• Arabica coffee rose 0.2% on the week in New York, closing at US₵ 201.15/lb
• On the London exchange, Robusta coffee prices fell 3% to USD 3440/t
• Dollar up 2% to USDBRL 5.17 on the week
• Cepea indicator for Arabica coffee down 1% at BRL 1,125.17/bag
• Cepea indicator for Robusta coffee down 3% to BRL 940.27/bag
• Weather in Vietnam continues to be a market focus
• NOAA: model points to neutral conditions and then the return of La Niña
• Dutch Bros coffee chain's financial results are positive in the first quarter
• US imported 1.99 million bags of coffee in March, up 2% year-on-year
• USDA: Production in 2024/25 in India to fall by 1.5% and remain stable in Guatemala
After ending the previous week with significant losses amid heavy speculative liquidation of contracts, coffee futures prices presented a certain stability with the end of liquidations and due to a practically unchanged scenario in the field of fundamentals. In New York, the most active contract ended last week with a slight gain of 0.2% to US₵ 201.15/lb. On the other hand, in London, Robusta coffee futures fell by 3% to USD 3440/t.
The latest COT/CFTC report showed that between April 30 and May 7, funds in New York reduced their net long position by 5633 contracts to 43343 long contracts. In addition, Index Traders also reduced their net long position by 1862 contracts. During this period, coffee futures prices fell by 2000 points (-9.2%) to US₵ 196.7/lb. In London, liquidation was even more intense, with funds reducing their net long position by 7666 contracts in the period, to 21825 long contracts. Robusta futures fell by USD 643/t (-16%) to USD 3378/t.
Weekly intraday (most active contract) - May 6 to May 10
On the Brazilian domestic market, coffee prices followed the trend seen abroad, especially in London, and ended the week down. The Cepea indicator for Arabica coffee posted losses of 1% over the week, closing last Friday (10) at BRL 1,125.17/bag. The indicator for Robusta coffee fell even more, by 3%, closing Friday at BRL 940.27/bag.
From the point of view of fundamentals, the main focus for agents continues to be the weather conditions in Vietnam. According to weather data, a large part of the country's coffee belt has received accumulated rainfall of between 15 and 150 mm over the last two weeks. However, reports indicate that the volumes were not enough to guarantee adequate development in some regions of the coffee belt. On the other hand, models indicate that almost all of the country's coffee belt should receive between 80 and 200 mm of rain over the next 14 days.
Accumulated rainfall in Vietnam over the last 14 days and forecast for the next two weeks (mm)
Source: StoneX, with data from NOAA/NCEP/EMC (GFS: Global Forecast System), 2024.
Last week, the US agency NOAA released its latest update to the probabilistic model which confirmed the transition from El Niño to a Neutral condition, with an 87% probability of this neutral condition remaining in the May, June and July quarter. The transition to a Neutral condition tends to favor the return of the rains in Vietnam, which has suffered in recent months from a dry and hot weather caused by El Niño. Also in this latest release, the model points to a 69% probability of the return of La Niña from the July, August and September quarter. So far, the models point to a phenomenon of low intensity, which would not be detrimental to the development of production, especially in Brazil. However, if there are changes, a strong phenomenon could cause delays in the arrival of rain during the second semester, as happened in 2020 and 2021. It is therefore necessary to monitor model updates in the coming weeks.
La Niña/El Niño probabilistic forecasts
Source: NOAA. Design: StoneX.
The US coffee shop chain Dutch Bros recently released its financial results for the first quarter of the year, which showed a 39.5% increase in the company's revenues to $275.1 million. In addition, the company opened 45 new stores in 14 American states. According to the report, the company expects to complete between 150 and 165 new stores by the end of the year and achieve revenues of between $1.2 and $1.215 billion. Dutch Bros' results come against the pattern presented by Starbucks, which reported a 2% drop in revenue in the first quarter amid a 4% drop in the company's global sales.
The latest update from the US Department of Agriculture (USDA) showed that the country's coffee imports totaled 1.99 million bags in March, which represents an increase of 22.6% compared to the volume imported in February, but is only 2% higher than the total imported in March 2023. In addition, the accumulated volume in the first quarter of the year was 5.2 million bags, which is 3.5% less than the volume imported in the first quarter of 2023.
US coffee imports (million bags)
Source: USDA. Design: StoneX.
The USDA has begun releasing reports from attachés in coffee producing countries, publishing reports on production in India and Guatemala last week. According to the agency, coffee production in India is expected to fall by 1.5% in 2024/25 due to adverse weather conditions, to 5.97 million bags, of which 4.55 million will be Robusta and 1.42 million Arabica. Coffee consumption in the country is expected to rise by 1.5% to 1.32 million bags and exports are expected to total 6.34 million bags. For Guatemala, the department reduced its estimate for production in 2023/24 by 5% to 3.26 million bags, due to drier weather caused by El Niño. For 2024/25, production was estimated at 3.258 million bags, practically unchanged. Consumption in the country should remain stable at 651,000 bags and exports should total 2.99 million bags. Reports from the other producing countries, including Brazil, Vietnam and Colombia, will be released in the coming weeks.
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