“New Year hangover”
• ICE Arabica futures have dropped 9% since the start of 2020 and by 16% since the peak price of 139 c/lb achieved in the run-up to the festive period last year.
• The Q4 bull surge has now given way to a market where origin appears well sold and market speculators actively wondering whether to keep their net long position or engage in selling activity instead. On the macro, the week saw crude prices rally and then slide while equity markets set new highs in a relief rally after the US and Iran moved to defuse escalating tensions.
• ICE exchange-certified stockpiles have been climbing since touching a low of 2.02 mio bags last month. The jump in pending-gradings – of about 185k bags - signals they are likely to rise further.
• The ICO increased their forecast for a global coffee deficit in 2019/20 to 626k bags, 24.7% higher than the previous forecast of 502k bags, and compared to last season’s 3.7 mio bag surplus.
• In Brazil, diffs have firmed this week, with producers well sold and not in a hurry to participate in this falling terminal market despite the marginally weaker BRL. Rainfall for the first week of January has been decent and widespread rains noted.
• Vietnam weather has been favourable for the remaining harvesting activities and drying process, with 98% of the crop estimated to have been harvested by this stage.
• Honduras coffee exports fell to 339.6 k bags in December, down from 354k bags in December 2018. Since the start of the current season, exports from Honduras have totalled 521.4 k bags, down 8.4% YoY.
• Arabica certified stocks on ICE have risen to 2.06 mio bags, while Robusta certified stocks have declined to 14,951 lots.
• We estimate ICE arabica speculator positions has returned to a more balanced situation of 12k lots at present, while that in Robusta is estimated at -17k lots
• Local market: Slow market with NY coming off further and most exporters still in holiday mood. Producers sold solid volumes for forward deliveries during the December rally and feel no pressure to sell additional volume at today’s prices
• Weather: Some showers reported over the coffee belt. No weather concerns as of today.
• Economy / Politics: The USD remains below 4.10 although a tad weaker on the back of the
• Export Market: Roasters remained on the side-line this week with diffs tightening a couple of
cents over the last 10 days. Brazil diffs continue to trade at a wide discount vs the milds.
• BMF (type 4/5): DEC19 $ 135.80 (-8.00)
• Arbitrage H/K – 14.70 (-2.00)
• Exchange rate: official - 4.09 (deval 1%)
COLOMBIA/LATIN AMERICAN MILDS
• Colombia: Internal flow of parchment has stopped dramatically after the market drop. Industry continues to buy modest volumes. Weather wise the year kicked off in extremes, with wildfires in the dry Northern region and part of Andean region suffering from frost. COLP: MAX 3282 MIN 3239 Close 3257
• Guatemala: Producers and intermediaries are not willing to sell large amounts of coffee. With the current market situation, many got stock with expensive coffee and wait for a market recovery before selling their stock.
• Honduras: Crop is picking up at the beginning of the month. Producers were optimistic due to the higher market prices but still faced difficulties to find coffee pickers.
• Costa Rica: Quiet week, producers have stepped back from the market as the industry has not been willing to pay up after the NY drop.
• Peru: Situation unchanged, some suppliers resume delivery of final commitments while most others are taking some time off to rest while preparing for the new season.
• Kenya: 11,000 bags on offer next week as the new crop slowly starts to build some momentum. Larger volumes of bold bean coffees on offer, though principally FAQ cups available as we wait for the `sweet spot` of the main crop. The following auction scheduled to be 20,000 bags. Weather shows moderate conditions for drying.
• Tanzania: The auction was held in Moshi and offered 3,500 bags of washed Arabica including some balances from the South. It was a quick auction and the price range was wide although the few nicer lots were absorbed quickly and at healthy prices. In general demand is still high and most of the lots were written up at the bid prices.
• Uganda: Robusta flow is at its peak though diffs remain unchanged. Given the price levels of ‘competitor’ robustas, diffs should remain steady. Arabica coming to an end in the west with smaller volumes arriving in Kampala. Mt Elgon season is slightly delayed due to rains which is usual for this time of year. Early samples from this region have been good.
• Ethiopia: Washed arabica outright prices have not moved despite NY’s move to the downside. Cherry prices upcountry continue to be firm as the government continues its efforts to implement the new pricing rules. New crop naturals diffs tighter.
• PNG: No major changes from last week. In between season so things are quiet.
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