As suggested last week, arabica coffee prices did continue the downfall trend seen the week before, with speculators exiting the market once all threats of a frost had been eliminated. There was however, again as suggested, some resistance to lower prices and prices did recover on Wednesday and Thursday but not enough to recover all the losses and arabica coffee prices finished the week 1.55 cents/lb lower. Robusta coffee prices on the other hand went in the opposite direction primarily on concerns about supplies coming out of Vietnam and Indonesia. As a result, robusta coffee prices gained $37/ton (1.65 cents/lb) over the week. In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea over the week to come will probably be between 10 and 15 toea/kg lower than what they were last week.

The situation in the robusta market reflects concerns about the logistics of getting coffee out of Asia at the moment. A COVID-19 outbreak in Ho Chi Minh City has resulted in tight restrictions on movement in the area. This combined with the container shortage affecting many origins in the region and the consequent hike in shipping costs, along with the fact that there is now only a limited volume of coffee left to be sold, means that supplies coming out of the region will inevitably be restricted over the next few weeks. The ICO has published its June report this week, raising its estimate for the 2020/21 surplus to 2.26 million bags, up by 240,000 bags from its previous estimate but down 53.3% from the 4.84 million bag surplus estimated for 2019/20. Colombia’s coffee exports were badly hit by the blockades in May when exports fell to just 427,000 bags. The country, however, appears to have recovered much of the ground lost, although its’ exports in June were still lower by around 11% at 986,000 bags, compared to the 1.11 million bags exported in the same month of 2020. Safras & Mercado reported this week that the Brazilian harvest is 54% complete with 30.5 million bags harvested so far, up 6% over the week, but 2% behind where they were last year. It is estimated that this represents 48% of arabica crop and 73% of the conillon crop.

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. Overall physical price differentials appear to have been relatively stable this week. Brazilian 3 /4’s, are ever so slightly lower at around minus 23/24; Honduras HG’s appear steady at plus 25; as do Kenya AB FAQ’s at plus 110/120; Colombian UGQ’s remain at plus 58; while PNG Y1’s also seem to be unmoved at plus 9. If an exporter had fixed a price on Friday for September /October delivery, he should have secured a price somewhere between 158.70 and 162.10 cents/lb.

There is no rain predicted to hit coffee growing areas of Brazil for at least the next 10 days and even thereafter only a few small, isolated regions look set to receive any wet weather. Whilst this bodes well for the harvest and indeed is not unusual for this time of the year, there remains the nagging concern that the continued dry weather, combined with the earlier long periods of dry weather will inevitably have some effect on the size of next year’s crop. These concerns may well be enough to prevent further slippage in prices, but they may not be enough. This week’s publication of GCA stock figures will be of interest. The outlook is, therefore, somewhat precarious, but, barring shocks, prices should remain largely unmoved.