W37: Coffee Update

In W37 in the coffee landscape, Arabica coffee futures on the New York Stock Exchange (NYSE) fluctuated. On September 11, the Dec-23 contract increased by 2.83% to USD 1.5285 pounds (lb) after hitting a three-week low of USD 1.476/lb at the beginning of the trading session due to a weakening of the United States (US) dollar. However, on September 12, Arabica futures dipped to USD 1.52/lb, and on September 13, they further decreased to USD 1.5195/lb. These declines were attributed to the US dollar's appreciation against the Brazilian real, contributing to strong selling pressure from Brazil. In contrast, on September 14, and September 15, Arabica futures rebounded significantly to USD 1.54/lb and USD 1.5915/lb, respectively. These gains were driven by the US dollar's decline against the real, despite recent export data from Brazil indicating an increase in exports the previous month.

Similarly, on September 11, the Nov-23 Robusta coffee contract increased by USD 32 per metric ton (mt) to USD 2,439/mt, primarily driven by a weakened US dollar ahead of US inflation data. However, on September 12, Robusta futures dropped by USD 9/mt to USD 2430/mt as the ICE inventory report rose to the highest level in two and a half weeks on Monday. The market also continues to monitor preparations for the Vietnam harvest, which should begin in the coming weeks and could put pressure on prices in London. Meanwhile, on September 13, Robusta futures rose by USD 49/mt to USD 2,479/mt due to the upcoming harvest in Vietnam. On September 14 and September 15, coffee futures increased to USD 2,495/mt and USD 2,556/mt, respectively, as the Brazilian real reached a 2-week high. This development discouraged Brazilians from selling coffee for export in the context of the ICE market.

In Aug-23, Brazilian coffee exports reached 3.67 million 60-kg bags, marking a significant year-on-year (YoY) increase of 29.4%. The foreign exchange revenue from these exports also rose by 7.5% YoY, reaching USD 723.8 million. This contributed to a total of 6.672 million bags of coffee shipped in the first two months of the 2023/24 crop year, generating foreign exchange revenue of USD 1.354 billion. These figures represent a 24.5% YoY increase in volume and a 6.6% YoY increase in value. Furthermore, during the first eight months of 2023, the United States (US) remained the largest importer of Brazilian coffee, purchasing 3.885 million bags, although this volume was 26.6% lower compared to the same period in 2022. This accounts for approximately 17% of the total Brazilian coffee shipments during this period.

Conversely, Vietnam's coffee exports in Aug-23 only reached 84,647 mt (about 1.41 million bags), down 30.97% YoY. This figure was lower than the earlier estimate of 90 thousand mt by the General Statistics Office. Consequently, the cumulative coffee exports for the first eight months of 2023 declined by 5.37% YoY. Moreover, the United States Department of Agriculture (USDA) forecasts Vietnam's coffee exports in the 2023/24 season at 27.5 million bags (60 kgs), the lowest level in the past three crop seasons. The forecast also suggests that the potential emergence of El Niño could negatively impact coffee crops in leading Asian-producing countries, particularly Vietnam, presenting a significant challenge for restoring coffee supply in the region.