen supply tempered earlier than anticipated this season. Meanwhile, Brazil, Indonesia, and Uganda will soon be ramping up their robusta coffee shipments to try and fill the gap. Vietnam's well-financed robusta producers have been hesitant to sell, holding out for higher internal prices. This lack of volume from the world's largest robusta exporter has contributed to the volatility of the London robusta futures market, recently driving the prompt month to record highs.
There is some complexity in the longer-term sustainability of the prevailing price structure meanwhile, the earning potential encouragement for farmers to plant out more coffee is evident, particularly so in robusta and this could lead to a recovery in production within the next two or so years. Coffee farmers worldwide are already improving husbandry, to increase yields in existing plantations, with the affordability now available to do so. The potential for increased productivity and coffee to fuel the supply pipeline will take time to come to the markets however, while coffee consumer markets continue to operate within fiercely competitive and price pressured economic environments.
The active and influential U.S.A. based markets are closed for the day on the 4th July, in observation of the country's Independence Day holiday, which will see the London market trading solo on the day.
The Certified washed Arabica coffee stocks held against the New York arabica market were seen to decrease by 790 bags on Friday, to register these stocks at 807,394 bags, with 98.81% of these certified stocks held in, Europe at a total of 797,801 bags and the remaining 1.19% being held in the USA at a total 9,593 Bags. Of this, a total 404,200 bags, or 50.06% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 16.05% of these certified coffees, originating from Honduras. The pending grading stocks were seen to increase by 3,625 bags; to register 42,487 bags pending grading on the day.
The September 2024 to September 2024 contract arbitrage between the London and New York markets widened on Friday, to register this at 44.86 Usc/Lb. This equates to 19.78% price discount for the London Robusta coffee.
It was a firmer day overall on the commodity markets on Friday, after newly released U.S. core personal consumption expenditures price index data showed that inflation did not rise from April to May, increasing speculative bets that there would be interest rates to come during the final quarter of the year. The New York Arabica Coffee, Cocoa, Sugar, Soybean, Gold, Silver, Platinum and Palladium markets ended the day on a positive note, while the London Robusta Coffee, Corn and Wheat markets ended the day on a negative note. The day starts with the U.S. Dollar trading at 1.265 Sterling, at 1.075 the Euro and with the US Dollar buying 5.592 Brazil Real.
The New York and London markets started the day on Friday trading on firmer notes respectively, making gains during the morning session to see both the New York and London markets set a new high for the days session early in the day. The late morning session saw the markets drop back from the early highs as there was a degree of selling pressure seen to weigh the markets lower. As the afternoon progressed, the New York and London markets traded back through par, albeit under light volumes of trade, to set a narrow range for the day. The New York market rebounded from the lows of the day to gain support for the remainder of the session and see the market settle on a modest firmer note with only some of the earlier gains of the day intact. The London market recovered from the lows of the session to trend firmer towards the close. The market encountered resistance late in the day to limit the upward momentum and see the London market settle on a softer note at the close, with more than half of the earlier losses of the day intact.
The London market ended the day on a negative note with 54.55% of the earlier losses of the day intact, while the New York market ended on a modest positive note, with 20.45% of the earlier gains of the day intact. This mixed close for the markets, with the London market recovering most of the earlier losses to settle near on a modest softer note and the New York market settling on a modest firmer note, might inspire some degree of follow through support to possibly see the markets set for a steady start to early trade today, against the prices set on Friday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
SEP 4011 – 36 SEP 226.80 + 0.45
NOV 3850 – 15 DEC 224.50 + 0.30
JAN 3680 – 11 MAR 222.85 + 0.25
MAR 3588 – 9 MAY 220.95 + 0.15
MAY 3523 – 11 JUL 219.10 + 0.20
JUL 3465 – 12 SEP 217.25 + 0.35
SEP 3402 – 12 DEC 215.50 + 0.70
NOV 3357 – 12 MAR 214.10 + 0.90
