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Coffee Weekly Report

By: StoneX Intelligence Brazil, StoneX Intelligence Brazil

Coffee futures closed lower in the last week of the year; prices showed a sharp decline in 2022
 
Fernando Maximiliano
 
Leonardo Rossetti
volume of trade have been limited in recent weeks due to the end-of-the-year celebrations. However, the market focuses on the outlook for the 2023 crop and the Brazilian weather.
HIGHLIGHTS 

•    Arabica coffee quotes retreated 470 points (2.7%) in NY, ending at US₵ 167.30/lb.
•    Arabica futures in New York dropped by 26% in 2022
•    Robusta prices retreated USD 76/t in London (4.1%) in the week to USD 1799/ton
•    Robusta futures showed a decline of 27.7% in 2022
•    Cepea's Arabica indicator ended the year with a decline of 27.5%, quoted at BRL 1037.90/bag.
•    According to Cepea, Robusta coffee prices dropped by 15,8% in Brazil in 2022
•    Due to the specific characteristics of 2022, the year was marked by great uncertainty and volatility in prices.
•    Attention will turn to the Brazilian crop estimates in 2023 and the weather in the first months of the year.
•    StoneX conducts its crop tour through the coffee-producing regions of Brazil; estimates to be released in the first half of February.

Arabica futures in New York and Robusta in London ended the last week of the year lower, with emphasis on Robusta prices, which fell amid coffee supply and increased availability of coffee in Vietnam – the Vietnamese government will release December export data in the coming weeks. The most active contract in New York ended the week down by 2.7%, while the most active contract in London ended the period down by 4.1%.

Considering the annual balance, coffee futures showed sharp drops during the year. In New York, Arabica contracts ended 2022 down by 26%, going from US₵ 226.10/lb on the last day of 2021 to US₵ 167.30/lb on the last trading day of 2022. During this same period, Robusta futures prices faced an even sharper loss, falling 27.7% in London, closing the year quoted at USD 1799/ton.
 

Coffee futures' trend in 2022

image 59647
Source: CommodityNetwork Traders ' Pro. Design: StoneX.

In the Brazilian domestic market, coffee prices followed international movements and ended the year lower, but with a slightly different scenario for Robusta coffee. The Cepea's Arabica indicator fell by 27.5% to BRL 1037.90/bag on the last trading day of the year, a variation similar to the loss observed in Arabica quotes in New York. According to Cepea's Robusta indicator, the variety dropped by 15,8% in 2022, a lower variation than the losses observed on the London exchange, a reference for Robusta. The less pronounced drop in Robusta prices in Brazil was due to strong demand from the domestic industry, which supported commodity prices in the Brazilian market. 

Coffee prices trend in the Brazilian domestic market in 2022 (BRL/bag)

image 59648
Source: Cepea. Design: StoneX.

2022 was one of the most challenging years for markets and, consequently, for the coffee market. In addition to the "traditional" challenges of coffee, such as lack of transparency, lack of Information, a wide range of estimates and uncertainties related to production and weather, agents had to face a period of uncertainty after the 2021 frost, post-pandemic and the start of the Russia-Ukraine war, raising serious concerns about coffee consumption in the world. As a reflection of these specific conditions in 2022, the coffee market faced a period with very high price volatility and great uncertainties. 

For 2023, there are still many uncertainties, especially around the expectations for Brazilian coffee production. While some players believe in a massive production, with expectations that could exceed the 2020 crop, others do not corroborate this optimism. Much of the attention at the beginning of the year will turn to the estimates for the 2023 Brazilian crop and the weather, which can still damage the crop if unfavorable conditions. The StoneX team conducts its studies in the producing regions, with field teams assessing crop conditions; estimates to be released in the first half of February. 

Regarding fundamentals, in the first weeks of the year, attention will turn to export data from Brazil, Colombia and Vietnam, which will be released in the coming weeks. In addition, as previously commented, the weather continues to play a central role, given that any adversity can generate losses for the 2023 crop. Finally, over the next few months, several estimates for Brazilian production will be released and will dictate the pace of movements in New York and London. 
 

indicators
image 59646
Source: ICE/NY; ICE/EU; B3; Commodity Network Trader’s Pro.
 

image 58497

 
 
  • Coffee

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