General market situation:
The international outlook remains complicated to navigate. There is no sign of peace as we are entering the 3rd year of Putin's invasion of Ukraine. Additionally, Putin's most significant opposition leader for the past decade, Alexei Navalny, died in an Artic Circle prison. Most of Putin's oppositionists are either dead, jailed, or living in exile. It takes great courage to speak up against the Kremlin; our most profound respect goes to those who dare to do so.
The Israeli-Palestinian conflict continues to escalate with no quick solution in sight. Besides the horrible pictures and the genuinely complex and intricate reality of the situation, there is a direct impact on the coffee world as Houthi rebels are attacking ships in the Red Sea. In turn, most shipping lines avoid the route through the Suez Canal and reroute their vessels via South Africa's Cape of Good Hope. This makes shipments from East Africa, India, Indonesia, PNG, and Vietnam more expensive and substantially longer. And, remembering COVID times, distressed maritime supply chains produce a domino effect as other vessels around the globe are waiting for containers to arrive and to be reloaded with new items.
Nonetheless, some shipments have been delivered to certified warehouses as the number of certified Arabica inventories has risen. After a record low, stocks registered a 33% surplus and now count more than 300,000 bags. Additionally, abundant rains in Brazil's main coffee production regions have brought international Arabica coffee prices slightly lower, closing the week at 186.70 c/lb. This is 2.5% lower than the previous Friday. Due to President's Day celebrations, the NYC market remains closed on Monday, 19th of February.
Robusta has also lost some ground, but it looks like a brief break before a new bullish stampede might start. The Vietnamese New Year celebrations have brought commercial activities almost to a halt. Certified Robusta stocks are tight and have reached a new low, supporting the bullish sentiment and high price scenario. They reached a new all-time high on Monday at 3,241 USD/MT. Nonetheless, the week closed 2.4% lower than the previous week at 3,141 USD/MT.
If you are comparing the prices to the previous weeks, please note that First Notice Day is around the corner, and hence, the spot months have switched from March (KCH24 or RMH24) to May (KCK24 or RMK24).
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.
For the past week, millions of Brazilians and tourists from around the globe have been out in the streets of Brazil to celebrate. This is the largest Carnival in the world, a vibrant celebration brimming with color, music, samba performances, parades, and a myriad of traditional festivities, embodying a spirit that champions diversity and equality.
In early February, the weather remained dry, but recent days have seen abundant rain, which has provided relief from the excessive heat typical for this time of the year. Moreover, the rain forecasts have further effects, holding both promise for a positive new crop outcome and having a declining impact on coffee prices.
According to CONAB's very conservative estimates, coffee production is anticipated to increase by 5.5% this year, reaching approximately 58 million bags. Arabica coffee output is projected to hit around 41 million bags, up 4.7% from 2023, while Robusta production is expected to rise by 7.2% to 17 million bags.
Due to the Carnival holidays, trade activities in Brazil have been quiet. But overall, the flow of Arabica has been steady in the last few weeks, as internal prices were firm. Exporters covered short-term contracts in the local market, and new crop business activity started to take off.
As for Conilon, there has been a strong flow of business driven by attractive local prices. This motivated farmers to secure sales and trade for the new crop 24/25. Due to the prevailing logistical challenges at the Red Sea, international demand remains high as buyers opt for Brazil over Asia for Robusta.
There is growing concern regarding the potential impact of the situation in the Red Sea on shipping operations in Central and South America.
Once again the government of Gustavo Petro sat down with the National Liberation Army (ELN) guerrilla group in search of a peace agreement. Another bilateral six-month ceasefire was announced after the preliminary one agreed to last year in August expired.
Moving on to the weather, Petro also declared a disaster situation due to wildfires raging across several parts of the country. The fires are the result of hot and dry conditions linked to the El Niño weather phenomenon, which is expected to continue for the next few months.
Temperatures across much of the country were reported to be 5-10°C above normal, leading to drought in key producing regions like Antioquia, Huila, and Valle del Cauca. However, recent weeks have brought much-needed rainfall. The forecast is now shifting away from dry conditions towards more scattered rains, providing some relief.
Dry mills are still processing the last of the 23/24 harvest. The fly crop or "mitaca" is expected to begin in April. The volumes traded, and the differentials remain stable.
So far, no significant news have come from the port of Buenaventura (Pacific Ocean), Cartagena, and Santa Marta (both Caribbean Sea).
The Peruvian government announced a 60-day State of Emergency for the provinces of Trujillo and Pataz in the region of La Libertad, which started last week. The precautionary measure was established due to increased crime incidents in the area.
Producing regions have experienced abundant sunshine, and forecasts indicate milder, cloudier days with some rain in the Junin region. Such weather conditions have been ideal for cherry development and foster optimistic expectations for the upcoming crop's volume and quality.
In lower zones, farmers are preparing to start harvest activities any time now, whereas in middle and high altitude zones, cherries are still in the developmental stage. Harvest in higher zones, ranging from 1,600 to 2,000+ masl, is expected to begin around June. We hear that higher zones are expected to yield good production volumes, while lower and middle zones may have a reduction due to increased coffee leaf rust incidence.
Few offers for the new crop 2024 are available. Exporters are waiting to conduct internal inspections before providing quotations.
No news from the port.
Coffee Production Estimates in South America