As anticipated, a large downward correction took place on both markets on Monday with coffee prices seeing record one-day falls. But again, as anticipated, prices then recovered throughout the week. However, what was not anticipated was the strength of that recovery especially on the arabica market in New York which saw arabica coffee prices soar to new heights, ending the week 12.20 cents/lb higher, with the second position (March) closing at 330.25 cents/lb. Robusta prices however, could not follow suit and although they recovered from the lows seen on Monday, they never regained all that they had lost and finished the week $261/ton (11.85 cents/lb) lower. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 90 and 95 toea/kg higher than they were last week.
The latest data from the ICO shows that global coffee exports totalled 11.13 million bags in October, up 15.9% from the 9.6 million bags exported in the same month last year. In a report published by Colombia’s FNC citing a consultancy report by a company called Global Data, it has been predicted that the 2024/25 coffee year (Oct/Sept) will probably see a coffee surplus of 0.85 million bags, compared with a surplus of 0.55 million bags they believed was produced last year. World production is expected to grow by 1.7% to 173.30 million bags, with increases in output seen for Colombia and Indonesia, but stable production in Brazil and Vietnam. Consumption is also expected to grow to 172.45 million bags compared with 169.81 million bags in 2023/24. According to the ECF, coffee stocks held in selected European ports totalled 8.65 million bags, up 2.4% on the same month last year and a 0.2% increase month on month. Such an increase has been anticipated as companies started to buy in extra coffee in order to get the coffee into the territory before the anticipated start of the EUDR, which has now been postponed. Interestingly the latest data from the All-Japan-Coffee-Association shows that green coffee stocks in Japan hit a new record low at the end of October of 2.3 million bags.
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 continue to come under pressure this week but once again the situation is mixed. Brazilian 3/4’s are lower at minus 16; as are Honduras HG’s at plus 7; However, Kenya AB FAQ’s, appear to be steady at between plus 30 and plus 40; while Colombian UGQ’s are lower at plus 8. PNG Y1’s will probably also be lower at somewhere around minus 9. Thus, had an exporter fixed on Friday in New York for March delivery he may have been able to secure a price somewhere between 304.70 cents/lb and 322.70 cents/lb. Ther can be little doubt that the record highs seen this week, whilst welcomed by producers, will also create serious problems throughout the supply chain with many struggling to find the liquidity they require to continue operating their businesses efficiently. ICE has raised it margin calls by almost 60% and many operators will find their lines of credit inadequate to cover their operational needs. Nevertheless, all this does is make a tight situation even tighter and whilst it is difficult to know when this current rally might end, the rise we saw on Friday suggests that it is not over yet. So, whilst prices may well continue to rise, I would expect the pace to be slower and for prices to finish the week higher, but probably not by much.
Source:
Mick Wheeler, UK.