Heavy rain throughout the week together with reports that this weather will continue on throughout next week caused prices to retreat on both markets this week. Yet prices on both markets started off the New Year on a positive note but, unfortunately, it was downhill thereafter. Arabica coffee prices finished the week losing 5.10 cents/lb with the second position (May 24) closing at 181.10 cents/lb. The London robusta coffee market followed suit losing $114/ton (5.20 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be around 40 toea/kg lower than they were last week.
Although the weather in Brazil over the last few weeks appears to have been extremely beneficial for the development of the 2024 harvest, there have been reports that there have been higher than usual rates of flower abortion over the last couple of months, which, if true, would certainly have a negative impact on yields. There is no hard evidence of this yet but is something that could be a factor later in the year. It was also interesting to note that the latest Commitment of Traders’ report showed non-commercials (i.e. speculative funds) increased their long position by 689 lots to 48,768 lots long and increased their short position by 271 lots to 26,212 lots short, with a net long position of 22,556 lots in the week to January 2nd. In itself these are relatively small changes but does suggest that the Funds are slightly more bullish about prices increasing in the future. Given the turmoil in various parts of the world it is hardly surprising that coffee is taking longer to arrive at its final destination, especially for shipments going through the Suez Canal. But it also appears that the number of transits through the Panama Canal is being limited to just 24 per day this month as a result of the drought caused by the El Niño phenomenon which has seriously reduced the levels needed in its reservoirs to allow greater usage. Vietnam’s General Statistics Office has forecast that the country’s coffee exports for December will total 3.167 million bags, 4.5% lower than for the same month last year. This would bring cumulative exports for the first three months of the current coffee year to 5.89 million bags, 12% lower than for the same period 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 appear to have been relatively steady again this week. Brazilian 3/4’s continue to be quoted at minus 17; Honduras HG’s remain at plus 4; Kenya AB FAQ’s are steady at between plus 60 and plus 75; while Colombian UGQ’s are unmoved at plus 11. So, without any update on PNG Y1’s, I would guess that they might also be steady at around minus 4. Therefore, had an exporter fixed on Friday in New York for April/May delivery he may have been able to secure a price somewhere between 176.20 cents/lb and 181.35 cents/lb.
The ongoing good weather in Brazil will inevitably continue to curb any upward movement in prices. The fact that the supply/demand situation continues to be tight with most analysts suggesting that there will only be a very small surplus this year is unlikely to be taken into consideration unless there is some dramatic development during the week ahead, which is unlikely. Consequently, despite the fact that there are valid reasons to argue that prices should at least stay stable next week or maybe even rise a bit, the outlook suggests that prices might come under further pressure next week.
Source:
Mick Wheeler, UK.