Yet another volatile week with concerns over continuing dry weather in Minas Gerais and the hint of some cold weather hitting some areas of Brazil next week initially sent prices higher. But it did not last as it soon became clear that it is unlikely that any coffee growing areas will see really cold temperatures next week. Also, a weaker Brazilian Real and Colombian Peso added to the bearish overtones. It could have been worse but arabica coffee prices finished the week 3.75 cents/lb lower while robusta price fell by $44/ton (1.95 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be about 25 to 30 toea/kg higher than what they were last week.
In their latest forecast Brazil’s IBGE forecast the country’s 2022 coffee crop at 52.8 million bags, a down 7.8% compared to 2021. Arabica production is estimated at 35.2 million bags, up 9.8% on last year, while conillon output is forecast at 17.6 million bags. However, by way of contrast the USDA released further attaché reports this week and are forecasting that Brazil’s 2022/23 coffee crop will be 64.3 million bags, an increase of 6.2 million bags over its estimate for last year of 58.1 million bags. Arabica production is projected at 41.5 million bags, up 14%, while the conillon or robusta crop is estimated at 22.8 million bags, up 1.1 million bags or 5.1%. The variation in forecasts put out by these two organisations probably display a degree of bias, with the USDA typically on the high side and IBGE on the low side. The truth probably lies somewhere in between. The USDA also released its report on Vietnam suggesting that the crop there will be 30.93 million bags, again somewhat on the high side vis-à-vis other analysts, although certainly closer than is the case with the Brazilian estimate. The latest export statistics from the ICO showed that global coffee exports amounted to 10.92 million bags in April 2022, 2.8% lower than in April 2021. In the 12 months ending April 2022, exports of arabica totalled 80.47 million bags compared to 82.95 million bags last year; while robusta exports amounted to 49.54 million bags compared to 47.45 million bags last year.
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 be slightly higher, but the situation remains mixed. Brazilian 3/4’s are back up to minus 13; Honduras HG’s are also slightly higher at plus 38; but Kenya AB FAQ’s are steady at between plus 65 and plus 90; Colombian UGQ’s are also higher at plus 74. Without any update on PNG Y1’s, I would guess that they might be unchanged to slightly higher at around plus 5/6, 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 232.70 cents/lb and 240.15 cents/lb.
The continued volatility, although to be expected at this time of the year, is of concern. Temperatures in Brazil are expected to fall to around 4 degrees in some areas on Tuesday which could mean that some isolated areas might see freezing temperatures although the chances of any real damage occurring is very small. The dry weather in Brazil looks set to continue although some rain is forecast for most areas over the next 2 weeks but overall, rainfall for the year is still significantly below the average. Even so the outlook has a very bearish feel about it, and it would come as no surprise if prices ebbed a little lower next week.
Mick Wheeler, UK