The reopening of the Suez Canal led to a sharp drop in oil prices which in turn had a negative impact on all commodity markets. This combined with a stronger US dollar and weaker Latin American currencies put significant pressure on both coffee markets and with both markets closed on Friday, prices fell significantly. Arabica coffee prices lost 6.95 cents/lb over the week while robusta coffee prices fell $56/ton (2.5 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea over the week to come will probably be around 50 to 55 toea/kg lower than what they were last week.

The latest data on world coffee exports from the ICO shows that during February 2021, total exports amounted to 10.48 million bags, this is 6% lower than the 11.16 million bags exported in February 2020. Exports in the first 5 months of coffee year 2020/21 (Oct/20 to Feb/21) have increased by 2.5% to 52.81 million bags from the 51.54 million bags in the same period in 2019/20. In the 12 months ending February 2021, exports of arabica totalled 81.05 million bags compared to 81.37 million bags last year; while robusta exports amounted to 47.52 million bags compared to 49.6 million bags. Vietnamese Government statistics suggest that the country’s coffee exports in March should total just over 2.4 million bags, this would be a fall of around 21% from the same month last year. Cumulative exports for the first three months of the 2021 calendar year will total around 7.1 million bags, which would be 17% lower than the first three months of 2020. Green coffee stocks in Japan increased during February by 1.3% to total 170,756 metric tons (2.85 million bags) up from 168,524 tons (2,80 million bags) at the end of January. This is however, 4% lower than the total reported for February 2020, when the total was 177,970 tons (2.97 million bags).

There continues to be no reliable regularly-published data on coffee price differentials that I have access to, so once again I have had to use sources, the accuracy of which cannot be guaranteed. These other sources suggest that movements in physical price differentials were in the face of a falling futures market, once again relatively positive. Brazilian 3 /4’s, appear to be higher at around minus 21/22; Honduras HG’s, appear to be stronger at plus 22/23; Kenya AB FAQ’s continue to be stable at plus 105/110; as are Colombian UGQ’s at plus 51; while PNG Y1’s appear to be unmoved at plus 8. If an exporter had fixed a price on Friday for July/August delivery, he should have secured a price somewhere between 130.75 and 135.30 cents/lb.

This week’s fall was certainly unexpected and reflects the view that although there will be a supply deficit over the coming year there are more than ample stocks to cover any shortfall. The fall was all the more surprising given that at the start of April the market’s attention invariably refocuses on the upcoming Brazilian frost season. There has not been a serious frost in Brazil since 1994, but this does not stop speculators taking up a position in relation to it, by either selling assuming that there will be no frost or by buying assuming that the chances are greater than in most other years. All sorts of theories abound at the moment, taking into account the transition from the La Nina to sunspot activity. All suggest an increased likelihood of a frost, but speculators seem more wary, although it is still early days. In the more short-term the outlook is for a small, but positive, rebound next week.