Weekly Market Report 07th May 2023

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Weekly Market Report 07th May 2023

Overall, both markets remained on tenterhooks throughout the week not really knowing what direction to take. Nevertheless, despite starting off positively, both markets came under pressure mid-week, only to rally on Friday as the threat of a cold front hitting Brazil late next week forced prices back upwards. Arabica coffee prices ended the week gaining 2.10 cents/lb but that was thanks to the 5.10 cents/lb rise seen on Friday. The second position for arabica closed at 188.05 cents/lb. The robusta market was closed on Monday but followed a similar path to the arabica market, although its’ movements were more muted, ending the week gaining $62/ton (2.80 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be about 15 to 20 toea/kg higher than they were last week.

Weather forecasters in Brazil have issued an early warning of a probable cold front arriving in Brazil at the end of next week, around May 13th. No frost is predicted at the moment, indeed the temperature looks like staying above 5 degrees in most areas, but it has clearly spooked some market players. However, rain continues to fall throughout most of Brazil’s coffee growing area, which could potentially cause some delays to the harvest of the current crop. Many areas will begin to see drier weather over the next two weeks but in some areas heavy rain is predicted to continue. The robusta harvest has already begun in most robusta growing regions but not all. The arabica harvest only usually begins in June but will require drier weather before it can start. The FNC have reported that Colombia’s coffee production fell 25% in April, following another fall of around 13% in March. This has been attributed to as torrential rains earlier last year, which prevented the key flowering season from taking place. Output over the 12 months to April, which is usually seen as a good gauge for predicting the full year of production, fell 9%. Starbucks issued its financial results for the first quarter of the calendar year this week reporting that global comparable store sales increased 11%, primarily driven by a 6% increase in comparable transactions and a 4% increase in average transaction values.

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. Movements in physical price differentials have been mixed this week with Brazilian 3/4’s losing a cent to be quoted at minus 5, Honduras HG’s have also fallen by the same amount to be quoted at plus 19; Kenya AB FAQ’s are however slightly higher at between plus 45 and plus 70; while Colombian UGQ’s are also lower at plus 44. For PNG Y1’s, I can only guess that they too will have lost ground to probably around plus 8. Therefore, had an exporter fixed on Friday in New York for July/August delivery he may have been able to secure a price between 190.80 cents/lb and 197.25 cents/lb.

The market remains jittery and whilst the approaching cold front really does not pose any real threat, the reaction seen on Friday is testament to how nervous market players remain. It is clear that most are unsure what the market balance for the year ahead really looks like. Stock levels continue to fall in both Europe and Japan as well as against the exchange, almost justifying the nervousness. Prices might therefore come under pressure next week, but there is a very good chance that they will end the week very close to where they are now.

Mick Wheeler, UK.

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