Coffee Market Analysis Report (September 30 – October 2, 2024)
1. COMMITMENT OF TRADERS (COT) REPORTS
New York Arabica Market:
The latest COT report for the New York Arabica coffee market shows a 4.54% decrease in the Non-Commercial Speculative sector’s net long position, bringing it to 41,649 lots (equivalent to 11.81 million bags) as of September 24, 2024. This reduction suggests some profit-taking or reduced optimism in market sentiment during that period. However, the firm trading activity that followed is likely to have resulted in a marginal increase in this position.
Additionally, as of October 1, 2024, the Managed Money fund sector in this market slightly reduced its net long position by 0.86%, registering 60,925 lots. In contrast, the Index Fund sector, characterized by longer-term investment strategies, increased its net long position by 0.82%, now totaling 52,716 lots. These contrasting movements reflect the different strategic approaches between short-term speculative and long-term investors.
London Robusta Market:
The Speculative Managed Money sector in the London robusta coffee market also witnessed a reduction in its net long position, down 7.28% to 32,061 lots (5.34 million bags) by September 24, 2024. Similar to the Arabica market, the subsequent period of firmer trade likely reversed this trend, leading to a slight increase in speculative positions. This reduction may reflect temporary uncertainty in the robusta market or a reevaluation of speculative strategies.
2. CERTIFIED COFFEE STOCK LEVELS
Arabica Coffee Stocks (New York Exchange): Certified washed arabica coffee stocks saw a consistent downward trend during the reporting period:
- – On September 30, 2024, stocks dropped by 2,037 bags to 818,183 bags.
- – By October 1, 2024, stocks decreased by 4,184 bags, leaving 813,999 bags in the exchange.
- – On October 2, 2024, stocks fell further by 12,655 bags to 801,344 bags.
Notably, 97.8% of these stocks are held in European warehouses, with Brazil contributing 47.77% of the total certified stocks and Honduras accounting for 14.7%. The increase in pending grading stocks, from 51,731 bags on September 30 to 54,830 bags on October 2, indicates an ongoing influx of supply awaiting certification, which may add pressure to the market in the near term.
Robusta Coffee Stocks (London Exchange): Certified robusta coffee stocks fell by 80,833 bags in the week leading to September 30, 2024, reaching 739,333 bags. This decline, concentrated in consumer country warehouses, signals potential supply-side tightening in the robusta market. The London market may face upward price pressure if stock levels continue to decline at this pace.
3. GLOBAL COFFEE EXPORT PERFORMANCE
Costa Rica: Costa Rica’s coffee exports surged in August 2024, with a 24.74% year-over-year increase to 111,662 bags. Despite this monthly increase, cumulative exports for the October 2023 to September 2024 coffee year were marginally down by 0.23%, totaling 921,507 bags. Looking ahead, the National Coffee Institute of Costa Rica (ICAFE) projects a 5.50% rise in production for the 2024/25 coffee year, potentially reaching 1.37 million bags. This anticipated increase could ease some supply constraints in the region and provide stability to Costa Rican coffee supply chains.
Indonesia (Sumatra): Indonesia’s robusta coffee exports from Sumatra in August 2024 rose by 17.87% year-over-year, reaching 317,585 bags. However, cumulative exports for the April to August 2024 period remained marginally lower by 0.15% compared to the same period in the previous year. The new coffee year forecast for April 2024 to March 2025 suggests total production could reach a median of 11.50 million bags, with robusta accounting for 85% of the output. This forecast reflects a stable supply outlook, though minor fluctuations in export volumes suggest some short-term logistical or production challenges.
4. MARKET MOVEMENTS AND TRADING DYNAMICS
Price Arbitrage Between New York and London Markets: The arbitrage between the New York and London coffee markets narrowed from 20.49 Usc/Lb on September 30, 2024, to 17.17 Usc/Lb by October 2, 2024. This equates to a price discount for London robusta coffee, moving from 7.61% to 6.50% during this period. The narrowing of the arbitrage reflects relative price stability in the New York market while the London market continued to experience bearish pressure, driven by speculative long liquidations.
Daily Market Performance:
- – September 30, 2024: Both the New York and London markets started the day on a weaker note, pressured by speculative selling and geopolitical uncertainty related to Middle Eastern tensions. As volumes increased during the afternoon, speculative selling intensified, pushing both markets lower. By the close, the London market retained 28.13% of its losses, while the New York market held on to 51.08% of its earlier declines.
- – October 1, 2024: The markets opened on a stronger note, supported by firmer trading volumes and buying activity. However, resistance emerged, limiting gains, and by the close, both markets settled slightly higher. The London market held some gains, while the New York market experienced a modest recovery from its earlier highs.
- – October 2, 2024: Both markets faced renewed downward pressure, driven by speculative selling. As volumes picked up in the afternoon, the markets dropped further, though they managed to recover a portion of their losses by the close. London ended with a softer note, retaining more than half of its earlier losses, while New York managed a minor recovery within a broad trading range.
5. BROADER COMMODITY MARKET TRENDS
The coffee markets’ performance mirrored broader trends in the global commodity landscape, with significant volatility across various sectors:
- – Positive Performance: Corn, Soybean, Wheat, and Sugar markets experienced firmer trading on both October 1 and 2, reflecting underlying strength in agricultural commodities.
- – Negative Performance: Coffee, Gold, Silver, Platinum, and Palladium markets, in contrast, faced downward pressure amid speculative selling and broader macroeconomic concerns, including the anticipation of U.S. labor data and possible interest rate cuts.
Currency fluctuations also played a role, with the U.S. Dollar strengthening slightly against major currencies:
- – On September 30, the USD was trading at 1.332 GBP, 1.116 EUR, and 5.434 BRL.
- – By October 2, the USD appreciated to 1.321 GBP, 1.107 EUR, and 5.425 BRL, reflecting its safe-haven status amid global uncertainty.
Conclusion: The coffee market from September 30 to October 2, 2024, exhibited significant volatility, driven by speculative activity and external geopolitical factors. Both Arabica and Robusta markets experienced fluctuations in speculative positions, with net long reductions indicating caution among investors. Falling certified coffee stocks across exchanges highlight potential supply-side constraints, particularly for robusta. In the broader commodity context, coffee markets remain sensitive to macroeconomic developments, with the strengthening U.S. Dollar adding further pressure. Going forward, sustained declines in stock levels, coupled with varying global export performances, suggest a complex near-term outlook for coffee prices.
