W36: Coffee Update

In W36 in the coffee landscape, Arabica coffee futures on the New York Stock Exchange (NYSE) fluctuated. On Tuesday, September 5, the Dec-23 contract increased by 1.02% to USD 1.5345 pound (lb) and slightly rose by 0.23% to USD 1.5380/lb on Wednesday, September 6. These gains were driven by concerns that excessive rainfall in Brazil's coffee-growing regions might delay the coffee harvest. However, on Thursday, September 7, coffee futures declined to USD 1.4980/lb and further dropped to USD 1.4685 on Friday. This decline was influenced by the strengthening of the United States (US) dollar, which reached a six-month peak, and the DXY index crossing the 105 mark. Additionally, information indicating increased coffee supply eased concerns about shortages, leading to a significant drop in coffee prices on both exchanges.

Similarly, on Monday, September 4, the Nov-23 Robusta coffee contract increased by USD 1 per metric ton (mt) to USD 2483/mt, mainly due to concerns about the impact of the El Niño phenomenon on the flowering of the new Brazilian coffee crop. However, on September 5, Robusta futures dropped by USD 30/mt to USD 2453/mt as the ICE inventory report showed an increase of 4.04% (1,360 mt) to 34,990 mt (equivalent to 568 thousand bags of 60-kilograms each). On September 6, Robusta futures rose by USD 3/mt to USD 2456/mt due to the upcoming harvest in Vietnam. Subsequently, on September 7, coffee futures experienced a decline of USD 49/mt, reaching USD 2407/mt. However, on September 8, Robusta futures stabilized at USD 2407/mt as the market adjusted after experiencing significant fluctuations in the international scene. The forthcoming Vietnam harvest, set to commence between the end of Sept-23 and the start of Oct-23, could potentially put downward pressure on prices.

According to the International Coffee Organization (ICO), global coffee exports dropped 1.54% year-on-year (YoY) to 10.21 million 60-kg bags in Jul-23, the tenth month of the 2022/23 harvest. Over the first ten months of the harvest, coffee shipments amounted to 103.74 million bags, reflecting a 5.7% YoY decline. Furthermore, in the 12 months leading up to Jul-23, Arabica coffee exports totaled 74.39 million bags, down by 8.72% compared to the corresponding period in the previous year. Meanwhile, Robusta coffee shipments increased slightly by 0.30% in the same comparison, rising from 49.23 million to 49.38 million bags.

Brazil's coffee exports in Aug-23 totaled 3.29 million bags, up 41.16% YoY. In contrast, Peru's coffee exports in Jul-23 experienced a significant decline, with a 33% YoY drop in volume to 15,388 metric tons (mt) and a 46% YoY decrease in value to USD 65 million. Additionally, the average international market price for Peruvian coffee declined by 19% YoY to USD 4.22/kg. Peruvian coffee was shipped to 29 different destinations, with three countries accounting for 60% of the shipments. The US led the list of top destinations with a 29% share, followed by Germany at 23% and Belgium at 8%.

Lastly, Arabica coffee farmers in the Gayo region of Aceh Province, Indonesia, have commenced their initial harvest period in W36. The price for green beans with 15% moisture content remains stable at approximately USD 5.48/kg (IDR 84,000/kg). This season’s anticipated lower production is attributed to adverse weather conditions during the previous fruiting period. The Gayo region is renowned for its high-quality Arabica coffee and typically experiences two harvest seasons, from September to November and from February to April.

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