As anticipated arabica coffee prices came under pressure all week, although daily volatility was quite high. Continuing rain in Brazil clearly pressured prices but there appeared reasonably strong resistance to the downward pressure although not enough to prevent further erosion. Arabica coffee prices finished the week 7.20 cents/lb lower with the second position (March 24) closing at 177.155 cents/lb. The robusta coffee market showed greater resilient but was still fairly volatile throughout the week but managed to finish the week fairly close to where it started losing just $2/ton (0.10 cents/lb) over the week. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be between 55 and 60 toea/kg lower than they were last week.
In its latest report the ICO has put world coffee production at 168.2 million bags in coffee year 2022/23, just 0.1% higher than last year. However, they also report that that there has been a dramatic shift in the geographical distribution of production with output in Asia & Oceania falling 4.7% to 49.84 million bags. Production in Africa has also fallen, shrinking 7.2% to17.9 million bags. In both regions the contraction can be attributed to adverse weather conditions, particularly in Vietnam, Côte d’Ivoire and Uganda. This was however offset by the 4.8% increase seen in Latin America driven mainly by the 8.4% increase in Brazil, which brought the combined output of Central and South America to 100.5 million bags. World coffee consumption in 2022/23 is believed to have shrunk by 2.0% to 173.1 million bags. Their forecasts for coffee year 2023/24 predicts that global output will increase by 5.8% to 178.0 million bags, with arabica accounting for 102.2 million bags and robusta 75.8 million bags. World coffee consumption is expected to grow by 2.2% to 177.0 million bags. The Vietnam Coffee and Cocoa Association (VICOFA) has estimated that the country’s 2023/24 crop will be between 26.67 and 28.33 million bags, some 2 to 4 million bags lower than last year, citing adverse weather during key development phases and fall in cultivated coffee area as farmers look to other crops for higher profits.
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. Given the recent price increases, it is of no surprise to see that physical price differentials are generally weaker. Brazilian 3/4’s are steady at minus 16; but Honduras HG’s are lower at plus 5; Kenya AB FAQ’s continued to be unchanged unmoved at between plus 60 and plus 75; while Colombian UGQ’s are lower at plus 12. Without any update on PNG Y1’s, I would guess that they might also be lower at around minus 3, although I must stress this remains just a guess. Therefore, had an exporter fixed on Friday in New York for March delivery he may have been able to secure a price somewhere between 173.22 cents/lb and 177.55 cents/lb. The weather forecasts for Brazil suggest that rain will continue to fall through the coffee growing areas of the country for at least the next 2 weeks, which inevitably will put pressure on prices. But there appears to be strong resistance at around the 173 cents/lb level, which at the moment is holding well. Of interest is the latest Commitment of Traders report which shows that speculators increased their long position by 1,514 lots but at the same time decreased their short position by 1,518 lots. This suggests that they are bullish. With luck prices will remain stable and finish the week very close to where they are now.
Mick Wheeler, UK.