Weekly Coffee News: South America

General market situation:

On the one side of the economic spectrum, we see stocks fetching new highs and showing a positive and steady growth trend. The S&P500 is up 20% since the beginning of this year, showing the highest levels since March 2023. Also, the Euro Stoxx 50 and the DAX are hitting new highs. On the other hand, central bankers from the US, Europe, and the UK are closely monitoring the evolution of the real economy and the job market. While still positive, both indicators show a slower-than-expected growth rate. The thin line goes between a "soft landing" and a recession. For now, interest rates should stay unchanged, and further changes should be conducted granularly.

International Arabica coffee prices started like a brave jumping leopard but dare to finish like a bedside carpet now... The bulls run out of steam after a very steep (and short) rally. Prices have come down this past week and closed at 177.15 c/lb on Friday. This is 4% lower than the previous week. The USD is gaining momentum and strength, and other soft commodities such as orange juice, sugar, and lumber are also losing their bullish impetus. Only cocoa continues its positive trend. And – we like it or not – oil, the globally most traded and often trendsetting commodity, has also lost some vigor. This might encourage a pull effect on other commodities.

Robusta continues to be on a robust growth trend. Despite minor setbacks, it closed the week trading at 2,561 USD/MT. This is almost unchanged from last Friday.

To stay informed about the ever-changing dynamics of the coffee market, refer to the table below. We update this table weekly, providing the latest insights and updates.

Brazil

Brazil's President Luiz Inacio Lula da Silva has taken over the presidency of the G20 group. Despite global challenges through wars and climate caprioles, Lula will focus the G20 activities on fighting hunger, renewable energy, and reforming global economic governance – three very ambitious undertakings!

The El Ni?o effect in Brazils' main coffee-producing regions revealed itself around mid-November with an intense heatwave. However, strong rains affected Brazil's key coffee regions toward the end of November and the beginning of December. This is a limbo dance between extreme weather situations.

Farmers are not accepting the offers made by buyers, so there is relatively little business going on. Growers are not in a hurry to sell as the last years have been very profitable for them, and they prefer to wait for better prices and avoid paying income taxes toward the end of the year. Additionally, there is some speculation on a smaller-than-expected crop 23/24. But in any case, Brazil's crop is huge and needs to be sold at a certain point. According to this logic, the pressure to sell coffee should increase in 2024.

Despite this situation, farmers and intermediaries supply exporters with bica corrida (milled but unsorted green coffee), which is then screen-sized, graded, sorted, cupped, and finally packed at the exporter's facilities before being readied for export.

The port of Santos is extremely busy, and the exporters' logistics teams are trying to secure space on the vessels. Some delays might occur.

Colombia

We are entering the final stage of the Colombian main-crop harvesting activities. The National Coffee Growers Association (FNC) estimates a production between 11.5 and 12 million bags. As we have seen in the past years, the reality will be at the lower end or even below their forecasts.

So far, the harvest comes in pretty handy in Colombia's various coffee-producing regions, ranging from Antioquia, Huila, Eje Cafetero (Caldas, Risaralda, Quindío), Tolima, Santander, Valle del Cauca, Cundinamarca, and till the Sierra Nevada de Santa Marta. Despite some scattered showers, the El Ni?o weather pattern brings warmer and drier conditions, which are advantageous for drying coffee post-processing (de-pulping, fermenting, and washing) at the farms.

Parchment continues to find its way from the mountains to the buying posts in the small villages. The coffee bags filled with dried pergamino are brought to the dry mills in the country's interior, often by truck but in certain regions, still on a jeep or bus called "chiva".

Dry mills are running at full steam, preparing the coffee for export. They receive loads of parchment, and after hulling, they clean and grade the coffee before it is cupped and finally prepared for export.

Prices continue to be on the lower side of the spectrum, and differentials are particularly attractive compared to other washed mild coffees from Central America and Peru.

Operations are running smoothly without significant news from the ports of Buenaventura (Pacific Ocean), Cartagena, and Santa Marta (Caribbean Ocean).

Peru

The coffee harvest is over. All coffee cherries were collected, and coffee growers focus on the next season now. The weather conditions have been rather unspectacular, with rains and sunshine. This is a good trend for the maturation process of the next harvest. Meanwhile, exporters focus their efforts on selling the remaining stocks. Free On Board (FOB) price differentials are decreasing due to reduced demand, and the urgency to sell coffee before the harvest in Central America adds more pressure on the prices. We are very happy with the quality of the lots that arrived.

No significant news is coming from the ports. Logistics are running smoothly.

Coffee Production Estimates in South America

?