Weekly Market Report – 04th August 2024

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Weekly Market Report – 04th August 2024

As anticipated it was an extremely quiet week with both markets ebbing slowly downwards until Friday when arabica prices rebounded to finish the week virtually unchanged.  Arabica coffee prices gained 0.40 cents/lb over the week with the second position (December 24) closing at 229.55 cents/lb. Robusta prices also made a small recovery on Friday, but it was not enough to regain the losses.  Over the week robusta coffee prices lost US$37/ton (1.75 cents/lb).  In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be unchanged from what they were last week.

The latest data from the Vietnamese government shows that since the start of the 2024 calendar year, the country has exported 16.05 million bags. This is almost 14% less than last year.  Reports suggest that the Brazilian harvest has moved on apace with just over 90% of the crop being harvested.  StoneX released a revised estimate for the current Brazilian harvest this week reducing their estimate by 1.7% from 67 million to 65.9 million bags. Arabica coffee production is put at 44.7 million bags, while robusta production has been estimated at 21.2 million bags.  There have been a few more company financial reports issued this week which once again show a mixed picture.  Illycaffè’s consolidated revenues for the first half of 2024 increased by 3.8% to 289.1 million euros as a result of growth in all its main markets. Similarly, JDE Peets saw its overall sales increase by 5.6% to generate 4,210 million Euros over the 6-month period. Starbucks, on the other hand saw its global comparable store sales fall by 3%, which they attribute to a 5% fall in comparable transactions, which was partially offset by a 2% increase in average transaction value.  An interesting comment in the JDE report highlighted that following their collaboration with Enveritas, which has allowed them to map more than 90% of the world’s coffee growing-areas, it has been found that that less than 0.07% of the coffee-related plots show deforestation after 31 December 2020.  This suggests that the problem is not nearly as bad as the EU believe to be the case. 

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 be largely unchanged this week, with Brazilian 3/4’s still quoted at minus 17; Honduras HG’s, remain at plus 10; likewise, Kenya AB FAQ’s, continue to be quoted at between plus 30 and plus 45; while Colombian UGQ’s are steady at plus 13.  So my best guess for PNG Y1’s is that they are probably also unmoved at around minus 7. Thus, had an exporter fixed on Friday in New York for November/December delivery he may have been able to secure a price somewhere between 218.45 cents/lb and 223.55 cents/lb.

The Commitment of Traders report suggests that speculators are reducing their exposure to coffee with a 7.5% decrease in their long position and an even bigger fall in their short position.  This is not surprising given that a lot of the uncertainty that surrounded the Brazilian harvest has almost evaporated and the chance of a frost this year is fairly remote.  However, a cold front is predicted to hit some growing areas in the south of the country next weekend, although only a few isolated areas are likely to see temperatures anywhere near freezing.  The outlook is therefore more settled and at the moment the market seems content with the equilibrium it appears to have achieved.  However, it would not be too much of a shock to see prices ebbing downwards again next week to close the week slightly lower.

Source:
Mick Wheeler, UK.

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