Coffee Market Analysis Report (11-16 October 2024)
Commitment of Traders Report Analysis
– New York Arabica Market: The Non-Commercial Speculative sector has decreased its net long position by 11.54%, reducing it to 36,024 lots (equivalent to 10,212,644 bags) as of October 8, 2024. This decline is likely a response to the mixed trading conditions that have followed.
– London Robusta Market: The Speculative Managed Money sector has also reduced its net long position by 6.02%, resulting in a new net long position of 32,137 lots (equivalent to 5,356,167 bags). Similar to the Arabica market, this decrease reflects the softer trading conditions experienced recently.
Weather Conditions Impacting Production
– Brazil: Recent rainfall across major coffee-growing regions is expected to bolster the flowering of the 2025/26 coffee crop. A cool, wet front is forecasted to enhance conditions in the Southeastern regions. The Brazilian Real has depreciated by 4.27% this month, potentially incentivizing producers to increase selling activity, although many are currently well-financed and taking a cautious approach.
– India: The Coffee Board of India has reported total production for the October 2023 to September 2024 crop at 6.00 million bags, aligning with previous forecasts. However, a slight decline to 5.95 million bags is anticipated for the October 2024 to September 2025 crop due to adverse weather conditions in Karnataka and Kerala, particularly high temperatures affecting flowering and cherry set.
Stock Levels and Market Dynamics
– Certified Stocks: The certified washed Arabica coffee stocks in the New York Exchange increased to 815,087 bags, a significant rise of 82.98% compared to the same period last year. This is largely attributed to Brazilian semi-washed Arabica (contributing 45.22%) and Central American countries like Nicaragua and Peru. Meanwhile, certified robusta coffee stocks on the London Exchange saw a decrease of 12,333 bags, totaling 696,500 bags.
– Pending Grading Stocks: There has been a noted increase in pending grading stocks for certified washed Arabica coffee, rising to 63,031 bags.
Market Pricing and Economic Impact
– Arbitrage Opportunities: The contract arbitrage between the London and New York markets has widened to 34.01 Usc/Lb, reflecting a 13.25% price discount for London robusta coffee.
– Commodity Market Overview: The commodity markets experienced a mixed day, with cocoa, sugar, gold, and silver closing positively, while coffee, corn, soybean, wheat, and palladium closed lower. The U.S. Dollar is trading at 1.307 Sterling, 1.089 Euro, and 5.653 Brazil Real.
Trading Activity and Market Sentiment
– Trading Trends: The New York market opened on a softer note but briefly recovered before succumbing to speculative selling pressure. The London market mirrored this trend, experiencing a similar trajectory. Both markets ended the day lower, with the London market retaining 85.71% of its earlier losses and the New York market retaining 79.85%.
Conclusion
The coffee market is currently navigating mixed signals from production forecasts, stock levels, and weather conditions. Stakeholders should consider these factors alongside the recent Commitment of Traders reports to make informed trading decisions. The anticipated impacts of weather patterns, particularly in Brazil and India, along with the evolving dynamics of certified coffee stocks, will be crucial in shaping market trends in the near term.
