Weekly Market Report – 10th January 2021
Against expectations both markets came under fairly intense downward pressure when they reopened on Monday and continued to fall for the first half of the week. The arabica market staged a bit of a recovery on Thursday and Friday, but it was not enough to prevent a lower overall finish to the week. Robusta coffee prices on the other hand fell every day. Over the week arabica coffee prices lost 4.40 cents/lb while robusta lost $68/ton (3.10 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 between 30 and 35 toea/kg lower than what they were last week.
The catalyst for the negative tone throughout the week appears to have been the release of preliminary data from Brazil’s Foreign Trade Secretariat (Secex) which showed that the country exported 4.24 million bags of green coffee in December, 34% higher than the same month last year. Brazil’s coffee exporters association, CeCafe, will publish the official data next week, but it is unlikely to be significantly different. The continuing devaluation of the Brazilian Real also played a part in pushing prices downward. Another, although less convincing, factor might have been the continuing rise in the volume of stocks certified against the C contract which reached a 5-year low last month but has since recovered to total 1.48 million bags on Friday. The continuing fall in robusta prices is a bit of a surprise for according to a report from Bloomberg this week approximately 22% of the Vietnamese coffee crop is thought to have been sold compared to 30% at this stage last year. The weaker pace of sales is being attributed to scattered showers and cloudy weather, which is hindering drying of the harvested coffee. If this weather pattern continues it will also impact quality, although reports suggest the harvest there is now nearing completion. Consequently. sales of coffee from Vietnam are expected to remain steady until the Tet holiday begins next month.
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, are apparently steady at around minus 20; Honduras HG’s also show little movement and remain at plus 20; Kenya AB FAQ’s, continue to be quoted at plus 75/90; while Colombian UGQ’s are steady at plus 49; PNG Y1’s also appear unmoved at plus 7. If an exporter had fixed a price on Friday for April/May delivery, he should have secured a price somewhere between 128.25 and 133.05 cents/lb.
For the next few weeks, the market will be subjected to a number of completing forecast of the size of the upcoming Brazilian harvest following various crop tours by the different agencies and trade houses. IBGE, for example, will release their estimate for the Brazil crop on January 13th, followed by the first forecast for the crop by CONAB on January 21st, trade houses and others will release their data whenever they see fit. This will inevitably lead to further volatility, although it will be interesting to see whether there is any consensus on the damage caused by the earlier drought. So far however there seems to be unanimity that the robusta (conillon) crop will be large. The outlook therefore remains rather opaque although the rally late last week suggests that maybe prices might close slightly higher next week.