Reports of heavy rain throughout Brazil plus a rise in certified stocks on the New York exchange to a two and half year high took its toll on coffee values this week, despite both markets being closed on New Year’s Day. Arabica coffee prices lost 4.00 cents/lb over the week, with the second position (May 25) closing at 314.90 cents/lb. Robusta prices, however, did not follow suit and appear to have been buoyed by reports from Vietnam that exports continue to decline. Consequently, they ended the week gaining $15/ton (0.70 cents/lb). The robust market was however only open for three days this week. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be around 60 toea/kg lower than they were last week.
The Brazilian meteorologist, Somar, reported this week that Minas Gerais (the largest arabica coffee producing region in Brazil) received 102.8 mm rain last week, which is 182% of the historical average. In addition, arabica coffee stocks certified against the New York market totalled 985,672 bags on Friday, slightly lower than the two and half year high seen on Monday but still suggesting that there is no real shortage of coffee for immediate delivery at the moment. However, CECAFE reported this week that its’ preliminary figures for Brazilian green coffee exports during December totalled 2.96 million bags, significantly lower than the 4.2 million bags exported during November. The total includes 2.5 million bags of arabica and 452,000 bags of conillon. IHCAFE reported this week that exports of green coffee from Honduras totalled 161,394 bags for the month (as of December 27th), compared to 28,782 bags exported during the month of November.
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. However, given the holiday period none of these sources have been updated. So I can only really report what they were two weeks ago. Brazilian 3/4’s were quoted at minus 16; Honduras HG’s at plus 7; Kenya AB FAQ’s, at between plus 30 and plus 40; Colombian UGQ’s at plus 8. So assuming that there has been no real change in the last two weeks, PNG Y1’s probably continue at around minus 9. Thus, had an exporter fixed on Friday in New York for April/May delivery he may have been able to secure a price somewhere between 305.12 cents/lb and 312.65 cents/lb.
Trading volumes throughout the week, especially in New York, were, as predicted, very low, which sometimes can have the effect of exaggerating movements, although there is little evidence that this was the case this week but might explain why New York fell, while London remained almost flat. Reports suggest that there has been very little progress in preventing the strikes at U.S. ports which are scheduled to begin on January 16th. There is still two weeks to go but if they were to go ahead then inevitably there will some sort of impact on the coffee industry in the US although much will depend on how long the strikes last. The outlook for the week ahead remains somewhat murky and this week’s drop could easily herald a fall to much lower levels, although that looks unlikely. Further falls cannot however be ruled out and I would not be surprised to see prices end the week slightly lower.
Source:
Mick Wheeler, UK.