As anticipated the market remained range bound this week, despite the publication of various forecasts of the global supply/demand balance, each predicting something different. Both markets seemed overwhelmingly non-plussed by these different predictions although both finished the week slightly higher. Arabica coffee prices gained 1.65 cents/lb over the week while robusta coffee prices finished the week $40/ton (1.8 cents/lb) higher. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea over the week to come will probably be around 10 to 15 toea/kg higher than what they were last week.

The ICO has increased its estimate of the global supply/demand balance for 2019/20 from a surplus of 961,000 bags to a surplus of 4.1 million bags. They have increased their estimate for global production for the 2019/20 coffee year from 168.6 million bags to 168.7 million bags, while lowering their consumption estimate from 167.6 million bags, down to 164.5 million bags. Interestingly their first official forecast for the 2020/21 coffee year, puts global production at 171.9 million bags, with demand at 166.6 million bags, resulting in a supply surplus of 5.3 million bags. Given recent estimates from other sources this seems rather large. Brazil-based coffee exporter, Comexim, has forecast that Brazil’s 2021/22 coffee crop will total 53.9 million bags, down 20.73% from the 68 million bags they say was produced last year. Stone X a US based trader put the upcoming Brazilian crop at 51.4 million bags, significantly lower than many other agencies and trade houses including the ICO, but above that published by CONAB. Early forecasts of the Colombian Mitaca (or secondary) crop suggest that it will be much lower than the 6.3 million bags initially forecast, primarily as a result of the La Nina weather phenomenon which inhibited flowering earlier in the year. No precise figures have been produced but the FNC are clearly trying to warn the market that production will be down. Preliminary data from Brazil’s Foreign Trade Secretariat showed that the country exported 3.7 million bags of green coffee in January, this is 35.8% higher or 1 million bags higher than the 2.7 million bags exported in January last year.

Once again, I have not been able to access any formal reports from Traders this week, but other sources of data (which I cannot stress enough are not as reliable, nor unfortunately as up to date) suggest that physical price differentials may have been relatively stable this week. Brazilian 3 /4’s, continue at around minus 23; Honduras HG’s, are also steady at plus 25; as are Kenya AB FAQ’s at plus 75/90; Similarly, Colombian UGQ’s continue at plus 50; while PNG Y1’s also appear to be unmoved at plus 8. If an exporter had fixed a price on Friday for May/June delivery, he should have secured a price somewhere between 132.90 and 134.85 cents/lb.

Although there appears to be almost universal acceptance of the fact that Brazilian output, especially arabica output, will be lower this year, the markets still seem unsure about what will happen to consumption. The evidence suggests that demand has fallen but no one is sure whether it will bounce back once various restrictions are lifted later in the year. It is therefore hardly surprising that both markets continue to tread water. This situation looks unlikely to change anytime soon so the outlook remains very much the same as it did last week with both markets remaining range-bound, ending the week very close to where they are now.