Coffee Market Analysis Report (26-27 September 2024)
Colombian Coffee Production and Exports Surge
The National Coffee Growers Federation in Colombia has reported a projected 15.04% increase in the country’s coffee production for the 2024/2025 coffee year, with an expected output of around 13 million bags. This rise is attributed to the gradual introduction of climate-resilient coffee varieties, marking a recovery after two consecutive years of La Niña conditions, which saw heavy rainfall disrupt yields. An additional 100,000 hectares are set to be replanted with these new varieties, expanding the total coffee-growing area in Colombia to 842,000 hectares. The federation aims to boost productivity to 17 bags per hectare, supported by higher coffee prices that have enabled farmers to invest more in essential inputs like fertilizers.
Colombia’s coffee exports have also shown resilience, with a cumulative total of 10,819,000 bags exported in the first eleven months of the current coffee year (October 2023 to September 2024), representing a 9.35% increase compared to the same period last year.
Certified Washed Arabica Stocks and Market Trends
Certified washed Arabica coffee stocks held against the New York exchange saw a reduction of 6,034 bags, bringing total stocks to 831,727 bags. The majority of these stocks (97.91%) are held in Europe, with the remaining 2.09% stored in the USA. Of these stocks, 48.40% originate from Brazil, with 14.40% from Honduras. Pending grading stocks remained unchanged at 10,881 bags. The arbitrage between the November and December 2024 contracts for the London and New York markets widened to 26.85 Usc/Lb, equating to a 10.03% price discount for London robusta coffee.
Market Performance Overview
The commodity markets experienced a broadly firmer day, influenced by positive movements in key markets, including oil, ahead of anticipated U.S. inflation data. This speculation suggests potential further interest rate cuts, driving gains in coffee, cocoa, sugar, soybean, gold, silver, platinum, and palladium. However, corn and wheat markets saw softer performances. Both the New York and London coffee markets exhibited strong upward momentum throughout the day, although gains were moderated by resistance during mid-morning trading. By the close, the London market retained 37.50% of its gains, while the New York market held onto 61.48%.
Uganda’s Coffee Industry Steadies Ahead of New Season
Uganda, Africa’s leading robusta producer and fourth largest exporter to non-producing consumer markets, is expected to maintain coffee production at around 6.50 million bags for the 2024/2025 coffee year. This output is composed of 5.50 million bags of robusta and 1 million bags of arabica coffee. The Uganda Coffee Development Authority (UCDA) reported exports of 5.82 million bags in the first eleven months of the current coffee year, and the country is expected to surpass the 6 million bag mark.
Efforts to boost robusta productivity are underway, driven by strong market prices and increasing demand. The UCDA, in partnership with the Agricultural Business Initiative (aBi), is working on a National Action Plan to comply with the European Union Deforestation Regulation, with a target of registering at least one million farmers by year-end. A National Traceability System is being developed to support these compliance processes, with a government allocation of 13.90 billion Uganda Shillings.
Indonesia and Vietnam: Production Outlooks and Market Dynamics
Indonesia’s April 2024 to March 2025 crop is projected to reach 11.50 million bags, a 31.45% increase over the previous year, driven predominantly by robusta coffee. The domestic market is expected to absorb 4.80 million bags, while imports will supplement local coffee roasting and soluble coffee production activities.
In Vietnam, limited supplies of current crop robusta have created a tight internal market, but favorable weather conditions for the upcoming October 2024 to September 2025 harvest signal potential relief. The new crop is estimated at 28 million bags, 95% of which will be robusta. The market anticipates harvest activities to commence in the coming weeks, which should ease supply constraints.
Brazil’s Weather Challenges and Market Implications
In Brazil, the coffee-growing regions experienced dry conditions following sporadic rainfall, with rain expected to arrive by mid-October. Adequate rainfall is crucial for triggering the flowering season in arabica-growing districts and setting the stage for the 2025/2026 crop. The performance of the upcoming rain season will be closely monitored as it will significantly impact next year’s crop development, especially after weather-related challenges in the 2024/2025 harvest.
Certified Robusta Stocks and Market Dynamics
Certified robusta coffee stocks held against the London Exchange decreased by 110,333 bags, registering a total of 820,167 bags in northern hemisphere warehouses. Brazil Conilon robusta accounts for over 80% of these stocks. The November to December 2024 arbitrage between London and New York markets narrowed to 22.08 Usc/Lb, translating to an 8.21% price discount for London robusta.
Commodity Market Trends
The broader commodity markets responded positively to speculation about a second consecutive interest rate cut, with gold reaching record highs. The coffee, cocoa, corn, sugar, soybean, wheat, gold, and platinum markets closed on a firm note, while silver and palladium faced softer closes. The New York and London coffee markets began the day on softer notes but gained momentum to close on a positive trajectory, reflecting ongoing investor confidence in the market outlook.
