Both markets meandered up and down throughout the week, reflecting movements in currencies and other more macro-economic factors. The prospects of rain hitting Brazil during the week to come added a slightly bearish tone and thus unsurprisingly arabica coffee prices finished the week down 2.40 cents/lb, with the second position (December) closing the week at 151.90 cents/lb. Robusta coffee prices were equally directionless but the tightness in supply from Asian sources kept prices a bit more buoyant. Robusta prices gained $45/ton (2.00 cents/lb) over the week. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be about 15 to 20 toea/kg lower than they were last week.
The Brazilian harvest appears to be speeding up with Cooxupe (the largest coffee cooperative in Brazil) reporting that harvesting is now 92% complete. This is more advanced than last year, when 91% of the area had been harvested by this time. The Confederation of Agriculture and Livestock of Brazil (CNA) has recalculated the costs of production for coffee in the country and found that as a result of lower yields and increased labour and other input costs, the cost of production is sharply up for some. Where the farm is highly mechanised the cost of production is estimated to be up 3% but where the farm relies on more traditional methods of cultivation costs are up by around 25%. However, a recent report suggested that fertiliser costs fell dramatically during July, falling on average by around 9.5%. The FNC predicted this week that Colombia’s coffee production will be around 12 million bags in calendar year 2023. The Colombian owned coffee shop chain Juan Valdez appears to have shut down all of its New York stores citing high rents as the reason for this move. The company is thought to operate around 490 stores worldwide with 357 of these in Colombia.
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. There appears to have been very little movement in physical price differentials this week with Brazilian 3/4’s steady at minus 14; Honduras HG’s, are slightly lower and are quoted at plus 12; but Kenya AB FAQ’s, are unmoved at between plus 45 and plus 70; as are Colombian UGQ’s at plus 29. Without any update on PNG Y1’s, I would guess that they might also be unmoved at around plus 1, but this remains just a guess without any evidence to base this on. Therefore, had an exporter fixed on Friday in New York for November/ December delivery he may have been able to secure a price between 152.65 cents/lb and 157.35 cents/lb.
New York will be closed on Monday for the Labour Day holiday. All the forecasts suggest that it will rain next week, and this will inevitably put pressure on prices, even though the wet weather has been widely anticipated. There is a chance that the rain might inhibit the remaining harvest and may lead to a lowering of the quality of that which remains to be picked, but as most of the harvest is already in, the impact this will have on prices will be negligible. Counteracting this downward pressure next week could be concern over the dwindling volume of stocks certified against the New York market which have now reached a 10-month low. However, this is unlikely to do anything other than slow the rate of decline. The outlook is therefore for prices to end the week lower, but given that prices appear to fairly range bound at the moment, any decline will probably be muted.
Source:
Mick Wheeler, UK.