Coffee Market Report
The India Meteorological Department have reported that the monsoon rains that traditionally fall from June through to September are likely to be prolonged into late September this year due to the development of a low-pressure weather system across the country. It is also reported that the monsoon rainfall could be further influenced by the development of the La Nina weather phenomenon, which will bring with it increased rainfall to the area. India has received on average, 7% more rainfall this monsoon season when compared to last year, which has led to flooding in isolated areas. The impact of the prolonged rains will depend on the intensity and duration, which will be closely monitored in the weeks ahead. This is not expected to affect the development of the new 2024/25 predominantly robusta coffee crop that will begin harvest around November this year. This new crop is expected to be marginally smaller than the previous year at a total 5.97 million bags.
The Intercontinental Exchange have reported that 57,820 bags of arabica coffee were tendered to the exchange for grading on the 28th August 2024, bringing the total number of bags pending grading to 104,415. An increase of 75,730 bags or 265% from last week. The largest contribution toward the increase in pending grading stocks, is Brazil semi-washed arabica coffee, supported by shipments from Central American washed arabica country Nicaragua as well as Peru. The prevailing New York arabica market conditions are conducive to lead one to anticipate that there may be some further replenishment of Brazil semi-washed arabica to the certified stocks as the Brazil 2024/25 crop flows to the markets, although through difficult logistical conditions. These daily released certified washed arabica coffee stock figures tend to be viewed by the speculative sector of the markets, as an indication of arabica coffee availability, in consumer markets and thus the sharp increase in pending grading stocks may be viewed as short term bearish indicator for the markets.
The USA will be observing their Labour Day holiday on Monday the 2nd September, which will see the New York market closed for the day. Thus, leaving the London market to trade solo on the day.
The Certified washed arabica coffee stocks held against the New York arabica market were seen to increase by 8,505 bags yesterday, to register these stocks at 840,190 bags, with 98.14% of these certified stocks held in, Europe at a total of 824,547 bags and the remaining 1.86% being held in the USA at a total 15,643 Bags. Of this, a total 394,985 bags, or 47.01% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 13.69% of these certified coffees, from Honduras. The pending grading stocks were seen to decrease by 12,641 bags; to register 91,774 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 25.29 Usc/Lb. This equates to 10.21% price discount for the London robusta coffee. This arbitrage is at a 5-year low level, following an arbitrage between the London and New York markets that at its widest since the outset of the current decade was recorded at 67% in February 2022. The prevailing arbitrage is considered to reflect prevailing tightness in demand for robusta coffee, while the London robusta market trades at record highs. The perceived value of robusta coffee may become less attractive to consumer roasters, in comparison to the alternative and against New York, tenderable washed arabica coffee readily available to draw from, in consumer markets.
It was an overall softer day on the commodity markets yesterday, with newly released US jobs data indicating that unemployment remained high in the month of August, contributing to speculation that the first in a series of interest rate cuts will come next month. The Cocoa, Corn, Soybean, Sugar, Wheat, Gold, Silver, Platinum and Palladium markets ended the day on a firmer note, while the Coffee markets ended the day on a negative note. The day starts with the U.S. Dollar trading at 1.316 Sterling, at 1.107 the Euro and with the US Dollar buying 5.629 Brazil Real.
The New York and London markets started the day yesterday trading to the north of par on modest firmer notes respectively, the markets were pressured lower during the early morning session, weighed by selling in the market in limited volumes of trade. The markets were seen to trade in modest softer territory for the remainder of the morning session before being pressured lower by selling activity. As the afternoon progressed, the markets continued in a softer manner, before some degree of speculative long liquidation followed, to see both the New York and London markets drop and set a new low for the day, in a large range on the day. The markets found support near to the lows of the day to see the New York market marginally recover some of the earlier losses of the day to settle on a very soft note at the close. The London market recovered most of the earlier losses to settle on softer note at the close, albeit with only some of the earlier losses of the day intact.
The London market ended the day on a negative note with 13.81% of the earlier losses of the day intact, while the New York market ended the day yesterday on a likewise negative note, with 70.80% of the earlier losses of the day intact. This softer close for the markets, does little to inspire confidence, albeit that the markets recovered from the lows of the day during the late afternoon session, which may indicate some degree of consolidation following yearly high set in New York and record high set in London this week, one might think that the markets are due for a follow through hesitant start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
NOV 4901 – 25 DEC 247.60 – 8.85
JAN 4692 – 25 MAR 245.20 – 8.80
MAR 4503 – 34 MAY 242.80 – 8.80
MAY 4383 – 32 JUL 240.00 – 8.95
JUL 4276 – 34 SEP 237.00 – 9.05
SEP 4203 – 35 DEC 233.65 – 9.00
NOV 4140 – 35 MAR 230.10 – 9.00
JAN 4050 – 35 MAY 226.80 – 8.75
