The main influences over both markets this week appears to have been currency fluctuations and other macro-economic considerations. The Colombian Peso dropped to its’ lowest level in history, while the dollar fluctuated widely against all currencies as fears about the ongoing trade war between America and China waxed and waned over the week. In spite of this both markets remained more stable than many were expecting with arabica coffee prices dropping by just 1.0 cent/lb and robusta $16/ton (0.75 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea over the week to come will probably be around 10 toea/kg lower.
Brazil’s Institute of Geography and Statistics (IBGE) has revised down their forecast for Brazil’s 2019/20 crop to 52.1 million bags, down 1% from the previous estimate of 52.6 million bags that it produced last month. Arabica production is now forecast at 36.7 million bags, down 1.4% from the previous estimate, while conillon production is now estimated at 15.3 million bags, unchanged from the previous estimate. According to the latest survey from Safras & Mercado, Brazil’s 2019/20 coffee harvest is 93% completed. This is more advanced than last year, when 88% of the harvest was completed by this time, and more advanced than the five-year average of 84% harvested. Based on the firm’s estimate of 58.9 million bags of total production, this would indicate that 54.95 million bags have been picked so far this year. The latest data from the ICO shows that world coffee exports amounted to 10.9 million bags in June 2019, up 2.8% compared with 10.6 million in June 2018. In the twelve months ending June 2019, exports of arabica totalled 82 million bags compared to 75.38 million bags last year; whereas robusta exports amounted to 46.11 million bags compared to 44.78 million bags. The ICO has also has upwardly revised their estimate for global coffee production for the 2018/19 crop to 168.77 million bags, up 0.6% from their previous estimate of 167.75 million bags. World coffee consumption is estimated 2.1% higher at 164.84 million bags. However, despite this growth, world production is expected to exceed consumption by 3.92 million bags, resulting in a cumulative surplus of 8 million bags over the last two crop years.
Unfortunately, it appears that the traders who normally issue weekly reports must be on holiday again as no such reports have been issued this week. Last week Brazilian 3 /4’s were trading at minus 12/13; Honduras HG’s were unquoted; Kenya AB FAQ’s were quoted at plus 80/90; Colombian UGQ’s at plus 32; and PNG Y1’s at plus 1. Assuming no change in these differentials, if an exporter had fixed a price on Friday for a shipment of Y1’s for November/December delivery he should have secured a price somewhere between 101.15 and 102.45 cents/lb.
Colombian output looks set to increase its output substantially this year, but a shortage of pickers might limit the amount the country can harvest. The concern is that as farmers cannot offer very high wages, this will force workers to look elsewhere for employment. However, with Brazil’s harvest well advanced there will not be any shortages of coffee and the outlook therefore remains bearish. The fact that outside influences played a big part in this week’s price movements suggests that in general the trade is happy with prices where they are now and thus there must a good chance that prices will remain very close to these levels.