Industry Updates | October 25, 2023

The unexpected rise in NYC last week put pressure on differentials for nearby shipments. ?At the same time, business continues to pick up with interest in both spot coffees and shipments into 2024.?While the crop in Peru is ending, the crop in Colombia is picking up quickly.?In Central America, the #crop is just starting although the flow is still very subdued, and early qualities are not particularly good.?

Colombia

The #coffee #harvest is picking up in all major regions of the country.? Differentials eased again with some good opportunities for 82+ cup and 84+ cup types.??

North

The crop flow in Sierra Nevada has slowed due to heavy rains over the week.?Quality and yields are still low with the better coffees not available for another month.

South

The crop flow in Huila has picked up quickly and there is a good volume of coffee coming into the mills, weather conditions are good.?In Cauca, it continues to be very wet, although crop flow is good with flow entering into the peak of the harvest.?The Tolima crop is starting to flow and weather conditions have been good/favorable to the harvest.?The crop in Narino has finished.

Coffee Axis The crop flow is good with the harvest starting to enter into its peak flow.

Peru

The harvest is in its final 15% of the crop and will wrap up in the next few weeks. The rise in NYC last week saw differentials drop, especially for #commercial #grades. This triggered plenty of activity with some good opportunities for all qualities.

Indonesia Sumatra

The crop flow remains slow and steady now held back as the October rains set in.? Field competition is strong and coffee is getting purchased from producers as soon as it is available.? Fixed price offers are rising, although differentials have fallen slightly due to the rising NYC values.?

'C' Market Commentary

Last week NYC December continued to climb, hitting a high of 166.90 cts/lb on Friday – 23 cts/lb above the low of the 10th of October.? While the market sentiment has shifted from bearish to bullish, technical indicators show the market is now oversold and some drawbacks can be expected.??The COT report showed plenty of activity with the funds decreasing their net short position by 8.6 K lots to 15.7 K lots and the commercials reducing their net short position by 12.1 K lots to 32.1 K lots net short.?The Index funds added 3.7 K lots to their net long position now at 66.6 K lots net long.???Note the chart below and the correlation between net fund position and NYC prices.?The December/March switch has again inverted and is currently trading at 110 points.? Once again adding to the cost of carrying coffee in inventories and reducing the incentive for the trade to finance large long positions for roasters.?? ICE stock numbers decreased slightly from 448 K bags to 441 K bags with no bags pending at the moment.?The tight ICE stock numbers are perceived as an indicator of short-term tightness.? This data point has a strong influence on the December/March spread.? Given that differentials are falling as NYC climbs, if differentials fall low enough and shippers start to deliver to the board the December / March spread may well switch back and alleviate some of the cost of carry.