The announcement by OPEC that they would be cutting production made crude oil prices jump on Monday, which in turn boosted other commodity markets including coffee. Prices steadied a bit on Tuesday but a lack of producer selling, a weak dollar together with a surge in sugar prices which, although unrelated, helped to boost the bullish mood, pushed prices higher over the next two days. Both markets were closed on Friday. Over the week arabica coffee prices gained 12.00 cents/lb, with the second position closing at 181.70 cents/lb. The robusta market followed suit and finished the week $83/ton (3.75 cents/lb) higher. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 90 to 95 toea/kg higher than they were last week.
The ICO released its first official forecasts for supply and demand for the 2022/23 coffee year this week, putting global production at 171.27 million bags, an increase of 1.7% from last year. Consumption is forecast at 178.53 million bags, also 1.7% higher than last year. This implies a supply/demand deficit of 7.27 million bags. They also revised their 2021/22 forecasts, increasing production from 167.17 million bags to 168.49 million bags and increasing consumption to 175.61 million bags from 170.32 million bags. The deficit for 2021/22 is therefore put at 7.12 million bags. As if to reinforce the message about the growing deficit, it appears that inventories in both Europe and Japan are shrinking. The ECF reported this week that in January, coffee stocks in selected warehouses in Europe totalled 11.72 million bags, a fall of around 8.8% since December and 0.7% less than in January 2022. The AJCA also issued a report this week indicating that at the end of February green coffee stocks totalled 2.52 million bags. This is 3% lower than in January 2023 and 15% lower than in the same month last year. The NCA coffee drinking study published this week showed that past-day coffee consumption across all generations in America has stabilized and returned to pre-COVID levels. It also showed that 65% of Americans drank coffee yesterday, more than any other beverage.
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 appear to have been mixed this week with Brazilian 3/4’s higher at level, but Honduras HG’s are lower at plus 22; as are Kenya AB FAQ’s at between plus 40 and plus 65; Colombian UGQ’s have also lost ground at plus 48. Again, without seeing any new quotes for PNG Y1’s, I can only guess that they too will have fallen to around plus 10. Consequently, had an exporter fixed on Friday in New York for July/August delivery he may have been able to secure a price between 186.55 cents/lb and 192.55 cents/lb. This week’s price rise was certainly unexpected and was certainly boosted by the lack of producer selling. This may have had something to do with the Easter holidays or it may not, as there is certainly a tightness in the Brazilian internal market which may be restricting sales from that origin. This is not likely to change much over the week to come so there is a good chance that prices will remain firm, but given the increase seen this week some sort of correction is possible. Prices may therefore, come under a bit of pressure when the market reopens on Monday but given the growing consensus that there will be a supply/demand deficit this year, prices are unlikely to finish the week much lower and might even go higher.
Source:
Mick Wheeler, UK,