Coffee Market Analysis Report – November 11, 2024

Nov 11, 2024

Global Supply and Demand Overview

The International Coffee Organization (ICO) has maintained its projection for global coffee supply for the October 2023 to September 2024 coffee year, forecasting a 5.83% decrease from the previous year, bringing total supply to 178 million bags. Global consumption is expected to grow by 2.25% year-on-year, reaching 177 million bags. September’s coffee export volume surged by 24.9% compared to the same period last year, totaling 10.76 million bags, thus elevating cumulative exports for the coffee year to 137.27 million bags, an increase of 11.7% compared to the previous period.

Regional Export Developments

In South America, coffee exports demonstrated robust growth, with a 30.8% increase in September compared to the previous year, totaling 6.2 million bags for the month. This contributed to an annual export total of 66.13 million bags for the coffee year, marking a 30.7% year-on-year increase. Notably, Brazil and Colombia were the primary contributors to this growth, with Brazil reporting a 34.3% increase, reaching 49.03 million bags, while Colombia saw a 13.7% increase, exporting 11.91 million bags.

In Asia, exports from Vietnam, India, and Indonesia cumulatively rose by 19.6% in September to reach 1.91 million bags. However, the region’s total exports declined by 6.7% year-on-year, down to 40.62 million bags. Africa saw a 14.3% year-on-year increase in September exports, totaling 1.37 million bags, with an annual increase of 17.3% for the coffee year, reaching 16.02 million bags. Ethiopia notably led this growth, with exports increasing by 63.5% to 5.59 million bags.

Exports from Mexico and the traditional washed arabica-producing Central American bloc—Costa Rica, Guatemala, Honduras, Nicaragua, and El Salvador—rose by 18.1% in September to 900,000 bags. However, for the entire coffee year, exports from the region declined by 4.1%, totaling 14.51 million bags.

Brazil’s Export and Domestic Consumption Insights

Brazil remains the world’s leading coffee exporter, maintaining an average 32% market share over the past five years, equivalent to approximately 38.5 million bags annually. For the July 2024 to June 2025 year, Brazil’s exports are expected to reach record levels, driven by a projected harvest of 66.5 million bags. The country’s exports have already reached 15.64 million bags in the first four months, up 18.75% compared to the same period last year, despite logistical bottlenecks at export ports. At the current pace, Brazil is well-positioned to set new export records this year.

Domestic consumption in Brazil remains high, with annual consumption levels reaching 22.5 million bags, positioning the country as the second-largest consumer of coffee after the United States.

Weather Conditions and Upcoming Harvest Projections

Heavy rains have continued in Brazil’s coffee-growing regions, which is crucial for flowering and early development for the 2025/2026 crop cycle. The initial crop projections for the upcoming harvest are expected to be released in mid-December, following the commencement of field surveys.

Market Prices and Financial Climate

The arbitrage between the New York December 2024 and London January 2025 contracts has widened to 56.92 cents/lb, representing a 21.86% price discount for London robusta. Commodity markets showed a bullish trend yesterday, bolstered by the U.S. Federal Reserve’s announcement of a 25-basis-point interest rate cut, which impacted coffee, cocoa, corn, soybean, sugar, gold, silver, and platinum markets. The U.S. dollar also strengthened, reaching its highest level in four months against a basket of currencies, creating pressure on commodities priced in foreign currencies.

The Central Bank of Brazil raised the Selic rate by 50 basis points, bringing it to 11.25%, as part of measures to curb inflation and stabilize the Brazilian Real, which has depreciated by 2.85% against the U.S. dollar over the past month.

Market Trading Dynamics

Both the New York and London coffee markets opened yesterday with positive sentiment. The New York market started modestly firmer, while the London market showed a more significant early surge. Strong buying interest supported the bullish trajectory throughout the day, with buy stops triggered in the afternoon session. The New York market closed on a strong note, maintaining the majority of its gains, while the London market also closed firmly, reflecting a high-volume trading day ahead of the New York market’s options expiry.

Conclusion

Brazil’s strong export performance solidifies its role as the primary coffee supplier globally, while supply-demand dynamics continue to face pressure due to reduced production levels alongside rising demand. Brazil’s export increases have somewhat offset the robusta supply shortfall resulting from lower yields in Vietnam. Nonetheless, ongoing financial pressures, currency fluctuations, and interest rate changes remain critical factors influencing market behavior and will require close monitoring in the coming months.