Continuing beneficial rains in Brazil together with a stronger Brazilian Real helped to force arabica prices sharply down this week. Over the four days of trading arabica coffee prices lost 8.45 cents/lb with the second position closing the week at 158.50 cents/lb. Robusta prices on the other hand took a completely different path ending the week $26/ton (1.20 cents/lb) higher. It is difficult to pinpoint why this is so, but demand for robusta remains strong while origins do not appear to be in any hurry to sell. In addition, robusta stocks certified against the exchange have been falling significantly over the past 12 months or so and are lower than they have been for at least 5 years. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be between 65 and 70 toea/kg lower than what they were last week.
The latest statistics from the ICO shows that world coffee exports amounted to 10.24 million bags in November 2022, up 9% compared with 9.38 million in November 2021. Exports in the first two months of coffee year 2022/23 (October/22 to November/22) have increased by 1.6% to 19.56 million bags compared with 19.25 million bags in the same period in 2021/22. In the 12 months ending November 2022, exports of arabica totalled 80.72 million bags compared with 80.7 million bags last year, while robusta exports amounted to 48.4 million bags, up almost 1 million bags from the 47.42 million bags exported last year. Reports suggest that Colombia’s coffee production fell to 11.1 million bags in calendar year 2022, down 12% from the 12.57 million bags produced in 2021. The FNC suggest that the torrential rain that have plagued the country for the past 30 months is the reason behind the fall. Data from the US Commerce Department showed that the US imported 73,369,479 kilograms of green arabica coffee in November, down 27.7% from the 101,446,628 kilograms imported in October. This brought cumulative arabica imports for the first eleven months of the 2022 calendar year to 1,063,705,595 kilograms.
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. Once again movements in physical price differentials appear to have hardened this week. Brazilian 3/4’s continue to be in short supply and as a result are much higher at around at minus 2; Honduras HG’s are slightly higher at plus 38; Kenya AB FAQ’s continue to be quoted at between plus 65 and plus 90; Colombian UGQ’s are steady at plus 61. Without any update on PNG Y1’s, I would guess that they might also be steady to slightly higher at around plus 4. Therefore, had an exporter fixed on Friday in New York for April/May delivery he may have been able to secure a price between 161.45 cents/lb and 166.45 cents/lb.
Although the market continues to see rain in Brazil as beneficial, some exporters in Brazil are expressing concern that the country might have seen too much rain with some reports suggesting that coffee trees in South Minas are beginning to abort cherries. Abundant rain has damaged the crop in Colombia so it might do the same in Brazil. At the moment there is no sign of any let up in rainfall in Brazil over the next 2 weeks. The situation will need close monitoring. With the Tet holidays looming, growers in Vietnam are expected to sell their coffee more aggressively ahead of the holidays, putting pressure on robusta prices. The outlook is therefore bearish, which suggest that prices on both markets might go lower.
Source:
Mick Wheeler, UK.