Coffee Market Report
The latest Commitment of Traders report from the New York arabica coffee market has seen the shorter term in nature Managed Money fund decrease their net long position by 12.41% within this market over the week of trade leading up to Tuesday 8th. October 2024; to register a new long position at 52,367 Lots. The longer term in nature, Index Fund sector of this market decreased their net long position by 5.20% within the market, to register a new net long position of 50,830 Lots on the day.
Over the same week, the Non-Commercial Speculative decrease their net long position by 11.54% within the market over the week of trade leading to Tuesday 8th. October 2024: to register a new net long position of 36,024 lots, which is the equivalent of 10,212,644 bags. This net long position has most likely been decreased further following the period of overall mixed trade that has since followed.
The focus of the markets continues to be the weather dynamics at play and this, with the new crop that has slowly begun harvest in Vietnam for the October 2024 to September 2025 coffee crop, by reports that are already absorbed by the markets, has been hindered by the drier weather as a result of the El Niño weather phenomenon. Although the forecasts vary, there is an acknowledgement that the primarily robusta crop that is due to come from Vietnam is likely to again fall short of potential, with the median estimate for around 26.50 million bags of robusta coffee, down 3.50% from the previous year.
The overall supply and demand scenario for the current October 2024 to September 2025 coffee year, is with the new Brazil 2024/25 coffee year harvest complete, shifting from earlier forecasts of a prospectively larger production year to come, to now reflect a production year that is likely 5.15% smaller than the previous 2023/24 year at a total of around 64.50 million bags, this as hot and dry weather during the cherry development phase has led to a lower intake of bolder bean coffee and resultant reduction in overall crop estimates. Thus, the overall global production forecast for the current coffee year is likely to be a marginal deficit in production versus demand, with inventories within consumer markets continue to reflect low numbers, one might comment that the pipeline of green coffee stocks, in transit and flowing to consumer markets under challenging logistical conditions continue reflect in the structure of the terminal markets.
While Brazil, Colombia, Peru, Indonesia, Uganda and smaller producers in East and Central Africa have completed or are soon to complete harvest to supply the 2024/25 coffee year. The main harvest from Colombia, Central America, Mexico, Vietnam, India, China, are all set to seasonally pick up pace in the weeks ahead. The projection for the coffee year October 2024 to September 2025 is for global production to reach an estimated 169.50 million bags and for global coffee demand in the region of 171.50 million bags.
The overall balance of the supply and demand is tipped toward a more widely accepted view that there will be a marginal deficit for the 2024/25 coffee year and pending any weather volatility or any other as yet unforeseen climatic events, particularly in key producer countries, Brazil, Vietnam, Colombia and Indonesia, which collectively produce on average 120 million bags and export on average 80 million bags of coffee to consumer markets, will be closely monitored ahead of the next coffee production cycle year 2025/26 to boost already low inventories and support worldwide consumer demand through the 2025/26 coffee year.
The northern hemisphere coffee importing consumer blocs, USA, Canada, Europe, and Japan, will soon be heading towards their main winter roasting season. These mature markets in terms of coffee consumption are anticipated to register steady consumption patterns, rather than growth, as had been seen over the previous years heading into the 2020/21 pandemic, to collectively be somewhere in the region of 92 million bags of coffee consumption per annum.
The long-term sustainability of the current price structure remains uncertain, though the potential for higher earnings is motivating farmers, particularly those growing robusta, to expand their coffee cultivation, which could lead to a recovery in production over the next couple of years. Many coffee farmers are already enhancing farming practices to boost yields on existing coffee farms, now more financially feasible in line with improved farm gate prices. However, it will take time for increased productivity to translate into a larger coffee supply, while consumer markets continue to operate in highly competitive and price-sensitive economic conditions.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 8,076 bags yesterday, to register these stocks at 823,163 bags, with 97.96% of these certified stocks held in Europe at a total of 806,389 and the remaining 2.04% being held in the USA at a total 16,774 Bags. Of this, a total 370,387 bags, or 44.99% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 16.46% of these certified coffees, from Nicaragua. The pending grading stocks were seen to decrease by 3,511 bags, to register 59,520 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 32.66 Usc/Lb. This equates to 12.46% price discount for the London robusta coffee.
It was softer day on the commodity markets yesterday, with the leading in influence Oil markets softer on the day following fresh news of economic stimulus measures within China, to boost their economy. This leading to gains in the US Dollar, reaching a two-month high against other currencies on the day. The Coffee, Sugar and Platinum markets ended the day on a firm note, while the Cocoa, Corn, Soybean, Wheat, Gold, Silver and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.305 Sterling, at 1.089 the Euro and with the US Dollar buying 5.596 Brazil Real.
The New York and London markets started the day yesterday trading on a modest firmer note. The London market started the day trading to south of par on a softer note but was seen to reverse the trend quickly to gain momentum gapping higher at the outset of the early morning session, in limited volume. The New York market was slower to react and having set a higher level, traded either side of par in a comparatively quiet volume morning. Both the New York and London markets were seen to build support as the day progressed. 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 very late in the day, to see the market marginally drop back and settle on a very firm note at the close. The London market followed suit to settle on a very firm note at the close, with most of the earlier gains of the day intact.
The London market ended the day on a positive note with 94% of the earlier gains of the day intact, while the New York market ended on a likewise very positive note, with 93.90% of the earlier gains of the day intact. This firmer close for the markets, might indicate some degree of support and direction with both the New York and London market gaining momentum throughout the session to settle near to the highs of the day albeit in modest volumes of trade, ahead of first notice day on the prompt month in the London market due in less than two weeks’ time. One might therefore think that the markets might be pressured for a steady start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
NOV 4969 + 141 DEC 262.05 + 10.00
JAN 4843 + 165 MAR 260.55 + 9.80
MAR 4701 + 159 MAY 258.50 + 9.60
MAY 4585 + 158 JUL 255.30 + 9.05
JUL 4475 + 158 SEP 251.35 + 8.30
SEP 4393 + 159 DEC 245.55 + 7.55
NOV 4319 + 160 MAR 240.35 + 7.20
JAN 4239 + 160 MAY 235.65 + 6.90
