Coffee Market Analysis Report (01-05 November 2024)
Market Activity and Investor Positions
– New York Arabica Market: The latest Commitment of Traders report shows that the short-term Managed Money fund slightly reduced its net long position by 2.74% in the week ending October 29, 2024, down to 54,747 lots. Meanwhile, the longer-term Index Fund sector saw a marginal decrease of 0.28% in net long positions, now at 53,650 lots. The Non-Commercial Speculative sector reduced its net long position by 1.72%, reaching 38,064 lots, equivalent to 10,790,975 bags.
– London Robusta Market: The Speculative Managed Money fund decreased its net long position by 17.14% to 19,284 lots, equivalent to 3,214,000 bags. This downward trend could likely continue in the near term.
Global Coffee Production and Export Trends
– Brazil: According to Brazil’s Coffee Exporters Association (Cecafé), Brazil’s green coffee exports increased by 24.54% year-on-year in October, totaling 4.38 million bags, including 3.43 million bags of arabica and 908,000 bags of robusta. Favorable weather conditions in key growing regions continue, with higher-than-average rainfall in October, providing beneficial soil moisture.
– Colombia, Central America, and Mexico: The 2024–2025 harvest season has begun to ramp up. Colombian production is forecast to increase by 3.95%, reaching around 13 million bags. Mexico’s output remains stable at 3.20 million bags, while Guatemala is forecast to produce 3.30 million bags, and Honduras is projected to reach 5.20 million bags. Overall, production in the region is expected to show slight growth, primarily driven by increases in Colombia.
Weather and Natural Events Impact
– Brazil: Rainfall remains steady, enhancing soil moisture after a prolonged dry period, which should support crop development for the 2025–2026 harvest season.
– Vietnam: Although Typhoon Trami brought heavy rains to the Central Highlands last week, it caused minimal damage. Forecasts indicate that lower rainfall in the coming period should facilitate the new crop’s harvest and drying.
Global Coffee Consumption Trends
– China: The rapid expansion of Luckin Coffee saw revenue grow by 41.40% year-on-year, with 1,382 new stores, bringing the total to 21,343 outlets across China. Domestic consumption continues to rise, increasing by 14.75% annually, highlighting strong growth potential in emerging coffee markets.
– European Union (EU): With annual coffee consumption of 53.50 million bags (31.20% of global coffee production), the EU remains the largest coffee consumer. A vote on the EU’s Deforestation Regulation (EUDR) on November 13 could extend the policy’s deadline by one year if approved.
Stock Levels and Market Arbitrage
– New York Arabica Certified Stocks: Certified arabica stocks rose by 5,167 bags to a total of 861,590 bags, with 97.90% stored in Europe.
– NY-London Arbitrage: The December-January arbitrage widened to 50.09 Usc/lb, reflecting a 20.36% price discount for London robusta compared to New York arabica.
Overall Insights
Current data indicates a potential increase in coffee production across multiple regions, while global consumption, particularly in China and the EU, remains steady with upward trends. Despite some short-term fluctuations, the market appears set for stability in the near term, as investors await key updates from the upcoming U.S. Federal Reserve policy meeting and presidential election outcomes in the U.S.
