Coffee Market Report

The final stretch to the deadline for European Union Deforestation Regulation (EUDR) which is to take hold on 30th December looms, while worldwide logistics and geopolitical disruptions to shipping lanes has led to extended ocean voyage shipment lead times. This slow delivery of coffee from producer countries to consumer markets via extended voyages on the water, would mean that coffee producer countries should already be prepared and aligned for EUDR compliance. The alternative is that the entire supply chain would risk that any coffee shipped from origin producer countries from October onward, will not be reach European ports in time, and may not be accepted into the European Union. The uncertainty created by the methodology of compliance to the regulation, that has already had an unintended impact in stretched resources and inadvertent cost, has also limited the strategic ability of and options for, coffee supply to the European coffee consumer markets. There was some welcome news to come to the markets, announced by the European Commission yesterday, that the Commission would propose a delay to the implementation of European Union Deforestation Regulation by twelve months. The news follows calls from various industry consortium and government lobbies, in response to the unintended consequences that the implementation of the regulation now, may have for millions of small scale farmers worldwide. Although the regulation has been hailed as a landmark in the fight against deforestation and climate change, meeting the regulatory compliance and implementation throughout the supply chain require additional resources, and time. The European Commission states that “the reason for this proposal is additional time needed by third countries, Member States as well as operators and traders to be better prepared and to ensure a smooth start for this important legislation fighting deforestation”. The proposal for a delay to implementation date from the European Commission will need the approval of the European Parliament and Council with less than three months to enact.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to remain unchanged yesterday, to register these stocks at 801,344 bags, with 97.83% of these certified stocks held in Europe at a total of 783,930 and the remaining 2.17% being held in the USA at a total 17,414 Bags. Of this, a total 378,868 bags, or 47.27% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 14.91% of these certified coffees, from Honduras. The pending grading stocks were seen to remain unchanged to register 54,830 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 24.67 Usc/Lb. This equates to 9.62% price discount for the London robusta coffee.

It was a mixed but overall softer day on the commodity markets yesterday, the leading in influence Oil markets registered firm upward momentum in response to the escalating geopolitical turmoil in the Middle East. It was a firmer day for Corn, Soybean, Wheat, Silver, Platinum and Palladium markets ended the day on a firm note, while the Coffee, Cocoa, Sugar and Gold markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.323 Sterling, at 1.104 the Euro and with the US Dollar buying 5.445 Brazil Real.

The New York and London markets started the day yesterday trading to the north of par in modest firmer territory, the markets continued to trade marginally to the north of par in light volumes for the remainder of the early morning session. The upward momentum in both markets retraced positive territory as macroeconomic factors and focus on the development of improved signals for rain to come to the Brazil arabica coffee belt met with speculative seller participation in New York and London to see the markets fall back and continue to trend in a softer direction. As the afternoon progressed the markets slipped lower with limited speculative buyer interest at the top of the early session day, speculative sellers returning to the New York floor to trigger stops 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. As the day progressed to the close selling activity started to wane toward the end of the days’ trade, to see the London market narrowly recover some of the earlier losses of the day, while the New York market was also seen to recover off of the lows of the day during the late afternoon session to settle on a softer note at the close, with most of the earlier losses of the day intact.

The London market ended the day on a negative note with 95.98% of the earlier losses of the day intact, while the New York market ended on a likewise negative note, with 91.85% of the earlier losses of the day intact. This follow through very soft close for the markets and with both the New York and the London markets retaining most of the earlier losses to settle near to the lows of the day, one might think that the markets are due for a hesitant start to early trade today, against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT                 NEW YORK USC/LB.

NOV       5111 – 334                                    DEC       256.50 – 7.65
JAN        4862 – 317                                    MAR      254.75 – 7.40
MAR      4651 – 294                                    MAY       252.80 – 7.00
MAY      4511 – 266                                    JUL         250.35 – 6.65
JUL        4392 – 245                                    SEP         247.45 – 6.25
SEP        4307 – 223                                    DEC        242.55 – 5.85
NOV      4230 – 215                                    MAR       238.05 – 5.65
JAN       4146 – 202                                   MAY         233.85 – 5.50