Weekly Market Report – 27th December 2020
As anticipated, it was a relatively quiet week on both markets with trading volumes well below the average. The emergence of a new strain of COVID 19 virus rattled all commodity markets at the beginning of the week, but the need of traders to square their books ahead of the shutdown helped to support prices. Arabica coffee prices gained 2.60 cents/lb over the week while robusta coffee prices only manged to move ahead by $3/ton (0.15 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 about 20 toea/kg higher than what they were last week.
The head of the Colombian FNC forecast this week that the 2020/21 coffee year will, for the third year running, result in a 10 million bag surplus, which he attributes primarily to an increase of coffee production in Brazil. He estimates that global coffee production will total 173.3 million bags, while worldwide consumption is put at 163.3 million bags. An interesting fact to emerge this week was that FNC purchased 1.202 million kgs of low-quality arabica coffee, known as Pasillas, (very low-level quality coffee bordering on triage) over the first 9 months of the calendar year in an effort to improve the cashflow of growers. Admittedly the price they paid to the growers was exceptionally low at COP33,945 ($10) per arroba (approximately US85 cents/kg), but this is significantly higher than the price they paid last year of COP5,000 pesos per arroba (approximately 16 cents/kg). A new report by the company “Research and Markets” released this week suggests that the global coffee market will expand in value terms over the next 4 years to reach US$134.25 billion by 2024 growing on average by 5.32% p.a. This total seems rather on the low side as other estimates put the global value at almost double that already. Whilst this obviously undermines the credibility of the report, it is interesting to note that they predict a rapid recovery in all markets post the pandemic and that they anticipate that 2021 will see exceptional growth.
Once again, I have not been able to access any formal reports from Traders this week, but other sources of data (which I cannot stress enough are not as reliable) suggest that there has, once again, been very little movement in physical price differentials this week. Brazilian 3 /4’s, however, are lower at around minus 20; Honduras HG’s are relatively unmoved at plus 20; Kenya AB FAQ’s, continue at plus 75/90; Colombian UGQ’s may be slightly higher at plus 49; but PNG Y1’s appear to be steady at plus 7. If an exporter had fixed a price on Friday for April/May delivery, he should have secured a price somewhere between 133.55 and 136.50 cents/lb.
Although not unexpected, this week’s rise was very welcome as there was a danger that the negative overtones caused by the worsening macro-economic outlook as a result of the fears that the new strain of Covid-19 would create even further havoc and push coffee prices lower. However, the successful start to the mass vaccination programmes in the Americas and elsewhere probably provided the boost the markets needed. This week’s rise also gives encouragement from a purely technical standpoint that there may be a further push upwards in the week to come. There remains a degree of uncertainty over this, but the signs look encouraging and thus there is every chance that prices might finish higher next week. maw