Coffee Market Report
The analysts Safras & Mercado have reported that Brazil coffee farmers have sold around 62% of the estimated total production of 66.04 million bags from this current Brazil Coffee crop. The pace of sale currently across a five-year average is reported to be around 60%, thus illustrating that current crop sales are marginally ahead that of the recorded five-year average. The internal market within Brazil remains tight, with producers continuing to release coffee at a measured pace, while exporters look to take cover on forward commitments. The performance of the Brazil Real exchange rate against the US Dollar may continue to influence local sentiment in the short term as weakness to the US Dollar can traditionally encourage some degree of selling activity within the interior of Brazil, as returns to producers are increased in Brazil Real terms.
The weather reports from Brazil indicate that the main arabica coffee districts in Southeast Brazil have been in receipt of good rains over the recent days. It is forecast that these rains continue over the next week with a moderate cool and wet front moving in from the southeast, assisting to keep temperatures in the mid-twenties in degrees Celsius.
There have been weather reports from Vietnam, that forecast persistent rains due to fall over the Central Highlands over the weekend and into the new week. This as the world’s largest Robusta coffee producer has begun their new October 2024 to September 2025 coffee crop harvest. Traditionally one would look to the cessation of the rains around this time to assist producers to begin their harvest. The relative persistence of the coming rains will be monitored over the coming days, as a prolonged continuation of rainfall may potentially delay the on-going coffee harvest.
The European Union Council announced yesterday that there has been an agreement to the European Commission’s proposal to postpone the implementation date of the European Union's Deforestation Regulation (EUDR), which was initially set to be enforced end December 2024. The final approval will need to be officially confirmed by a European Union Parliamentary vote, due to take place on the 13th of November 2024. Should the vote be in favour of a delay to the implantation of EUDR, the new implementation date will be 30th December 2025. This would provide additional time to ensure the smooth and effective implementation of the regulations, including the establishment and onboarding of an EU reporting instrument and due diligence system as required to cover the relevant commodities, including cattle, coffee, cocoa, oil palm, rubber, soya and wood.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 521 bags yesterday, to register these stocks at 837,519 bags, with 97.99% of these certified stocks held in Europe at a total of 820,745 and the remaining 2.01% being held in the USA at a total 16,774 Bags. Of this, a total 385,222 bags, or 45.99% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 15.99% of these certified coffees, from Nicaragua. The pending grading stocks were seen to increase by 9,596 bags, to register 43,421 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 42.64 Usc/Lb. This equates to 16.71% price discount for the London robusta coffee.
It was firmer day on the commodity markets yesterday, geo-political tensions continue to create a degree of uncertainty in the markets, while the European Central Bank cut interest rates by 25 basis points for the third time this year. The Cocoa, Corn, Sugar, Wheat, Gold, Platinum and Palladium markets ended the day on a firm note, while the Coffee, Soybean and Silver markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.302 Sterling, at 1.084 the Euro and with the US Dollar buying 5.653 Brazil Real.
The New York market started the day yesterday trading to the north of par, gaining support from the outset, whilst the London market started the day trading on a softer note, pressured lower during the morning session. The support in New York filtered into the London market to see the market likewise gain momentum and set a new high for the day during the early session. This support was short lived as both the New York and London markets were seen to encounter resistance during the morning session to drop back below par and trend softer for the remainder of the morning session. As the afternoon progressed the volume increased, to contribute to the day’s direction with speculative selling pressuring the New York market lower as stops were triggered 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. The late afternoon session saw the markets rebound off of the lows of the day to recover a small degree of losses, to see the London market settle on a very soft note at the close with most of the earlier losses of the day intact, whilst the New York market recovered from the earlier lows to settle on a negative note with only some of the earlier losses of the day intact.
The London market ended the day on a negative note with 86.13% of the earlier losses of the day intact, while the New York market ended on a likewise negative note, with 61.96% of the earlier losses of the day intact. This softer close for both New York and London markets, with the markets pressured lowered throughout the session to settle near to the lows of the day in a comparatively light volume session, might see the markets set for a hesitant start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
NOV 4685 – 174 DEC 255.15 – 2.85
JAN 4598 – 154 MAR 253.85 – 2.80
MAR 4492 – 136 MAY 252.00 – 2.70
MAY 4402 – 116 JUL 248.90 – 2.55
JUL 4318 – 96 SEP 245.15 – 2.35
SEP 4242 – 93 DEC 239.25 – 2.35
NOV 4165 – 97 MAR 233.95 – 2.35
JAN 4085 – 97 MAY 229.20 – 2.30
