With the market closed on Monday for Independence Day celebrations, it turned out to be a much quieter week than of late, although prices came under pressure from the start. There was a bit of a rally towards the end of the week, but prices never really fully recovered. Much of the negativity can be put down to the strength of the dollar, but the improving weather outlook in Brazil may also have had something to do with it. Arabica coffee prices lost 4.40 cents/lb over the week while robusta lost $25/ton (1.1 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be between 30 and 35 toea/kg lower than where they last week.
The latest data from the ICO shows that world coffee exports in May totalled 10.80 million bags up 10% on May last year. Exports in the first 8 months of coffee year 2021/22 (October/21 to May/22) have increased by 1.3% to 88.51 million bags compared with 87.34 million bags in the same period in 2020/21. However, the latest data from the Vietnam Customs Authority indicates that Vietnam’s coffee exports in June totalled 2.29 million bags, down 3.5% from the previous month. This is slightly lower than suggested last week Similarly preliminary data from Costa Rica and Honduras also shows that their exports fell during June, by 10.3% and 16.3% respectively. It has been reported that Colombia’s coffee output fell by 10% in June reflecting the impact of the torrential rains that hit the country last year during the flowering season. Heavy rain continues to plague the country and are expected to continue until December as the La Niña weather phenomenon merges with the country’s second rainy season. The Coffee Board of India has just published its first official “post blossom” forecast for the country’s 2022/23 coffee crop. Total production is forecast at 6.56 million bags up almost 15% on last year. Arabica output is forecast at 1.94 million bags, up 22.5% on last year, while robusta output is estimated at 4.6 million bags, up 12%.
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 appear to have stabilised this week but as always, the situation is mixed. Brazilian 3/4’s are unmoved at minus 12; Honduras HG’s are also unmoved at plus 39; Kenya AB FAQ’s continue to be quoted at between plus 65 and plus 90; while Colombian UGQ’s are slightly lower at plus 75. Without any update on PNG Y1’s, I would guess that they might also be unmoved at around plus 6/7, but I need to emphasise that this remains just a guess. Therefore, had an exporter fixed on Friday in New York for Nov/Dec delivery he may have been able to secure a price between 218.50 cents/lb and 224.75 cents/lb.
Although the rally late last week is encouraging, the truth is that the negatives appear to outweigh the positives. The dollar continues to be strong and the Brazilian Real weak, making current prices very attractive to farmers in Brazil. Furthermore, the weather outlook for Brazil remains good with very little rain and relatively warm weather forecast for at least the next 2 weeks. On the plus side however, certified stocks continue to shrink falling a further 65,000 bags over the week to total just 789,981 bags, which suggests that demand continues to be strong. Even so, it is difficult to be positive and thus it looks as though prices may continue to ebb downwards next week, but hopefully not by much.
Source:
Mick Wheeler, UK