It was anything but a good week on the arabica market with values falling every day. It is difficult to pinpoint the main drivers of the push downwards but a weaker Brazilian Real did not help, plus there was some worrying news about consumption trends in Brazil. Arabica coffee prices lost 13.95 cents/lb over the week with the second position closing at 173.75 cents/lb. The robusta market came under a degree of pressure earlier on in the week but rallied a bit midweek only to finish the week on a negative note. Nevertheless, it still managed to finish the week higher gaining $11/ton (0.50 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be between 105 and 110 toea/kg lower than what they were last week.
Brazil’s ABIC has reported that the country’s domestic consumption totalled 21.3 million bags in 2022, down 1% from the 21.5 million bags consumed in 2021. This is however 3.2% lower than the record of 22 million bags consumed in 2016. In terms of per capita consumption, this also fell year on year by 1.61% to 4.77 kg per person/per year. ABIC attribute the fall to the higher price of coffee as well as the cost of living increases every nation is witnessing. Reports suggest that in Brazil food costs rose by 9.1% in 2022, with roast and ground coffee prices jumping 35.4%. Interestingly exports from Brazil appear to have fallen sharply with preliminary data suggesting that the country exported 2.04 million bags in February, down 41.23% from the same month last year. America’s NCA reported some good news this week. For many years, the coffee industry in America has been fighting proposals from the State of California to have coffee labelled as potentially cancer-causing, under provision of California’s infamous “Proposition 65”. On February 15th, California’s Supreme Court issued a decision that denied an appeal to overturn an earlier California courts’ decision in the industry’s favour. Official reports suggest that the average price for roast and ground coffee during January in the US was $6.358/lb, down 1.7% from December, when coffee prices reached $6.465/lb, the highest level in the series. However, this is still 23.9% higher than that recorded in January 2022.
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. Movements in physical price differentials have been mixed this week with Brazilian 3/4’s now quoted at plus 3, Honduras HG’s are also lower at plus 29; But Kenya AB FAQ’s are higher at between plus 90 and plus 110; Colombian UGQ’s remain at plus 55. The few quotes I have seen for PNG Y1’s, suggest that they are much higher than I have been reporting and I am therefore guessing that they may now be around plus 15. Therefore, had an exporter fixed on Friday in New York for May/June delivery he may have been able to secure a price between 188.55 cents/lb and 190.45 cents/lb.
Whilst it is disappointing to see this week’s price falls, nothing much appears to have changed fundamentally. It is true that data about consumption is of real concern but nothing suggests that the overall supply/demand balance is going to be radically different from many of the earlier estimates. As said last week some sort of correction was inevitable although I did not foresee such a big correction. Even so there is a good chance that the market will be more stable next week and might even manage to put on a few cents.
Source:
Mick Wheeler, UK.