MMFI for Coffee is an integral index created by MacroMicro for coffee futures fundamentals. When it goes up, it means the fundamentals of coffee are looking good.
This chart reflects the fundamentals of coffee; the components of coffee MMFI are listed in this collection of charts, including world demand and supply, stocks, oceanic niño index and Brazilian Real exchange rate. We adjust weight of each component according to the latest market conditions.
Market: Intercontiental Exchange (ICE)
Contract Size: 37,500 Pounds
Price Quotation: USD/pound
Demand for coffee grows stably every year because there's no alternative drink for coffee. Supply is the sole factor that affect short-term coffee price.
Top producers of coffee are Brazil (32%), Vietnam (18%), Colombia (9%), Indonesia (6%) and India (3%). Brazil's harvest season are between April and September; rich harvest weighs down coffee price.
Top consumers of coffee are EU (28.5%), US (20%) and Brazil (14%). EU and US completely rely on coffee imports. Consumption reaches its highest in the winter, from November to February, during which price gains support.
Stocks to Use Ratio = Ending stocks / demand
S/U ratio forecasts the number of years or days that, under current demand pattern, the remaining stocks will be sufficient for. The stocks here refer to the projected ending stocks at the end of upcoming April. When the ratio goes down, price rises.
More than 50% of the coffee in the world are from Vietnam and Brazil.
Brazil grows and exports Arabica (75%) and Robusta (25%); coffee fields are mostly in the Southeastern Brazil. Harvest begins in April; frost usually causes damage to the crop in June and July.
The second largest producer, Vietnam, grows Robusta (95%) coffee beans. Harvest begins in November. Most of its production are for exports. Vietnam's domestic demand for coffee has been low.
*Y axis = thousand bags; each bag weighs 60 kilos
More than 50% of the coffee in the world are from Vietnam and Brazil.
EU, US and Brazil are the biggest consumers of coffee, altogether accounting for over 60% of consumption. EU and the US rely entirely on coffee imports. Demand surges in the winter and has been growing steadily every year.
*Y axis = thousand bags; each bag weighs 60 kilos
Intercontinental Exchange (ICE) releases daily warehouse stocks. When stocks decrease, coffee price might rise.
National Oceanic and Atmospheric Administration uses Oceanic Niño Index (ONI) to monitor El Niño and La Niña. It measures the difference between the average temperature and the average sea surface temperature. El Niño is met by ONI of +0.5 celsius for 5 consecutive months, while La Niña is met by ONI of -0.5 celsius for 5 consecutive months.
Climate is the biggest factor behind coffee price. Droughts during La Niña could hurt Brazil's coffee harvest.
Southern Oscillation Index (SOI) is a measure for the difference in air pressure between Tahiti and Darwin, Australia. SOI higher than 7 suggests La Nina; SOI lower than -7 suggests El Nino. Heat, drought and frost are harmful for coffee crops.
Brazil is the largest producer and exporter of coffee, so Real has an effect on coffee price; they have a positive correlation. When Real appreciates against the US dollar, coffee price might rise. When Real depreciates against the US dollar, supply increases and coffee price might decline.
Coffee COT Index = Large Non-Commercial (speculator) Net Position - Large Commercial (hedger) Net Position
COT index represents the positioning of large traders, when it heads up, it means they are bullish about the coffee market.
*Updates every Friday ET
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