The coffee market has been witnessing interesting dynamics recently, with arabica futures gaining support due to historically low ICE certified stocks.
However, it's the robusta segment that holds the edge, benefitting from concerns about limited fresh coffee entering the futures market.
Key consumer staple companies have reported strong quarterly earnings, mainly driven by higher prices in Q2 and resilient consumer demand. This positive trend indicates the coffee market's ability to adapt to changing circumstances and maintain its appeal to consumers.
Brazil's coffee harvest has made significant progress, reaching the 75% mark, with farmers reporting excellent tree conditions. Nevertheless, there are apprehensions about potential forthcoming rains, which could affect the quality of the new crop.
In terms of certified stocks, ICE arabica stocks stand at 532k bags, while robusta certified stocks have further decreased to 5.2k lots. This highlights the demand for robusta beans and the need to monitor supply availability closely.
During the past week, the coffee market has witnessed more supportive trends, driven by firmer differentials and a stronger Brazilian currency, which encouraged technical buying and briefly pushed KC into the mid 160s. Reports of robust physical demand have also added to the market's support. The current chart outlook remains neutral.
On the local front, with KC rebounding from the previous week's lows, the internal market has seen some loosening, allowing coffee to flow from producers to exporters. While differentials have not seen significant changes, there has been increased business activity. July's export figures have been slow, but there was some demand noted on the spot market, leading to gap filling. For Conilon coffee, the differentials traded weaker compared to Sep, but demand remains steady.
Weather conditions have been generally dry, with some light rains observed over ZdM and Bahia. The forecast indicates continued dry weather, with no immediate risk of cold weather affecting the coffee-producing regions.
Regarding exports, demand for arabica beans has been consistent in recent weeks, attracting interest from roasters both domestically and internationally. Similarly, Conilon demand remains steady as roasters seek to secure adequate coverage.
Overall, the coffee market demonstrates resilience and adaptability, with both arabica and robusta segments presenting unique opportunities and challenges for industry stakeholders. Monitoring supply and demand dynamics, weather conditions, and global economic factors will be crucial for making informed decisions in this thriving market.