Coffee Market Report
Hurricane Gilma has formed off the west coast of Mexico in the Pacific Ocean and has been classified as a category three hurricane. This weather phenomenon is foreseen to be tracking in a westerly direction away from the coastline and not expected to make landfall and thus not seen to pose a climatic threat for the ripening new crop coffees within the Central American and Mexico producer bloc.
Within Brazil, another cold front is forecast to pass through southeastern Brazil, over the weekend with temperatures expected to be in the low teens in degrees Celsius and not expected to drop below zero. Weather volatility has inspired wide speculative moves on the coffee futures markets and this latest forecast is anticipated to have contributed toward some degree of buoyancy in trade this week, along with first notice day technical and commercial action on the prompt month in New York that has transpired and with London first notice day due on Tuesday next week. The cold front that is forecast for the Brazil southeastern arabica areas is likely the last of these for the traditional seasonal winter months seasonally marked by the end of August each year, ahead of September brining in spring and the seasonally rainfall that will be expected in the weeks ahead.
The mainstream northern hemisphere coffee consumer markets are gradually returning following seasonal summer holidays, which would in a normal coffee year, contribute toward some uptick in physical coffee trade during the months to come and ahead of winter roasting in Europe and USA. The latter half of the calendar year in 2024 however will bring forth new coffee harvest activity in producer countries in an uncertain state due to the EU deforestation regulations that are set by the EU on an implementation date 1st January 2025. While coffee producer countries and harvests are underway or will soon begin in the last quarter of this year, there is little clarity on compliance processes for their new coffee crops to be receipted into Europe ahead of the EU stipulated implementation date, information that must come from the European Union. Thus, urgent action will be required from European Union policy makers, to provide substantive actionable compliance tools to the global coffee community. New coffee crops that are to be harvested in fourth quarter 2024 will need to flow to consumer markets, yet within the context of logistical challenges that are a worldwide constraint, unlikely to reach European shores ahead of EUDR implementation date. The European Union as a combined cumulative coffee consumer bloc, accounts for an average 53.50 million bags, or 31.20% of the world's coffee production in import absorption.
The Certified washed arabica coffee stocks held against the New York arabica market were seen to decrease by 660 bags yesterday, to register these stocks at 841,570 bags, with 98.14% of these certified stocks held in, Europe at a total of 825,927 bags and the remaining 1.86% being held in the USA at a total 15,643 Bags. Of this, a total 413,590 bags, or 49.15% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 13.96% of these certified coffees, from Honduras. The pending grading stocks were seen to increase by 7,420 bags; to register 30,516 bags pending grading on the day.
The November 2024 to December 2024 contract arbitrage between the London and New York markets widened yesterday, to register this at 39.15 Usc/Lb. This equates to 15.71% price discount for the London robusta coffee.
It was an overall firmer day on the commodity markets yesterday, investor focus turned to the US Federal Reserve meeting minutes, released yesterday and towards a potential for an interest rate cut anticipated to come in the next policy meeting in September. The Coffee, Cocoa, Corn, Soybean, Sugar, Gold, Silver, Palladium and Platinum markets ended the day on a firm note, while the Wheat market ended the day on a negative note. The day starts with the U.S. Dollar trading at 1.308 Sterling, at 1.115 the Euro and with the US Dollar buying 5.483 Brazil Real.
The New York and London markets started the day yesterday trading to the south of par, pressured lower during the early morning session to accentuate the losses in light volumes of trade. Both markets attracted buying support during the late morning session to track mildly firmer for the remainder of the morning session, gaining momentum, as support was seen to build. As the afternoon progressed the New York and London markets continued to trend in a firmer direction, as trade volume began to pick up, albeit still comparatively light, the markets hit a ceiling to limit the gains for the day with sellers returning to the floor. This saw the New York and London markets drop back from the earlier highs. The London market dropped back from the highs of the day to settle on a firmer note with only some of the earlier gains of the day intact, whilst the New York market dropped back from the earlier highs to settle on a modest firmer note at the close.
The London market ended the day on a positive note with 33.33% of the earlier gains of the day intact, while the New York market ended on a likewise positive note, with 21.43% of the earlier gains of the day intact. This firmer close for the markets, might provide some degree of support and direction, albeit that the London and New York markets fell back from the highs of the day during the session, to possibly see the markets set for a follow through steady start to early trade today, ahead of first notice day in the London market in three days’ time, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
SEP 4954 + 75 DEC 249.25 + 0.75
NOV 4632 + 13 MAR 247.05 + 1.15
JAN 4440 + 13 MAY 244.95 + 1.30
MAR 4279 + 15 JUL 242.60 + 1.40
MAY 4162 + 22 SEP 240.35 + 1.55
JUL 4062 + 30 DEC 237.80 + 1.75
SEP 3989 + 30 MAR 235.15 + 2.00
NOV 3928 + 29 MAY 232.45 + 2.00
