Weekly Market Report 05th November 2023

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Weekly Market Report 05th November 2023

An extremely volatile week with arabica coffee prices in particular oscillating up and down on a daily basis. Fortunately there were more ups than downs with the upward hikes reflecting the concerns about the dwindling volume of stock certified against the New York market which many believe is a symptom of the shortage of coffee for immediate delivery. A weaker dollar also helped.   Arabica coffee prices ended the week up 8.65 cents/lb with the second position (March 24) closing at 169.15 cents/lb.  The robusta market was equally volatile but despite concerns about potential shortages from Vietnam and Indonesia, robusta prices finished the week down $9/ton (0.45 cents/lb).  In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 70 and 75 toea/kg higher than they were last week.

ICE certified stocks fell to a 25-year low this week to total 360,009 bags. It is important to note, however, that whilst certified stocks do not in themselves represent supply availability, they are often seen as a proxy for what is going on in the physical market in that roasters are clearly finding it easier to source from the exchange rather than direct from origin.  At the Exporters Association meeting in Colombia, Olam reported that 2023/24 global coffee production will total 176.2 million bags, up from 164.7 million bags they estimated were produced last year.  Consumption is forecast at 170.5 million bags, up from 167.5 million bags believed to have been consumed last year.  Olam expect global coffee production to rise to 187.5 million bags in 2024/25, while consumption will reach 174.1 million bags, leading to a surplus of 13.5 million bags.  They put Brazil’s 2023/24 output at 69.6 million bags and its 2024/25 production at 76.5 million.  However at the same conference Sucafina estimated that Brazil will produce 67.73 million bags in 2023/24 and 72.65 million in 2024/25.  Starbucks reported its 3rd quarter results this week reporting that global comparable store sales increased by 8%, driven by a 4% increase in prices and a 3% increase in comparable transactions.

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.  Given this week’s volatility it is somewhat surprising but physical price differentials have remained relatively stable.  Brazilian 3/4’s are a cent lower at minus 14; but Honduras HG’s remain at plus 10; Kenya AB FAQ’s continue at between plus 60 and plus 75; likewise Colombian UGQ’s are unmoved at plus 20.  Without any update on PNG Y1’s, I would guess that they might also be stable at around plus 1/2, but as always this remains just a guess. Therefore, had an exporter fixed on Friday in New York for February/March delivery he may have been able to secure a price somewhere between 167.10 cents/lb and 172.35 cents/lb.

I think this week’s volatility caught everyone by surprise.  It continues to rain in Brazil and all reports suggest that the crop is developing well, hence the optimistic reports heard in Colombia this week.  However concern is being expressed about the potential crops in Vietnam and Indonesia with most agencies suggesting that both output in both origins will be sharply down.  Consequently the immediate outlook is murky at best.  It looks however that concern about the short term availability will override the bearish tones of the longer term outlook and there is a good chance that prices might finish the week slightly higher although another volatile week should be anticipated.                                                                                                                                                                                                  

Mick Wheeler, UK.

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