It was perhaps inevitable that after the tremendous jump in prices seen over the last few weeks that both markets would pause to take stock. Initially profit taking forced prices down on both markets but both markets rebounded on Friday to recover most of what had been lost. Indeed, robusta coffee prices finished higher. Over the week arabica coffee prices lost just 0.65 cents/lb while robusta prices increased by $24/ton (105 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea over the week to come will probably be very close to what they were last week.

Both markets were closed on Monday although that does not appear to have had any real impact on either market. The Brazil Real appreciated against the US dollar by more than 1% on Tuesday following positive economic news and this inevitably put pressure on arabica coffee prices. Both markets were quiet on Wednesday before falling on Thursday only to recover on Friday. Rabobank has revised its global deficit estimate for 2021/22 to 3.5 million bags, due to the anticipated smaller crop in Brazil. However they have revised their estimate of last year’s Brazilian arabica crop, pushing it up by 4.0 million bags to 53.0 million bags, citing the fact that local stocks are higher than expected. The situation in Colombia continues to give cause for concern as the national strike continues into its’ eight week. It has been estimated that the strike has blocked the export of at least 800,000 bags of coffee. For while the protests have dissipated in some parts of Colombia, the unrest in other parts of the country have persisted, despite the fact that President Ivan Duque withdrew a controversial tax reform bill that first ignited nationwide demonstrations on 28 April. Two more USDA attaché reports were published this week with the agency estimating that Costa Rica’s coffee production will expand slightly to about 1.485 million bags, up by 13,000 bags from the 1.472 million bags produced in 2020/2021. For Nicaragua the agency expects output to grow by around 5% to 2.38 million bags up from 2.27 million bags last year.

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 the huge rise in futures prices over the last few weeks, it would normally be expected that differentials would come under pressure but so far this does not appear to be the case. Brazilian 3 /4’s, appear to be slightly higher at around minus 23; Honduras HG’s are also higher at plus 24; as are Kenya AB FAQ’s at plus 110/120; Similarly Colombian UGQ’s are higher at plus 55; and although PNG Y1’s are still not widely quoted they appear to be also higher at plus 10. If an exporter had fixed a price on Friday for August/September delivery, he should have secured a price somewhere between 167.20 and 173.95 cents/lb.

The recovery in prices on Friday sends a very positive signal for next week, although the hesitancy to continue the rally earlier on in the week suggests that the market may have found a comfortable level for the time being. A cold front looks as though it will move across Brazil in about 10 days’ time and although, at the moment, temperatures are not forecast to fall that low, the market will keep a very close eye on weather forecasts. The outlook for next week therefore remains positive but, in the absence of any dramatic news, prices are unlikely to move significantly higher although some upward movement is not out of the question.