Despite the fact there has been some rain in the coffee growing areas of Brazil over the last week, the market still appears to be concerned about the continuing hot weather in Brazil. So much so that despite expectations to the contrary, prices improved on both markets. Prices were also helped by a fall in the value of the US Dollar. Arabica coffee prices gained 2.55 cents/lb over the week, while robusta gained just $13/ton (0.55 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 20 toea/kg higher than they were last week.
Flowering has started in Brazil for the 2020/21 crop and rains are expected to continue in the next few days, which should ease concerns of possible abortion of the flowers and should help with the development of the crop. However, there are conflicting longer-range forecasts with some suggesting fairly consistent rain while others are not so optimistic. Furthermore, it is really still too early to assess likely future production levels at this point, especially as it still is too early to assess how much damage was caused from the cold snap that occurred in July. Consequently, the market remains somewhat cautious. At the 74th United Nations General Assembly the Colombian president Ivan Duque along with President of Honduras, Juan Orlando Hernández, urged consuming countries to work with producers for a fair coffee price in the international markets. President Duque also led a meeting called ” Joint Action to Face the Coffee Price Crisis and Achieve Sustainable Production”. In his speech to that meeting, the President stressed that the creation of the Coffee Price Stabilization Fund in Colombia is a sign that the government is committed to support the coffee sector. The government is also supporting a fertilization and coffee renovation programme with the goal of renovating 90,000 hectares per year. At the ICO meeting in London, CEOs, other Senior Executives and Global Leaders of the Coffee signed the “London Declaration”, which aims to establish a clear road-map enabling the implementation of concrete solutions to address the current coffee price crisis. However, although welcoming the declaration, producing countries were disappointed that the declaration focuses more on environmental and social sustainability than on economic sustainability and therefore were not prepared endorse it as requested. They have however set up a task force to work with these private sector companies in the attempt to find meaningful solutions to the current crisis.
Once again there have been no new reports from traders this week, so no update is possible. Two weeks ago Brazilian 3 /4’s were trading at minus 12; Honduras HG’s were unquoted; Kenya AB FAQ’s were quoted at plus 90/100; Colombian UGQ’s at plus 32; while PNG Y1’s were quoted at plus 3. If these differentials remain unchanged then had an exporter fixed a price on Friday for a shipment of Y1’s for December/January delivery he should have secured a price somewhere between 103.40 and 104.90 cents/lb.
The outlook remains very weather dependent. The fear is that dry weather will cause the flowers to abort, but the weather reports suggest that for the next 2 weeks at least rains should be plentiful although are not certain about thereafter. Market participants will therefore keep a close eye on these reports and any change will have a direct impact on the direction that prices take over the week ahead. On balance and assuming no radical change in the outlook, prices will probably edge downwards over the week ahead, but hopefully not by much.