Contrary to expectations both markets rose strongly on Monday and Tuesday, fuelled mainly by technical issues and in particular the notion that the arabica market was oversold on the Friday before. However, profit taking during the rest of the week, forced prices downwards, but even so both markets still ended the week higher than when they started. Arabica coffee prices finished the week up 2.75 cents/lb with the second position (December) for arabica closing the week at 160.95, while robusta coffee prices gained $51/ton (2.30 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be about 20 toea/kg higher than they were last week.
Coffee growers in Colombia are extremely unhappy about the current price of coffee, which they say is below their cost of production and are requesting that the country’s stabilisation fund be used to prop up internal prices. At the moment the Government does not appear to be reacting but this may have something to do with the fact that the country’s President is embroiled in a political scandal with his son accusing him of using illegal funds during his election campaign last year. There are reports that excessive rainfall in India has damaged the crop and that as a result production this year will be significantly lower. The Coffee Board of India is conducting a survey in affected regions and expects to have something to report next week. The latest data from the Vietnam General Statistics Office showed that coffee exports in July totalled 1.33 million bags, 32.1% lower than in July last year. This means that exports over the first 10 months of the coffee year will total 24.9 million bags, 1.1% lower than during the same period last year. The latest data from the All-Japan Coffee Association showed that green coffee stocks in the country totalled 2.36 million bags at the end of June, 1% lower than in May and 26% lower than was recorded in June 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. Physical price differentials have been relatively steady this week with no major movements seen. Brazilian 3/4’s therefore are unchanged at minus 15; Honduras HG’s, remain at plus 13; as do Kenya AB FAQ’s, at between plus 45 and plus 70; but Colombian UGQ’s are ever-so-slightly lower at around plus 33/34. Without any update on PNG Y1’s, I would guess that they might also be steady at around plus 2/3, but as always this remains just a guess. Therefore, had an exporter fixed on Friday in New York for November/December delivery he may have been able to secure a price between 162.60 cents/lb and 166.30 cents/lb. This week’s action on both markets is confusing but suggests that both are experiencing strong resistance to downward pressure below certain levels and similarly strong resistance to any push for higher prices above a certain level. It is difficult to pinpoint what those resistance levels are, but arabica coffee prices appear to have been trading with a 10-cent range for at least the last four weeks. Robusta is a bit different as we did see a big rise the week before last, but for this week at least it seems to be following movements in New York once again. The outlook is therefore somewhat murky at the moment and while there is no doubt that the fundamentals suggest that prices should come under further pressure, both markets appear to be resisting that pressure really well. Consequently, this suggests that prices might end the week reasonably close to where they are now.
Source:
Mick Wheeler, UK.