Weekly Market Report 08 October 2023

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Weekly Market Report 08 October 2023

Although it rained in Brazil last week, concern over longer term forecasts together with a rule change regarding the resubmission of stocks certified against the New York market countered much of the negative reaction that the wet weather originally forecast was expected to produce.  Indeed, it was a much quieter week than many had anticipated with prices essentially trading within a relatively narrow band all week.  Arabica coffee prices ended the week unchanged with the second position (March 24) closing at 147.20 cents/lb.  The robusta market, however lost value practically every day to end the week $89/ton (4.00 cents/lb) lower.  In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be about the same as they were last week.

The weather agencies have changed their longer-range forecasts of wet weather for Brazil’s main coffee producing areas with their models now showing that a dry weather pattern will develop after Tuesday and last through to the weekend.  The forecasts suggest it might rain thereafter but it has introduced a level of uncertainty which helped keep prices firm. The company running the New Yorks coffee market, InterContinental Exchange, announced on Friday a new rule that bans the re-submission for grading of coffee that has been previously certified.  This had been a common practice for a long time now but it is thought to have undermined confidence in the overall quality of certified stocks and hence in the whole credibility of the exchange.  Preliminary trade data from Brazil showed that the county exported 2.96 million bags of coffee in September, 5.3% higher than in September last year.  European Coffee Federation (ECF) data on coffee stocks for selected ports in Europe released this week for August showed that stocks in these warehouses totalled 10.20 million bags, down almost 27% on the total registered at the same time last year. This total comprised 3.95 million bags of robusta, 2.50 million bags of natural arabica, and 3.77 million bags of washed arabica.

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 stable this week.  Brazilian 3/4’s remain at minus 11; Honduras HG’s, are also unmoved at plus 13; Similarly Kenya AB FAQ’s, continue at between plus 60 and plus 75; while Colombian UGQ’s are steady at plus 26.  Without any update on PNG Y1’s, I would guess that they might still be trading at around plus 3, but this remains just a guess. Therefore, had an exporter fixed on Friday in New York for February/March delivery he may have been able to secure a price somewhere between 148.5 cents/lb and 150.80 cents/lb. The arabica market has proven to be more resilient than many had anticipated, indicating that there remains a considerable amount of nervousness about the size of next year’s crop in Brazil. There is also concern that both Indonesia and Vietnam will have lower crops which combined makes the global demand/supply balance look decidedly uncertain.  The dry weather predicted for later this week should not cause any lasting damage to the Brazil’s next harvest, but it does demonstrate that the situation remains very fragile.  Traders will continue to watch the weather forecast closely and given the uncertainty, the market may well continue to trade within a relatively narrow band, ending the week very close to where it is now.            

Mick Wheeler, UK.

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