It always looked as though it would be a very volatile week, even though both markets were closed on Monday and it did not disappoint. Arabica prices jumped by more than 12 cents/lb on Tuesday and even climbed to a high of over 234 cents/lb on Thursday before coming back down to earth on Friday with a drop of over 10 cents/lb. Despite this fall, arabica coffee prices finished the week 3.90 cents/lb higher, with the second position (September 24) closing at 221.25 cents/lb. The robusta market was equally volatile and ended the week gaining US$48/ton (2.15 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 higher than what they were last week.
The rise at the beginning of the week appears to have in response to the continuing dry conditions in Brazil. It has rained very little over the last four weeks although that is not unusual for this time of the year and certainly will have brought forward the harvest a bit. The drop on Friday, on the other hand, appears to have been in response to the release of USDA’s forecast of the 2024/25 Vietnamese crop which they put at 29.0 million bags. This is very high compared to other estimates, especially as the Vietnamese Ministry of Agriculture forecast earlier in the week that this year’s coffee crop will fall by 20% due to adverse weather. Nevertheless, the higher forecast for next year’s crop by the USDA appears to have made many market participants re-evaluate the overall upcoming supply/demand balance. It should also be added that the rapid upward surge earlier in the week caught many market players unawares and they rushed in to try and catch up providing the opportunity for others to cash in their profits in what became a very over-bought market. The ECF released its data for coffee stocks in selected ports throughout Europe for the month of April this week showing that total coffee stocks totalled 424,860 tons (7.08 million bags), 37% lower than last year but up 10.6% on the total recorded in March 2024.
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. Despite the volatility seen this week, physical price differentials appear to be relatively stable. Brazilian 3/4’s are steady at minus 14; Honduras HG’s remain at plus 9; while Kenya AB FAQ’s, are unmoved at between plus 40 and plus 55; Colombian UGQ’s are also steady at plus 15. Without any regular updates on PNG Y1’s I can only guess that they might also be steady at around plus 3. Therefore, had an exporter fixed on Friday in New York for October delivery he may have been able to secure a price somewhere between 225.45 cents/lb and 239.60 cents/lb.
The volatility seen this week demonstrates how uncertain market players are about the future supply/demand balance. The weather forecast for Brazil shows good weather for the next 10 days with little chance of a frost and indeed some rainfall, although this will be slightly negative for the harvest. Even so it will add to the overall bearish overtone, and it would not be surprising to see prices dip when the market opens next week. Whether there will be a recovery later in the week is hard to say but it would not be too surprising to see prices end the week very close to where they are now or maybe just a little lower.
Source:
Mick Wheeler, UK.