As suggested last week, the arabica market effectively paused this week to take stock and adjust to the last few weeks torrent decline in prices. The market was closed on Tuesday for Independence Day and although there was some volatility in prices, all movements were fairly muted. Arabica coffee prices finished the week up 1.90 cents/lb with the second position for arabica closing the week at 160.90. It was however a different story for robusta coffee prices which like arabica experienced fairly muted movements for most of the week but exploded upwards on Friday as buying pressure was met with a lack of sellers. By close of business on Friday robusta coffee prices were up $130/ton (5.90 cents/lb) the bulk of which is down to Friday’s activity. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be about 15 toea/kg higher than what they were last week.
One of the concerns which is possibly putting a floor under prices in both markets at the moment is the dwindling levels of certified stocks. In New York the total is now down to 545,000 bags while in London the total is 998,000 bags. Historically both levels are really low. Over the year arabica certified stocks have fallen by 265,000 bags while robusta stocks have fallen by 762,000 bags. And in both markets the amount pending grading is also quite low. The World Meteorological Organization said on Tuesday that temperatures are expected to rise across the world after the El Nino weather pattern emerged in the tropical Pacific for the first time in seven years. The WMO expects the record temperatures recorded in 2016 will be broken. This will probably have a significant impact on global coffee production and in particular the Colombian authorities have already stated that they expect to see much higher temperatures in the country from December through to March 2024, a key harvesting period in Colombia. Slightly better news emerged on demand this week with data from the US Commerce Department showing that in May, the US imported 85,790,575 kgs of green Arabica coffee, up 6% from the 80,883,478 kgs imported in April. This brought the total imports for the first 5 months of the 2023 calendar year to 422,511,794 kgs.
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 are still under pressure with Brazilian 3/4’s steady at minus 15; But Honduras HG’s are down another cent at plus 15; Kenya AB FAQ’s, are unmoved at between plus 45 and plus 70; while Colombian UGQ’s are lower at around plus 36. Without any update on PNG Y1’s, I would guess that they might be lower around plus 3, but this remains just a guess. Therefore, had an exporter fixed on Friday in New York for Sept/Oct delivery he may have been able to secure a price between 161.05 cents/lb and 165.40 cents/lb. The longer-range weather forecasts suggest that a cold spell might hit the state of Parana next weekend. At the moment the forecasts suggest that while the temperature will drop, the threat of a frost is low. The steadier prices seen this week suggest that maybe things have calmed down a bit, but if robusta coffee prices continue to rise as they did on Friday then this might drag arabica coffee prices up as well. Nevertheless, the outlook is for prices, especially arabica coffee prices to stay very close to where they are now.
Source:
Mick Wheeler, UK.