Arabica Coffee Dec '24 (KCZ24)
248.40s USc/lb +2.95 (+1.20%) 10/25/24 [ICE/US]
$8.38 AUD/kg
Robusta Coffee 10-T Jan '25 (RMF25)
4,411s USD/MT +74 (+1.71%) 10/25/24 [ICE/EU]
$6.75 AUD/kg
Brazil's coffee exports hit record highs, despite shipping delays that left 2 million bags stuck at ports. Arabica coffee flowering in Brazil is progressing well due to favourable rains, signalling a strong upcoming harvest. Prices saw mixed movements, with Arabica rising slightly, while Robusta fell due to Vietnam's new crop. Inflation is affecting coffee prices, with increases seen in both the U.S. and Brazil. Lastly, European coffee stocks are rising, helping stabilize supply chains in the coming months.
Arabica Coffee Flowering Reaches Key Milestone
The return of seasonal rains in Brazil has spurred the main flowering stage of Arabica coffee. This development is crucial as it sets the stage for the next crop cycle, determining the volume and quality of coffee. By the end of October, almost 100% of Arabica flowering is expected to be completed, thanks to favourable weather patterns and moisture accumulation of up to 200 mm across major coffee-producing regions. Such robust flowering is above the historical average for this time of year, which could signal a strong upcoming harvest.
Brazilian Coffee Exports Continue to Surge Despite Logistical Hurdles
Brazil has set another record for coffee exports, with 4.5 million 60-kg bags shipped in September 2024, a 33.3% increase compared to last year. However, exporters are facing significant challenges at ports due to logistical delays. Around 2 million bags of coffee remain unshipped, accumulating at Brazilian ports, which could influence both the supply chain and price volatility in the short term. Cecafé reports that 70% of scheduled shipments experienced delays, adding extra costs for exporters.
Price Movements: Arabica and Robusta Diverge
Coffee prices saw mixed results this week, with Arabica gaining 2.1% to settle at US¢ 257.30/lb in New York, while Robusta experienced a decline of 1.3% on the London exchange, quoted at USD 4615/t. Pre-weekend short covering on Friday drove prices higher, with December Arabica closing up 1.2% and November Robusta up 1.42%. However, both Arabica and Robusta saw multi-week lows earlier in the week due to improved weather in Brazil. Short-term rain in Minas Gerais, Brazil's primary Arabica region, and long-term drought concerns are key factors shaping price trends.
Inflation Impact on Coffee Prices
Coffee inflation continues to impact consumers and businesses alike. In the United States, coffee prices have risen by 6.3% over the past year, with the average cost of roasted and ground coffee hitting USD 6.47 per pound. In Brazil, the inflation rate is even higher, with coffee prices soaring nearly 23% year-on-year. This increase is being passed down the supply chain, impacting both the wholesale and retail markets, potentially dampening demand in key regions.
Green Coffee Stocks and Global Consumption Trends
In consumer port inventories, the European Coffee Federation (ECF) reported that stocks increased by 0.44 million bags from July to August 2024, with a total stockpile of 13.7 million bags by the end of September. This easing of freight rates, particularly in Asia, is expected to improve coffee flow in the coming months. Meanwhile, North American coffee consumption surprised on the upside in August, even though total consumption for the year is likely to be slightly below last year’s levels.
Glossary of Terms
Flowering: A key stage in coffee plant development when blossoms appear, which will later develop into coffee cherries. Flowering is essential as it determines the potential yield and quality of the coffee harvest.
Pre-Weekend Short Covering: A trading move where investors buy back short-sold contracts to close their positions before the weekend, often causing a temporary price increase.
Consumer Port Inventories: Coffee stocks stored at ports in consumer regions, such as Europe, the U.S., and Japan, that reflect available coffee supply for the market.
Logistical Bottlenecks: Disruptions in transport, particularly at shipping ports, due to issues like space limitations and scheduling delays, which impact the timely export and distribution of coffee.
European Coffee Federation (ECF): A trade organization representing the European coffee industry, including roasters, traders, and logistics providers. ECF tracks coffee stocks, consumption trends, and trade data within Europe.
ICE-Monitored Coffee Inventories: Coffee stocks overseen by the Intercontinental Exchange (ICE), serving as a measure of coffee availability for futures contracts. Low inventories typically support higher prices.
Short-Term Rainfall Conditions: Temporary rain events, as observed in Brazil’s Minas Gerais coffee region, that help improve soil moisture and support crop growth, impacting short-term coffee prices.
US¢/lb: Price measurement in U.S. cents per pound, commonly used for trading coffee on futures markets like the New York Intercontinental Exchange (ICE).
Excessive Dryness: Extended drought periods that hinder crop growth, as seen in Vietnam’s Robusta regions, reducing yield and potentially leading to higher prices due to limited supply.
Off-Biennial Crop Year: In coffee production, a year of lower output that follows a high-yielding year, due to the plant’s natural growth cycle.
ICE (Intercontinental Exchange): A global platform for trading commodities, including coffee. ICE oversees coffee futures contracts and monitors inventories.
Short-Term vs. Long-Term Price Drivers: Short-term drivers, like temporary rainfall, influence immediate price changes, while long-term drivers, such as extended drought conditions, impact price trends over a longer period.
By staying on top of these developments, you can better plan your green coffee purchases and navigate market shifts efficiently. Keep an eye on pricing trends and weather patterns to optimize your inventory and manage costs effectively.
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