As anticipated, it was another week which saw coffee prices on both markets see-sawing, while traders and speculators try to get to grips with the basic fundamentals of the market. On the one hand they are concerned about the impact that the Russian invasion of Ukraine will have on the longer-term outlook for demand but are trying to balance that with concerns about future supplies and the downturn anticipated in Brazilian output. As a result, prices fell mid-week only to recover all the lost ground on Friday to finish the week with arabica coffee prices gaining 3.10 cents/lb and robusta prices up $34/ton (1.50 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week, will probably be around 20 to 25 toea/kg higher than what they were last week.
Some of the volatility seen this week can also be put down to fluctuations in the currency markets with the US dollar strengthening mid-week as a result of hawkish comments from a US Federal Reserve official, only to lose ground later in the week. In their latest forecast, Brazil’s IBGE forecast the country’s 2022/23 coffee crop 56.1 million bags, an increase of 0.9% compared to their forecast made last month. Arabica production is estimated at 38.7 million bags, while the robusta (conillon) crop is forecast at 17.4 million bags. The Brazilian Coffee Industry Association (ABIC) estimate that domestic coffee consumption in Brazil over the 12 months from November 2020 to October 2021 increased by 1.71% to 21.54 million bags. Domestic consumption of roasted and ground coffee grew by 1.58%, to 20.56 million bags, while consumption of soluble coffee increased 4.48%, to 985,310 bags. Per capita consumption of whole coffee beans grew by 1.06%, at 6.06 kg/person, while that of roasted and ground coffee also increased 1.06%, at 4.84 kg/person. The Coffee Board of India has issued their latest forecast for the 2021/22 crop, putting it at 348,500 tons (5.8 million bags), this is an increase of 4.3% on last year’s output, but is 5.6% lower than their earlier forecast. The editor of Coffee and Tea Russia Magazine, Ramaz Chanturiya, said this week that there are only 2 to 3 months of coffee stocks currently available in Russia forcing coffee companies there to look for alternative routes to get coffee into the country.
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 coffee price differentials continue to be relatively steady. Brazilian 3/4’s remain at minus 16; while Honduras HG’s are also unmoved at plus 33; Kenya AB FAQ’s continue to be quoted at between plus 75 and plus 100; while Colombian UGQ’s appear to be slightly higher at plus 66. Without any update on PNG Y1’s, I would guess that they might also be steady at around plus 2/3. Therefore, had an exporter fixed on Friday in New York for July/August delivery he may have been able to secure a price between 226.80 cents/lb and 234.95 cents/lb.
Although it is difficult to be that positive about the outlook, the rise on Friday does give some encouragement that maybe the market is now poised for another push upwards. It is, however, also true that we may well be in for another week of volatility in which prices do not advance at all. However next week will be a short week with both markets closed on Friday for Easter and given the momentum that the rise seen Friday will provide there is a good chance that prices might finish the week higher. maw