News that the EU Commission will propose a one-year delay in the implementation of the EUDR, together with forecasts of rain in about a week’s time in Brazil, forced coffee prices sharply lower. At one stage arabica prices had fallen by over 16 cents/lb but a bounce on Friday limited the losses to 11.25 cents with the second position (March 25) closing at 255.65 cents/lb. Robusta prices followed arabica coffee prices down losing US$344/ton (15.85 cents/lb), virtually all of the gains the robusta market made last week. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 95 and 100 toea/kg lower than they were last week.
The European Commission said this week that it is considering extending the implementation of the EU Deforestation Regulation by 12 months, giving large companies until 30 December 2025 and micro- and small enterprises a new deadline of 30 June 2026. It must be noted, however, that the extension on the timing is pending the approval of the European Parliament and the Council, but it is highly unlikely that this recommendation will be rejected. The New York market authorities immediately said that they would consider delaying the rule change which would have enabled the exchange to cope with the requirements of the EUDR to later next year. This delay appears to be in response to the concerns about the state of preparedness to comply with the regulation raised by various countries during the United Nations General Assembly in New York last week. In addition, it should also be noted that the EU itself was struggling to work out exactly how it would implement the regulation, although it did provide some further clarifications this week, which are useful. The Brazilian weather forecasts issued this week show a very slight improvement in the amount of rainfall that will fall during the latter half of October. But whether this will be sufficient to save the first flowering triggered a couple of weeks ago is open to question. However, it will certainly be helpful in those areas that have not yet had a flowering.
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. Despite the volatility seen this week physical price differentials have remained relatively stable. Brazilian 3/4’s remain at minus 17; as do Honduras HG’s at plus 10; Kenya AB FAQ’s, continue to be quoted at between plus 35 and plus 50; and Colombian UGQ’s remain at plus 11. So, my best guess for PNG Y1’s is that they are probably steady at around minus 7. Thus, had an exporter fixed on Friday in New York for December delivery he may have been able to secure a price somewhere between 243.30 cents/lb and 249.00 cents/lb.
It can safely be said that the whole industry let out a sigh of relief this week when it was announced that the implementation of the EUDR will probably be delayed by a year. It is not going away, but does give further time to work out how best to cope with the trauma it will cause. Whilst it looks like the pressure may be off with regards to the extended dry spell that Brazil has been suffering it is still worth noting that the amounts of rain in the forecast are still well below historical averages. This realisation may well have been the reason for the correction on Friday. The outlook therefore continues to be uncertain, but I suspect that prices will end the week very close to where they are now or maybe ever so slightly higher.
Source:
Mick Wheeler, UK.