As anticipated coffee prices continued to surge upwards throughout the week, only pausing on Friday for a minor correction downwards. Indeed, it was an incredible week which saw both markets rally to a 47 year high on heightened concern about the tight supply/demand balance for next year, given predicted huge crop shortfalls in both Brazil and Vietnam. The arabica market ended the week 15.95 cents/lb higher, with the second position (March) closing at 318.05 cents/lb. Robusta prices made even more impressive gains, rising $454/ton (20.60 cents/lb) over the period. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 125 and 130 toea/kg higher than they were last week.
The catalyst for this week’s continued surge appears to have been data released by the Vietnamese authorities which showed that exports from the country are 11% lower year on year. Furthermore, the country is experiencing heavy rainfall, which many believe will impact the pace of the current harvest. An additional factor which supports the continued concern is the fact that robusta certified stocks are still very low and only really hovering just above the record lows posted in February of this year. To make matters worse Brazilian coffee exporters continue to face intense logistical bottlenecks due to the lack of adequate infrastructure for containerized cargo in Brazil’s ports. In 2024, multiple delays and constant changes in the number of ships available for exporting coffee has, according to CeCafe, caused the country to accumulate 1.717 million bags, approximately 5,203 container loads of coffee still to be shipped as of October. Further bad news emerged this week when the authorities in Costa Rica reported that the 2024/25 coffee crop might see losses of around 15% in volume as a result of Hurricane Rafael and Tropical Storm Sara both of which caused floods and landslides as well as knocking a large amount of coffee cherries off the tree. It has been estimated that the crop will fall from 1.31million bags to 1.1 million bags.
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. Inevitably physical price differentials have come under pressure this week but once again the situation is mixed. Brazilian 3/4’s appear to be steady at minus 14; But Honduras HG’s are lower at plus 8; However, Kenya AB FAQ’s, appear to be steady at between plus 30 and plus 40; while Colombian UGQ’s are lower at plus 9. PNG Y1’s will also be lower at around minus 9. Thus, had an exporter fixed on Friday in New York for March delivery he may have been able to secure a price somewhere between 309.80 cents/lb and 328.45 cents/lb. The relentless march upwards seen over the last few weeks, which have seen prices equal that achieved in 1977 is rather amazing. However, whilst there can be doubt that the overall supply situation will be considerably lower next year, it is still too early to make accurate predictions of what Brazil might produce next year. As mentioned before there is still time for further flowerings and whilst this will affect quality, the volumes produced might well be higher than anticipated. So, Friday’s small but nevertheless significant correction is a timely reminder that the rally might have been overdone and that there is a good chance that a further correction will take place next week. However, it is highly unlikely that all the gains made this week will be lost and I expect prices to finish lower but not by much.
Source:
Mick Wheeler, UK