Weekly Market Report – 18 October 2020

Weekly Market Report – 18 October 2020

As predicted arabica coffee prices fell on Monday when it was confirmed that it was raining in Brazil.  There was however a small bounce on Tuesday but thereafter prices ebbed away.  By the end of the week arabica coffee prices had lost 3.80 cents/lb.  Robusta coffee prices although initially dipping on Monday staged a more convincing recovery and finished the week $17/ton (0.80 cents/lb) higher.   In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea over the week to come will probably be around 25 to 30 toea/kg lower than what they were last week.

The Brazil Coffee Export Association (CeCafe) reported that Brazil exported 3.5 million bags of green coffee in September, up 11.2% from the 3.1 million bags exported during the same month last year.  It is interesting to note that Cecafe also said that a lack of containers and warehouse space prevented the country from exporting more. US Green Coffee Association (GCA), coffee stocks totalled 6,402,065 bags at the end of September, down 343,271 bags from the August total and 12.9% or 950,169 bags lower than in September 2019. Over the past 5 years GCA stocks have fallen by an average of 103,076 bags, so this year’s fall is significantly larger.  However, some analysts believe that this fall reflects the fall in imports of coffee into the US.  This may well be true but an NCA survey published this week shows that shows the pandemic has not changed the amount of coffee Americans drink at just under 3 cups per day per coffee drinker or how often.  60% of Americans drink coffee every day. Just as before the pandemic, the vast majority of coffee drinkers (about 80 percent) drink coffee at home, but more than one-third miss visiting coffee shops. More than half of Americans have already returned to coffee shops or plan to do so in the next month. 75% of coffee drinkers say the pandemic has not changed their consumption of coffee and of the remainder most now say that they make more coffee at home. The survey also found that App-based ordering, including delivery, increased by over 63% amongst those who drank coffee in the last week while drive-through ordering increased by 13%.  Another study published this week – “Global Coffee Market Trends and Forecast (2020 – 2025) – suggests that the global market will grow over the forecast period by around 4.22% p.a. in value terms.

Once again there have not been any formal reports from Traders this week, but other sources of data (which I cannot stress enough are not as reliable) suggest that physical price differentials are lower this week. Brazilian 3 /4’s appears to be 2 cents/lb lower at around minus 17;  Honduras HG’s are also down 2 cents at plus 19;  Kenya AB FAQ’s, however appear to be steady at plus 75/95; Colombian UGQ’s are a cent lower at plus 49; PNG Y1’s are also lower at plus 8.  If an exporter had fixed a price on Friday for February/March delivery, he should have secured a price somewhere between 117.55 and 121.60 cents/lb.

Long range weather forecasts for Brazil show rain fall hitting all coffee growing areas of Brazil at some point in time over the next 2 weeks.  This will be beneficial, but the rains so far have been sporadic and irregular, and some areas of Central Brazil have seen record high temperatures, which some believe will have damaged the crop already.  Indeed some are already talking of next year’s crop being as much as 30% lower than this year’s.  Even so, the rains will inevitably be bearish for the market   Prices will therefore come under downward pressure and will probably finish the week lower but, hopefully, not significantly so.                                                                                                                           maw