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Weekly Market Report 10th March 2024

A very volatile week with New York undecided whether to follow London’s lead and go higher or follow its own path.  The result was daily swings sometimes in excess of 5 cent/lb with arabica coffee prices finishing the week slightly higher, gaining 1.90 cents/lb with the second position (May 24) closing at 185.20 cents/lb.  Robusta coffee prices, on the other hand, fared better than arabica gaining ground on continued concerns about supplies coming out of Vietnam.   Over the week the London robusta coffee market gained $154/ton (7.00 cents/lb) on top of the $113/ton it made last week.  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.

Robusta coffee prices reached an all-time high for the 10 ton contract this week and continued to make ground all week bar Friday when it suffered a small correction downwards.  The upward momentum is fuelled by concerns about supplies from Vietnam amid unconfirmed reports of contract defaults.  Colombia’s production in February slumped by more than 20% to total 961,000 bags, down from 1.205 million bags the country produced last February.  However, its exports amounted to 1.046 million bags, forcing its stock level down to 1.308 million bags in February, down from 1.465 million bags in January.  Preliminary estimates of its domestic consumption was put at 182,000 bags, down from 186,000 bags in January and almost unchanged from the 181,000 bags in February 2023.  Interestingly its imports during calendar year 2023 amounted to 1.51 million bags, down from 2.377 million bags it imported in 2022. The latest data from the All Japan Coffee Association shows that coffee stocks in Japan totalled 144,554 metric tons in January, down 7.4% from the 156,056 tons registered in the same month last year, but 0.7% higher than in December. 

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 have been mixed.  Brazilian 3/4’s are lower at minus 14; but Honduras HG’s are steady at plus 6; Kenya AB FAQ’s are also lower at between plus 45 and plus 70; although Colombian UGQ’s are unchanged at plus 15.  So, without any update on PNG Y1’s, I can only guess that they might also be unchanged at around minus 2/3. Therefore, had an exporter fixed on Friday in New York for May delivery he may have been able to secure a price somewhere between 182.30 cents/lb and 188.80 cents/lb.

As anticipated a couple of weeks ago certified stocks of arabica have leapt up this week by over 64,000 bags to total 424,752 bags on Friday.  However, counteracting this rather bearish factor is the fact that rainfall in Brazil over the past week  has been considerably less than anticipated and not a lot of rain is forecast to fall this week.  Nevertheless, a good crop is still expected there.  The situation in Vietnam does not sound good but as we have seen an impressive increase in robusta prices over the last 3 to 4 weeks, it seems that massive further increases are unlikely, indeed some sort of retreat looks more plausible.  Even so, the increase has been impressive and will continue to underpin current values.  Consequently, it can be anticipated that both markets will end the week very close to where they are now.

Source:
Mick Wheeler, UK.

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