Preliminary reports of record exports from Brazil during November together with many analysts stating that they thought last week’s Volcafe report overstated the potential crop loss undermined both markets this week. Further beneficial rains over the week did not help. Arabica coffee prices lost 6.65 cents/lb over the week while robusta coffee prices lost $58/ton (2.65 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 50 toea/kg lower than what they were last week.
Preliminary data from Brazil’s Foreign Trade Secretariat (Secex) showed that the country exported 3.59 million bags of green coffee in November, 39.5% higher than the same month last year. When combined with exports of soluble coffee the total is likely to exceed 4.5 million bags. The latest data from the ICO shows that world coffee exports amounted to 9.67 million bags in October 2020, up 3.2% compared with 9.37 million in October 2019.
In the 12 months ending October 2020, exports of arabica totalled 78.46 million bags compared to 83.81 million bags last year and robusta exports totalled 49.04 million bags compared to 48.65 million bags. The latest US Commerce Department data shows that the US imported 77,680 tons of arabica coffee in October, up 9.9% from the 70,678 tons imported in September. This brought cumulative coffee imports for the first ten months of the 2020 calendar year to 845,954 tons. Colombia’s Finance Ministry expects that the country’s coffee production in 2020 to be between 12.7 and 13.4 million bags. This lower than the FNC’s estimates which put the crop at 13.5 to 13.8 million bags. In their latest report, Marex Spectron has forecast a 7 million bag coffee surplus for the 2020/21 coffee year. This is double their previous forecast of a surplus of 3.5 million bags. For the 2021/22 crop year, however, the commodity trader sees a supply deficit of 8 million bags on optimism that demand will bounce back strongly on the back of a COVID-19 vaccine.
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 have once again remained relatively stable this week. Brazilian 3 /4’s, remain at around minus 19/20; Honduras HG’s are slightly lower now that it appears that supplies, although impacted, will still be plentiful, at plus 26; Kenya AB FAQ’s, continue 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 March/April delivery, he should have secured a price somewhere between 124.00 and 127.90 cents/lb.
This week’s fall was largely unexpected although the market clearly does not believe that the earlier drought has had that much impact on the Brazilian crop given the abundant rain that has fallen since late October. However, in 1985/86 when there was a similar lack of rainfall over the March to November period the impact on the Brazilian arabica crop despite good rainfall in November and December was significant. More concrete evidence may emerge with the results of the CONAB survey currently being undertaken, but for the moment the market remains unconvinced. The rollout of effective COVID 19 vaccines this week has brightened the outlook for consumption and should help to support prices, which should end the week very close to where they are now or slightly higher. maw