Both markets came under pressure this week as the expectation of a record upcoming Brazilian coffee crop increases, with multiple major trade houses now projecting production to be in the region of 75 to 76 million bags. Although short term tightness keeps both markets from retreating too rapidly. Over the week arabica coffee prices lost 6.50 cents/lb, with the second position (July) closing at 289.40 cents/lb. Robusta coffee prices lost even more ground, losing $170/ton (7.70 cents/lb) to finish the week at $3,346/ton (July). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be about 60 toea/kg lower than they were last week.
Limited support was given to both markets this week by the increase in the value of the Brazilian Real against the dollar. This has reduced prices to growers and exporters in Brazil discouraging them from selling at the moment. However, it was not enough to prevent the downward drift that was seen throughout the week. Lower than average rainfall in Brazil also lent some limited support to the market but as this cannot be classified as a drought in any way, it only has had only a very limited impact. Certified arabica inventories against the New York market have increased in recent weeks, although only modestly, but in so doing have eased near‑term supply concerns. Nevertheless, over the week the volume of certified stocks fell by just over 4,000 bags to 547,667 bags. In addition to fundamentals, the broader macroeconomic outlook continues to play an important part in determining prices. The war in the Middle-East is forcing up energy prices across the world and in turn increasing transportation and operational costs across both producing and consuming countries. And while these factors do not directly impact coffee futures markets in the short term, over the longer term they do contribute to higher replacement costs for importers and roasters and thus will keep prices higher for consumers than they otherwise would have been. Global consumption, after increasing in 2024, fell in 2025 by approximately 2.5%, reflecting not only higher prices, but also inflation which has tightened consumer budgets, as well as slowing economic growth across most regions of the world.
Once again, I cannot get access to any reliable regularly-published data on price differentials, so I have had to rely on sources which may not be entirely accurate or up to date. Once again physical price differentials appear to have hardened with Brazilian 3/4’s now quoted at plus 222, Honduras HGs are up a couple of cents at plus 19, Kenya AB FAQ’s are slightly higher at between plus 47 and plus 50; Colombian UGQ’s, on the other hand, are steady at plus 40. This leaves a somewhat confused picture, but I can only guess that PNG Y1’s may also be slightly higher at around plus 8. If this is correct, then, it should have been possible for an exporter to fix on Friday in New York for July delivery at a price somewhere between 294.20 cents/lb and 302.20 cents/lb.
To be frank I am surprised that prices have not fallen further, given the overwhelming number of forecasts that suggest that Brazil will harvest a massive crop in just a few months’ time. The geopolitical situation inevitably continues to create confusion and uncertainty which looks set to do so for much longer than those engaged in the conflict are probably hoping. Even so, I think that this political uncertainty is now being factored into both markets and I therefore, anticipate that fundamentals will take centre stage next week, forcing prices lower.
Source:
Mick Wheeler, UK.
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