A somewhat volatile period since my last report three weeks ago and although prices appeared to be trending slowly lower, a sudden hike last Thursday on concerns about lower-than-average rainfall in Brazil changed the immediate price landscape although an abrupt correction on Friday saw over half of those gains lost. Nevertheless, arabica coffee prices have held up well, having lost just 2.90 cents/lb over the last three weeks with the second position closing at 253.10 cents/lb. Robusta prices on the other hand did not do so well losing $239/ton (10.85 cents/lb) over the period. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea next week will probably be about 20 toea/kg lower than they were three weeks ago.
Speaking at a conference in Colombia this week, Keith Flurry the head analyst at Sucden said that he thinks that the current 2024/25 coffee market is flat with demand equalling supply, albeit with a shortage of arabica and a surplus of robusta. At the same conference Bill Murray reported that the latest NCA coffee drinking survey found that young coffee consumers in the US thought that the degree of coffee roast was the most important factor when choosing a coffee. The second was whether the coffee was freshly roasted, while the third was whether coffee is grown on farms that treat their workers well, and that the farmers are paid a fair price. Finally, they prefer coffee if it is grown in an environmentally sustainable way. A total of 60% of coffee consumed by 18-24 years olds was cold coffee verses 16% for people 60 years and older. However, daily coffee drinking in the US has increased by 16% over the past 29 years, while 72% of Americans drink coffee each week. The election of Donald Trump as president of the US has created nervousness among some coffee exporters as they fear that the proposed universal tariffs of between 10% and 20% which he says will be placed on imported goods might affect coffee. However, this looks somewhat farfetched, although remains a remote possibility.
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 movements over the last three weeks have been mixed although any movements seen have been relatively small. Brazilian 3/4’s are slightly firmer at minus 15; Honduras HG’s remain at plus 12; Kenya AB FAQ’s, are slightly firmer at between plus 30 and plus 40; while Colombian UGQ’s are steady at plus 14. So, my best guess for PNG Y1’s is that they are probably also unmoved at around minus 7, but given the usual weakening we see during the late season there is a chance that they may be lower. Thus, had an exporter fixed on Friday in New York for February/March delivery he may have been able to secure a price somewhere between 245.60 cents/lb and 252.35 cents/lb. It would be very easy to suggest that Thursday’s hike can be put down to technical factors rather than any fundamental reason. But there can be no doubt that the lack of rain in Brazil will have had some sort of impact on future yields and while the rain over the last three weeks will have helped, it probably will not be enough to repair all the damage down. So the market nervousness certainly appears justified and the fact that speculators and the hedge funds increased their long position last week only adds credibility to that observation. Prices will probably remain volatile next week but may finish the week slightly higher.
Source:
Mick Wheeler, UK.