Weekly Coffee News: South America

General market situation:

According to EU scientists, 2023 will probably mark the hottest year in 125,000 years. The month of October was holding this record already, but now it will apply to the whole year. Looking at this alarming state of nature, it sounds dodgy when the COP28 convention is held in the United Arab Emirates and led by Badr Jafar, President of Crescent Petroleum (a leading global oil company). Ever asked a hairdresser if you need a haircut?

The international Arabica coffee prices continue their bullish move, reaching a new high at 179.00 c/lb, stretching to the 180 c/lb support line. To find higher levels, we must return to early summer 2023, precisely June 20. Analysts refer to the record-low certified stocks in New York to explain this rally, but besides this technical hint, there is little substance to this bullish move. Other voices suggest investment funds are protecting their positions, adding 'spice to the sauce'. From a more fundamental point of view, there is abundant coffee in the pipeline, with the harvests in Brazil, Colombia, Central America, and Vietnam being collected or having a positive outlook. Irrespective of this, the market closed the week with a four-day bullish move and took a small break on Friday, with a little retracement and closing at 174.50 c/lb and a positive 2.1% growth.

Robusta prices developed a tad steadier. While maintaining a bullish note, the week ended with a minor correction on Friday at 2,421 USD/MT and a firm 2.1% price increase compared to the previous week's close.

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

There has been a notable decrease in deforestation in the Amazon rainforest, with a 22.3% reduction in the 12 months leading up to July 2023. This improvement is attributed to President Lula's commitment to reducing deforestation, contrasting the trends observed during his predecessor Jair Bolsonaro's tenure.

Weather conditions continue to be optimal for the development of the 24/25 harvest. Abundant rains restore much-needed soil humidity, and flowering has fixed into growing coffee buds. The new cherries are starting their growth process.

Internal pricing discrepancies don't align with buyer expectations, leading to minimal commercial transactions. Farmers choose to either store their coffee in warehouses or deliver it without establishing a fixed price.

Both farmers and intermediaries are supplying 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 situation at the port of Santos continues to be complicated. There is a shortage of food containers, and therefore shipments are being delayed. Furthermore, sugar exports are also entering its "hot" season, making both commodities compete for vessel space.

Colombia

Colombia's economy is reported to have grown by 0.5% year-on-year in the third quarter. This figure is slightly more optimistic than the central bank's estimates despite the challenges posed by high inflation.

The main harvest is in full swing across various regions, including Antioquia, Huila, Eje Cafetero (Caldas, Risaralda, Quindío), Tolima, Santander, Valle del Cauca, Cundinamarca, and the Sierra Nevada de Santa Marta. 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.

The first observations in the fields indicate a promising yield in quantity, with expectations of more uniform and improved quality this season. October marked a 30% production increase (1.2 million bags) compared to the previous year's October numbers. The FNC (Colombian National Coffee Growers Federation) has forecasted 12.6 million bags for the 23/24 coffee year. We keep our fingers crossed!

In contrast, the past two years witnessed excessive rainfall and humidity, posing challenges for coffee drying. However, current conditions mark a positive shift. On the flip side, the warmer weather associated with El Ni?o leads to an uptick in pests and diseases. Consequently, farmers vigilantly monitor their crops for early signs of coffee berry borer (broca) infestations or leaf rust (roya) to mitigate these challenges.

Prices are coming lower, 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 (both Caribbean Ocean).

Peru

The Peruvian government has announced a new stimulus package consisting of more than two dozen measures to boost investments. This initiative is mainly focused on the country's critical mining sector. Amidst the recession triggered by the El Ni?o weather phenomenon, lower private investment, and the aftermath of social conflicts, this package aims to stimulate a primary economic recovery. The plan includes a significant increase in funding for public and private projects, expected to reach $8 billion in 2024, up from $2.3 billion in the current year.

The coffee harvest has concluded, and producers are now turning their attention to preparations for the next season. More typical rainfall patterns are anticipated to resume in the upcoming month. Meanwhile, exporters are concentrating on selling the stock they currently have in storage. 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.

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

Coffee Production Estimates in South America

?