MILAN – A soaring dollar pushed coffee markets lower after a mid-week rally in New York. The Federal Reserve cut its key interest rates by 25 basis points (0.25%) to 4.25%-4.50% on Wednesday. However, it also indicated that US monetary policy will be more conservative in the future. The hawkish tone of the statements and the Fed’s increased focus on inflation levels reignited market volatility, sending equities tumbling and the dollar soaring (DXY index at two-year highs).
The greenback’s strength put pressure on all commodities, including coffee futures.
Thus, after a rise of 770 points in the session of 18th December, New York lost 890 points (-2.7%) yesterday, Thursday 19th December, closing at 323.75 cents.
London was down for the third straight day: the Ice Robusta contract for March delivery fell a further $93 yesterday to close at $5,046 (-1.8%).
Ice Robusta certified stocks rose to 39,120 tonnes on Wednesday from a 7-1/2 month low of 36,720 tonnes on Monday. New York certified stocks reached a new high of 981,565 bags yesterday, the highest level in two and a half years, although still relatively low by historical standards.
Meanwhile, the latest figures published by the European Coffee Federation (ECF) show that stocks in Europe’s main ports stood at 8,646,167 bags as of 31 October 2024, slightly up (+0.2%) on the previous month and 2.44% higher than on the same date in 2023.
The breakdown of stocks is 3,055,367 bags of Robusta, 2,499,550 bags of Natural Arabica and 3,091,250 bags of Washed Arabica.
Marketing of the new Vietnamese crop has been slow, partly due to rain delays in harvesting. Estimates of harvest progress vary, ranging from 30% to 60% of estimated production.
In Brazil, domestic prices (data from the Institute of Agricultural Economics – IEA) rose to new highs between November and December. On 16th December, Arabica prices were up 112% from the beginning of the year at 2,100 reais ($340.637) per 60kg bag (257.50 cents/lb).
Likewise, conilon grew 116% over the same period, to 1,800 reais ($291,974) per bag ($4,866/tonne). The market continues to be affected by logistical problems and uncertainties over the new US administration’s tariff policies, while the implementation of the Eudr is postponed by one year.
But above all, the large discrepancies in preliminary estimates for the next harvest (2025/26) are weighing heavily on the coffee markets. Reflecting the uncertainty of the moment, Conab will publish its fourth estimate for 2024/25 production on 21 January, more than a month later than usual, and has not yet announced when it will release its first estimate for the 2025/26 harvest season.
According to a Rabobank report, most of Brazil’s coffee regions experienced above-average rainfall in November, except for Manhuaçu (Minas Gerais) and Alta Floresta (Rondônia).
Despite good flowering, fruit set was far below expectations, especially in Alta Mogiana (São Paulo) and Cerrado Mineiro (Minas Gerais). We will need to wait until February/March to assess the impact. In December, rains continued in most of the coffee belt, except for the conilon region of EspÃrito Santo.
