It looked as though it would be another really good week for the arabica market with prices jumping up over 11.00 cents/lb on Tuesday in response to a report by Volcafe that the upcoming crop in Brazil will be significantly smaller than originally predicted. But profit taking by speculators over the second half of the week reduced that gain significantly. Nevertheless, prices ended the week showing a positive gain rising by 3.25 cents/lb over the week, with the second position closing at 173.30 cents/lb. The robusta market followed it own path, not quite mirroring what was happening in New York but still finished the week in positive territory gaining $14/ton (0.65 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be around 25 toea/kg higher than what they were last week.
Volcafe reported this week that due to weak flower blossoming on the coffee trees in Minas Gerais, it has cut its’ production estimate for Brazil 2023/24 arabica crop to 40.5 million bags from its’ July forecast of 49.8 million bags. This sparked a buyng spree but unfortunately it does not appear to have been sufficient to have sustained it. Later in the week Rabobank published its estimate for 2023/24 global production at 174.8 million bags, with demand at 173.2 million bags, suggesting a supply surplus of 1.6 million bags. This is down from its’ previous estimate of a 4-million bag surplus. Brazil’s crop was forecast at 67.1 million bags, while Colombia and Vietnam were expected to reach 14 million bags and 29.5 million bags, respectively. The latest data from the ICO shows that world coffee exports totalled 10.88 million bags in December 2022, down just over a million bags from the 11.89 million bag total seen in December 2021. Exports in the first 3 months of coffee year 2022/23 (Oct/22 to Dec/22) have fallen by 2.8% to 30.27 million bags compared to 31.14 million bags in the same period in 2021/22. In the twelve months ending December 2022, exports of arabica amounted to 79.67 million bags compared to 80.58 million bags last year; whereas robusta exports amounted to 48.29 million bags compared to 48.28 million bags.
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. Brazilian 3/4’s have resumed their upward path gaining another 3 cents/lb to plus 15; Honduras HG’s however appear to have weakened to plus 35; Kenya AB FAQ’s continue to be steady at between plus 65 and plus 90; Colombian UGQ’s are slightly lower at plus 60. Without any update on PNG Y1’s, I would guess (and it remains just a guess) that they might be steady at plus 4. Therefore, had an exporter fixed on Friday in New York for April/May delivery he may have been able to secure a price between 176.45 cents/lb and 182.10 cents/lb. The volatility seen this week suggests that the market is still grappling with the idea that Brazil may or may not produce a much lower arabica crop than initially predicted. The fact that the crop will be lower seems to be confirmed not only by the large revisions in estimates but also by the continuing rise in Brazilian differentials. Brazilian farmers continue to be reluctant to sell which suggests that they know that the flowering and subsequent setting was not as good as in previous years. The outlook therefore remains reasonably positive, but much will depend on the various estimates of the Brazilian crop due out over the next couple of weeks. Market volatility will continue, but there is a chance that prices may end the week higher.
Source:
Mick Wheeler, UK.