Coffee Market Report
The Brazil Real currency has strengthened by 6.08% against the US Dollar over the past two weeks, that has encouraged a withdrawal of producer selling activity within Brazil. This while the new crop harvest is by now mostly complete. A stronger Brazil Real traditionally discourages export selling from Brazil’s coffee producers, which could see a continued degree of internal price resistance and a reticence of producers to sell coffee at current market levels. With the harvest now completed warehouses are likely to be filling up while the corresponding export process continues to experience severe bottlenecks and delays through the continued lack of equipment and capacity in the main ports.
The month of August in Brazil’s coffee producing areas is historically one of the lowest rainfall months of the year, and while this year is no different there is data published by Refinitiv, to indicate that most areas have received marginally above average rainfall for the month thus far, at a cumulative 35.65mm vs the 5-year average of 32.50mm. The Brazil coffee belt is forecast to remain dry for the next week to ten days, with the chance of isolated light rains to come to Espirito Santo and South of Bahia.
Whilst the northern hemisphere coffee commercial industry return to the desk following the traditional summer holidays in an environment where consumer held coffee stocks are reported to be at a low eight weeks of roasting cover, consumer markets continue to grapple with the increased cost of living due to macro-economic pressures. The higher coffee futures market reference prices that have registered a 35.54% increase in the New York Arabica market and an 84.61% increase in the London Robusta market over the past eight months, since January 2024, which is not anticipated to provide much relief to import supply conditions and consumer country coffee prices in the short to medium term.
The Certified washed arabica coffee stocks held against the New York arabica market were seen to decrease by 5,275 bags yesterday, to register these stocks at 838,450 bags, with 98.13% of these certified stocks held in, Europe at a total of 822,807 bags and the remaining 1.87% being held in the USA at a total 15,643 Bags. Of this, a total 402,750 bags, or 48.03% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 13.77% of these certified coffees, from Honduras. The pending grading stocks were seen to increase by 18,010 unchanged; to register 46,595 bags pending grading on the day.
The November 2024 to December 2024 contract arbitrage between the London and New York markets narrowed yesterday, to register this at 35.44 Usc/Lb. This equates to 13.88% price discount for the London robusta coffee.
It was an overall firmer day on the commodity markets yesterday, with the US Dollar softening by 0.30% against a basket of other currencies, a weaker Dollar is traditionally seen to be a bullish factor for commodities traded in other currencies. This ahead of key US Personal Consumption Data that is due to be released on Friday, which may provide guidance on where inflation currently is, in the world’s largest economy. The Coffee, Corn, Sugar, Soybean, Wheat, Gold, Silver and Palladium markets ended the day on a firmer note, while the Cocoa and Platinum markets ended the day on a negative note. The day starts with the U.S. Dollar trading at 1.324 Sterling, at 1.116 the Euro and with the US Dollar buying 5.509 Brazil Real.
The New York and London markets started the day yesterday in muted volume, trading on very firm notes. The London market quickly gained momentum gapping higher at the outset of the early morning session. The New York market was also seen to make significant gains during the early morning session, in comparatively lighter volumes to start the day. Both the New York and London markets were seen to build support as the day progressed, before encountering some degree of resistance during the mid-morning session to drop back from the morning highs.
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 late in the day, to see the market drop back and settle on a very firm note at the close, in fair volumes on the day. The London market set a new high late in the afternoon session before encountering resistance near to the highs of the day to drop back and settle on a firmer note at the close, with more than half of the earlier gains of the day intact, in good volumes on the day. The first notice day for London prompt month September ’24 has now passed with the necessary stops against this month still reflected in the open interest that remains relatively high at 5,947 Lots ahead of the last trading day which is the 25th September 2024.
The London market ended the day on a positive note with 55.27% of the earlier gains of the day intact, while the New York market ended the day yesterday, on a positive note, with 57.14% of the earlier gains of the day intact. The firmer close for the markets might indicate some degree of confidence and direction, albeit that the markets encountered resistance near to the highs of the day late in the day, which may see the markets pressured for a hesitant start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
NOV 4846 + 131 DEC 255.25 + 5.60
JAN 4648 + 135 MAR 253.15 + 6.00
MAR 4469 + 129 MAY 250.80 + 6.00
MAY 4350 + 130 JUL 248.20 + 6.05
JUL 4248 + 133 SEP 245.25 + 5.95
SEP 4177 + 134 DEC 241.90 + 5.75
NOV 4116 + 136 MAR 238.50 + 5.50
JAN 3998 + 110 MAY 235.40 + 5.25
