Despite experiencing considerable volatility throughout the week, concerns that dry weather in Brazil may lead to a smaller coffee crop together with a stronger Brazilian Real and Colombian Peso helped to push prices higher this week. Arabica coffee prices gained 2.85 cents/lb but were at one stage almost 10 cents/lb higher. Robusta coffee prices gained $43/ton (1.90 cents/lb), but the market was closed on Thursday and Friday for the Jubilee celebrations. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be about 20 to 25 toea/kg higher than what they were last week.
Brazilian meteorologist Somar highlighted this week that Minas Gerais, which accounts for 30% of the origin’s arabica crop, has seen very little rainfall this year and indeed received no rain at all over the past week. New York market certified stocks continue to decline falling 55,000 bags over the week to 1,023,477 bags. The ICO reported this week that global arabica exports during April were 6.808 million bags, which is below 7.3% last year’s total. The USDA continue to release various attaché reports and this week forecast that Colombian coffee production in 2022/23 would be 13.0 million bags with domestic consumption at 2.2 million bags; Mexico’s output is put at 3.84 million bags and domestic consumption at 2.7 million bags; while India’s total is forecast at 5.74 million bags (arabica 1.32 million bags and robusta 4.42 million bags) with domestic coffee consumption 2% higher than last year at 1.24 million bags. The American Bureau of Labour Statistics released the results of their food prices survey this week which tracks the cost of popular food items on supermarket shelves. Overall, food prices in April jumped 10.8% year on year, the largest 12-month percentage increase in more than 41 years. The cost of roast and ground coffee in major US cities averaged $5.53/lb in April, an increase of 16.4% from the average cost of $4.75 in April last year. This is also the highest price for a pound of coffee since June of 2013.
I still cannot get access to any reliable regularly-published data on price differentials, so once again I have had to use sources, the accuracy of which cannot be guaranteed. Physical price differentials do not appear to have moved much over the week, but the situation remains mixed. Brazilian 3/4’s are slightly lower at minus 14/15; Honduras HG’s are steady at plus 37; similarly Kenya AB FAQ’s are also steady at between plus 65 and plus 90; Colombian UGQ’s however are slightly lower at plus 71/72. Without any update on PNG Y1’s, I would guess that they might also be unchanged at around plus 5, but I need to emphasise that this remains just a guess. Therefore, had an exporter fixed on Friday in New York for Sept/Oct delivery he may have been able to secure a price between 236.60 cents/lb and 244.90 cents/lb.
Although the increase seen over the week is encouraging, the large fall on Friday is of concern. Market analysts put the fall down to a lack of buying support, but it could well herald something more serious. There is no doubt that with the harvest now well underway and the weather outlook, despite the dry weather, looking reasonably good without any dangerous cold spells for at least the next 10 days, that there will be downward pressure on prices during the week ahead. Whilst further upward movement cannot be ruled out it seems more likely that prices may well dip a bit over the week to come. maw