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8-21-2023 Armenia Coffee Report

Happy Monday to all,

It was a glorious weekend here in the Northeast and we’re all recharged an ready to go. This morning was nice for a cold brew Ethiopia blend, yum yum. Well, how do you slam a market and get it to drop through all previous support? Take 10,000 lots of fund selling as a start. We haven’t seen trading like that in a long time. FND for Sept is around the corner now. Interesting watching switches return to more “normal” values, it’s a good thing.

COT issued Friday August 18 for trading as of Tuesday August 15 showed long fund sold 479 lots to stand at 22,151 and short fund sold an amazing 10,053 lots to stand at a 48,192 lots short. Trade was the other side doing buying and roasters have now caught up in a flurry. ICE stocks stood at 513,665 bags with nothing pending grading. Things have really slowed here and that’s probably a contributor in why we’re seeing switches head for traditional values. The Brazilian Real was weaker on the week out to 4.98919 as we’re writing, the Colombia Peso was also weaker at 4119.9.

Total world coffee production for the 2023-2024 harvest is estimated at 174.3 million 60-kg bags. The data comes from Embrapa Café. Of this forecast total, 96.3 million bags will be Coffea arabica coffee, which will account for 55.2% of the world volume, and an additional 78 million bags of Coffea canephora (robusta+conilon), which will account for 44.8% of the world crop.

In this same context, if a ranking of the three largest coffee producing countries in the world is made, it can be seen that the current coffee crop in Brazil, which is the leading producer and exporter, as well as being the second largest consumer of coffee in the world, has been calculated at 54.7 million 60kg bags, a volume that will represent approximately 31.4% of the total world crop, if this estimate is confirmed.

Of this Brazilian crop, around 37.9 million 60-kg bags will be C. arabica, which will account for 39.3% of the total Coffea arabica to be harvested worldwide. And, in addition, 16.8 million bags of Coffea canephora, which will represent 21.5% of the world crop of this same species, obviously, if these estimates are realized this crop year.

Folks have been blaming a larger than expected Brazil crop now coming to market, and a strong dollar which encourages origin to sell, but that’s not what we’re seeing here, except for the change in sentiment, we guess. With size you can make any market do what you want but ultimately it then comes down to how do you find an exit when you want one. We’ve been thinking the mid 30’s short the fund was carrying was excessive well, they just threw another 10,000 lots on the pile. This morning’s reaction higher is likely predicated on these factors and we think some wild days might be coming soon. How can we be of help today?

All the best,
The Armenia Team