Weekly Market Report – 15 November 2020
As suggested last week coffee prices finished the week higher. The main factors influencing the move upwards were the threat of further damage to the coffee growing areas of many Central American countries from another tropical storm, following the earlier extensive damage caused by Hurricane Eta. As well as news that CONAB will start collecting information on the Brazilian harvest earlier than normal this year because of extent of the damage caused by the dry weather in August and September. Arabica coffee prices gained 2.75 cents/lb over the week, while robusta prices rose $60/ton (2.75 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 20 to 25 toea/kg higher than what they were last week.
Hurricane Eta caused widespread damage throughout Central America last week mainly as a result of flooding which caused landslides and the destruction of many bridges and roads. Apart from the immediate damage to coffee plantations, an added worry is that this will seriously impact the harvest in the region which is just about to start not only by damaging the ripening cherries but also by impeding the supply of pickers to harvest the crop. The excessive wet weather this year appears to be the result of the La Nina weather phenomenon which is now predicted to last until at least the second quarter of 2021. The latest data from the Vietnam Customs Authority showed that the country exported 1.523 million bags in October, down 8.4% from the month prior. This brings cumulative exports for the first ten months of the 2020 calendar year to 22.33 million bags, down 1.2% from the same period in 2019. At the Costa Rican Sintercafe conference held virtually this week Euromonitor forecast that because of the COVID-19 pandemic, global coffee shop transactions should contract by 15% this year. But more dramatically Andrea Illy report that his company had been hit hard by the pandemic as 60% of their sales is to the out of home market which has virtually disappeared this year. However, he remained confident that the company would survive and bounce back stronger next year.
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 may have been relatively stable this week. Brazilian 3 /4’s, however, appear to be slightly lower at around minus 19/20; Honduras HG’s are steady at plus 18; as are Kenya AB FAQ’s, at plus 75/90; Similarly Colombian UGQ’s are also steady at plus 48; and PNG Y1’s remain at plus 7. If an exporter had fixed a price on Friday for February/March delivery, he should have secured a price somewhere between 118.55 and 120.40 cents/lb.
Although the outlook appears to be reasonably bullish there are doubts being expressed about the extent of any damage caused by the earlier dry weather to the next Brazilian crop. Christian Wolthers reported this week that the warehouses in Brazil are full and that he saw no evidence of any real damage. There are also reports of record deliveries of Brazilian semi-washed arabicas being made this week to the New York exchange. Indeed 8% of the certified stock is now of Brazilian origin. This does not bode well, especially if reports of another 400,000 bags waiting to be delivered to the exchange are true. That said there remains an overall air of uncertainty which looks supportive and thus there is a good chance that prices might finish the week very close to where they are now or maybe slightly higher.