There was a brief rally early on Monday morning but profit taking forced prices lower by the close of business. A strong bearish sentiment then gripped the arabica market over the next two days forcing prices down. Prices steadied on Thursday and Friday but failed to make up the lost ground. Over the week arabica coffee prices lost 8.60 cents/lb, with the second position closing at 169.70 cents/lb. The robusta market on the other hand was relatively quiet with fairly muted movements on most days to finish the week $17/ton (0.75 cents/lb) higher. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be about 65 to 70 toea/kg lower than they were last week.
The continuing good weather in Brazil has certainly improved prospects for the upcoming crop and will encourage on-branch growth, which bodes well for the 2024/25 crop. This may have been the reason why the bearish tone dominated the week, but this is not anything new. Of possibly greater interest is the fact that the Vietnamese harvest is coming in at around 10% lower than earlier projections, similarly heavy rain in Indonesia and also in Colombia has reduced the crop prospects in both origins. Consequently, it is hardly surprising that some traders are estimating there may be a deficit in 2023. However, there are some worrying signs that global consumption is still stagnating. Brazil’s CONAB published a study this week that showed that Brazil consumed 21.3 million bags between November 2021 and October 2022, a drop of 1.01% compared to the same period last year. Another study published this week suggests that out-of-home consumption in Greece is also down. The study also showed that 95% of Greeks purchase coffee. Nearly 8 in 10 of those asked drink coffee daily (84%), while most do not still buy coffee for their household (66% of non-drinkers) suggesting that most coffee consumption in Greece is out-of-home. 50% of those who drink coffee consume more than a cup a day, usually 2 or 3 cups daily.
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 come under pressure this week with Brazilian 3/4’s lower at minus 3, Honduras HG’s are also lower at plus 24; as are Kenya AB FAQ’s at between plus 50 and plus 70; Colombian UGQ’s have also lost ground at plus 50. Again without seeing any new quotes for PNG Y1’s, I can only guess that they too will have fallen to around plus 10/12. Consequently, had an exporter fixed on Friday in New York for July/August delivery he may have been able to secure a price between 175.55 cents/lb and 180.75 cents/lb. Although the fundamental outlook has not changed significantly over the week, the global economic outlook is becoming increasingly pessimistic with real concern that efforts to control inflation will damage demand for all goods and services. There is clear evidence now that coffee consumption is under pressure, although it appears that consumers are downgrading their quality purchases, switching to instant coffee and in-home consumption, suggesting that overall demand is remaining fairly resilient. The poorer economic outlook may explain the overall bearish sentiment which is gripping the arabica market, but the steadier tone seen on Thursday and Friday suggests that traders remain concerned about the overall supply/demand deficit. Prices may remain at current levels over the week to come.
Mick Wheeler, UK.