Weekly coffee market review 12/14/2020.
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TECHNICAL ANALYSIS OF ARABICA COFFEE
Last week, ICE US coffee futures closed higher at 121.60 ct/lb.
The International Coffee Organization ICO reported that world coffee exports for October were 3.19% higher than the same month last year at 9.672 million bags. Cumulative world coffee exports for the first 10 months of 2020 were 3.8% lower than the previous year, totalling 107.08 million bags. According to the ICO, world coffee supply is estimated at 168.55 million bags over the last 12 months, and world consumption at around 167.59 million bags. This would result in a world coffee market in slight oversupply.
The association of coffee exporters in Brazil Cecafé reported that exports were 3.69 million bags of Arabica coffee, an increase of 33.85% compared to the same month last year.
Regarding Robusta coffee, the trade in Vietnam is now in full swing as farmers begin to supply more and more coffee. The harvest is estimated to be 25% complete and is accelerating now that weather conditions are more favorable and drier. Forecasts are estimated for this new crop, between 27 million and 28 million bags for Vietnam and 11.60 million bags for Indonesia.
In Brazil, more favourable weather in early December is being observed with heavy rains over the vast coffee growing areas in Brazil. The rainy weather is welcome after months of drier weather, although irreversible damage will be expected. Local consumption in Brazil, at around 21.50 million bags per year, is expected to be slightly lower overall this year.
Internationally, the ECB has increased its asset repurchase program by 500 billion, the US support plan is still slow in coming, and a brexit no-deal is increasingly likely. The FDA in turn is approving the use of Pfizer's vaccine, and vaccination begins this week in the US. In terms of the pandemic update, we have just surpassed 72 million cases worldwide, with more than 1.607 million deaths. The U.S. is still the most affected country, and will approach and surpass the 300,000 mark in deaths and more than 16 million cases.
The Dollar consolidated last week as the DXY closed higher at 90.976, with the long-term trend still bearish.
WEATHER IN BRAZIL
90% of Brazilian coffee is grown in 4 regions: Minas Gerais, Espirito Santo, Sao Paulo and Parana.
The rainy season has started and lasts until April-May. Rainfall was below normal in October and November in the Brazilian coffee belt. The rains were late in coming and irreversible damage is feared for the next harvest. Last week, rains were abundant, with up to 75 to 100 mm, especially in Minas Gerais. The rainy weather in December is seen as more favorable for the next harvest. Next week, heavy rains are also expected, but this time further south in Sao Paulo and Parana.
ICE US CERTIFIED COFFEE STOCKS
Coffee stocks are up to 1.324 million 60 kg bags, compared to 1.294 last week. ICE US stocks of Arabica coffee are below the five-year average. The low stocks may provide some support to the coffee price on futures contracts.
THE DOLLAR
The DXY index representing the Dollar against a basket of foreign currencies closed last week up at 90.976, although the long-term trend is still bearish. The DXY consolidated last week. The ECB increased its asset repurchase program by $500 billion, and, the U.S. support plan is still lagging behind, still failing to agree on emergency aid of just over $900 billion. The dollar has also strengthened against the pound sterling, on an increasingly likely no-deal, as the disagreements seem so deep.
Last week, the Brazilian Real closed higher at 0.1971, for the 4th consecutive week. The Brazilian Real has been benefiting in recent weeks from the falling Dollar, breaking the bearish channel it was in, and benefiting greatly from the rise in coffee prices this past week. If the dollar's downtrend remains unchanged, the Real will surely test the 0.20 it hasn't reached since June. The BRL/USD pair is positively correlated with coffee futures prices. A low Real increases the competitiveness of Brazilian producers and encourages them to export.
COMMITMENTS OF TRADERS
The weekly COT (Commitments of Traders) report of the Commodity Futures Trading Commission (CFTC) shows all the positions opened by all market participants. The COT report is published on Friday, and reflects the open positions on Tuesday of the same week. It shows the position of commercial traders (producers, commodity buyers, ...) but also non-commercial (speculators).
The net positions of speculators on the futures markets are particularly interesting to observe.
The speculative net position on the cotton futures markets is down this week to 31.519 K instead of 32.265 K.
TECHNICAL ANALYSIS OF ARABICA COFFEE
Last week, ICE US coffee futures closed higher at 121.60 ct/lb.
The International Coffee Organization ICO reported that world coffee exports for October were 3.19% higher than the same month last year at 9.672 million bags. Cumulative world coffee exports for the first 10 months of 2020 were 3.8% lower than the previous year, totalling 107.08 million bags. According to the ICO, world coffee supply is estimated at 168.55 million bags over the last 12 months, and world consumption at around 167.59 million bags. This would result in a world coffee market in slight oversupply.
The association of coffee exporters in Brazil Cecafé reported that exports were 3.69 million bags of Arabica coffee, an increase of 33.85% compared to the same month last year.
Regarding Robusta coffee, the trade in Vietnam is now in full swing as farmers begin to supply more and more coffee. The harvest is estimated to be 25% complete and is accelerating now that weather conditions are more favorable and drier. Forecasts are estimated for this new crop, between 27 million and 28 million bags for Vietnam and 11.60 million bags for Indonesia.
In Brazil, more favourable weather in early December is being observed with heavy rains over the vast coffee growing areas in Brazil. The rainy weather is welcome after months of drier weather, although irreversible damage will be expected. Local consumption in Brazil, at around 21.50 million bags per year, is expected to be slightly lower overall this year.
Internationally, the ECB has increased its asset repurchase program by 500 billion, the US support plan is still slow in coming, and a brexit no-deal is increasingly likely. The FDA in turn is approving the use of Pfizer's vaccine, and vaccination begins this week in the US. In terms of the pandemic update, we have just surpassed 72 million cases worldwide, with more than 1.607 million deaths. The U.S. is still the most affected country, and will approach and surpass the 300,000 mark in deaths and more than 16 million cases.
The Dollar consolidated last week as the DXY closed higher at 90.976, with the long-term trend still bearish.
WEATHER IN BRAZIL
90% of Brazilian coffee is grown in 4 regions: Minas Gerais, Espirito Santo, Sao Paulo and Parana.
The rainy season has started and lasts until April-May. Rainfall was below normal in October and November in the Brazilian coffee belt. The rains were late in coming and irreversible damage is feared for the next harvest. Last week, rains were abundant, with up to 75 to 100 mm, especially in Minas Gerais. The rainy weather in December is seen as more favorable for the next harvest. Next week, heavy rains are also expected, but this time further south in Sao Paulo and Parana.
ICE US CERTIFIED COFFEE STOCKS
Coffee stocks are up to 1.324 million 60 kg bags, compared to 1.294 last week. ICE US stocks of Arabica coffee are below the five-year average. The low stocks may provide some support to the coffee price on futures contracts.
THE DOLLAR
The DXY index representing the Dollar against a basket of foreign currencies closed last week up at 90.976, although the long-term trend is still bearish. The DXY consolidated last week. The ECB increased its asset repurchase program by $500 billion, and, the U.S. support plan is still lagging behind, still failing to agree on emergency aid of just over $900 billion. The dollar has also strengthened against the pound sterling, on an increasingly likely no-deal, as the disagreements seem so deep.
Last week, the Brazilian Real closed higher at 0.1971, for the 4th consecutive week. The Brazilian Real has been benefiting in recent weeks from the falling Dollar, breaking the bearish channel it was in, and benefiting greatly from the rise in coffee prices this past week. If the dollar's downtrend remains unchanged, the Real will surely test the 0.20 it hasn't reached since June. The BRL/USD pair is positively correlated with coffee futures prices. A low Real increases the competitiveness of Brazilian producers and encourages them to export.
COMMITMENTS OF TRADERS
The weekly COT (Commitments of Traders) report of the Commodity Futures Trading Commission (CFTC) shows all the positions opened by all market participants. The COT report is published on Friday, and reflects the open positions on Tuesday of the same week. It shows the position of commercial traders (producers, commodity buyers, ...) but also non-commercial (speculators).
The net positions of speculators on the futures markets are particularly interesting to observe.
The speculative net position on the cotton futures markets is down this week to 31.519 K instead of 32.265 K.
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